Retirement Savings Strategies for Every Stage of Life

Planning for retirement requires different strategies depending on your age and financial situation. By taking the right steps at each stage of life, you can build a strong foundation for your future. Here’s how to approach retirement savings from your twenties through your sixties and beyond. The average household retirement savings in the U.S. is approximately $114,435, though this amount varies widely by state, ranging from less than half to twice as much.

Your 20s: Start Early and Build Momentum

Starting early gives your money more time to grow. Even small contributions can add up over time the sooner you start saving

• Contribute to a 401(k) or IRA: Take advantage of employer-sponsored retirement plans especially if your employer offers a matching contribution.
• Focus on Growth: Invest in a diversified portfolio with higher-risk, higher-reward investments.
• Develop Good Financial Habits: Set a budget, control debt, and increase your savings rate as your income grows.
• Automate Contributions: Set up automatic transfers to ensure you consistently save a certain amount per month. 

Your 30s: Increase Contributions and Balance Priorities

As your career progresses, aim to contribute more while balancing other financial responsibilities.

• Boost Your Savings Rate: Increase your 401(k) or IRA contributions, aiming for at least 15% of your income while ultimately aiming to contribute the maximum amount allowed per plan.
• Diversify Investments: Consider a mix of various investments to balance growth and stability in your portfolio.
• Avoid Lifestyle Inflation: As your income rises, allocate extra money for savings instead of unnecessary expenses.
• Plan for Family Needs: If you have children, start thinking about college savings as well as keeping retirement funds a priority.

Your 40s: Stay on Track and Maximize Earnings

This is a crucial time to ensure your retirement savings remain on target to meet your goals.

• Max Out Contributions: If possible, contribute the maximum allowed to your retirement accounts And/or work sponsored retirement plans.
• Rebalance Your Portfolio: Adjust your investment mix based on risk tolerance and age as needed.
• Eliminate High-Interest Debt: Pay down credit cards and personal loans to free up money for savings.
• Prepare for Unexpected Costs: Build an emergency fund to protect your retirement savings from being used for unplanned expenses.

 Your 50s: Catch Up and Fine-Tune Your Strategy

With retirement approaching, it’s time to increase savings and reduce financial risk.

• Use Catch-Up Contributions: If you’re 50 or older, you can contribute extra to your 401(k) and IRA.
• Shift Toward Stability: Gradually move funds into lower-risk investments like bonds.
• Plan for Healthcare Costs: Consider a Health Savings Account (HSA) to cover future medical expenses.
• Check Your Retirement Plan: Consider how much you’ll need for the future and adjust your strategy if necessary.

Your 60s and Beyond: Transition to Retirement

Now it’s time to finalize your retirement plans and create a withdrawal strategy.

• Delay Social Security If Possible: Waiting until full retirement age (or later) increases your benefits.
• Create a Withdrawal Plan: Follow the 4% rule or another strategy to ensure your money lasts.
• Minimize Taxes: Withdraw from accounts in a tax-efficient way to avoid unnecessary costs.
• Protect Your Assets: Consider long-term care insurance or estate planning to secure your financial legacy.

Richard Lerner, Senior Vice President of David Lerner Associates, advises, “Retirement planning isn’t just about saving—it’s about making smart choices at every stage of life. The earlier you start, the better your financial future will be.”

Regardless of your age, it’s never too late to improve your retirement savings strategy. Taking action now can help you achieve financial security and peace of mind in your retirement years.

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Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.