Preparing For Retirement: A Checklist By Decade
BY: Daniel M. Savage
Your 20s and 30s
- Aggressively contribute to your employer’s retirement plan; 15%, including an employer match, is a preferable target.
- If 15% isn’t possible, start lower and gradually increase the amount as your budget permits over time. One- or two-percent annual increases are a good starting point.
- Don’t neglect other financial priorities, such as minimizing/reducing debt.
- Develop a realistic budget that allows you to attain all of your financial goals ... and stick to it!
Consider a robust exposure to stocks (equities) in your retirement account. Most people can tolerate 90% equities or more, due to their work and life expectancy time horizons.
Your 40s and 50s
- If you’re still not saving 15% annually, continue to increase in 2% increments until you’re there.
- Consider maintaining that robust exposure to equities, at least 60%. Your work and life expectancy time horizons are still significant.
- Consider adding long-term care insurance to your overall plan for retirement. It will never cost less, and it may help prevent financial disaster during retirement.
- If you’re 50 or older, take advantage of retirement plan “catch-up” provisions: up to $6,000 more annually to your employer’s plan and $1,000 to your IRA in 2019.
- Ensure that your old retirement accounts from previous employers are consistent with your plan. Better yet, consolidate them.
- Focus on further reducing or eliminating any remaining debt.
Adjust your budget to reflect changing income and expense realities … and stick to it!
Your 60s and Beyond
- Consider saving more than 15% of your income, again including an employer match.
- Budget permitting, take advantage of those “catch-up” provisions.
- Now may be the right time to explore a more balanced approach to asset allocation, while maintaining appropriate exposure to equities (perhaps 50% to 60%).
- Take a closer look at what your budget will look like in retirement.
Other Thoughts and Key Considerations
- Two factors will have the greatest impact on your ability to achieve your long-term retirement goals: 1.) how much you save, and 2.) how long you save. Start early, and let the power of compounding work for you.
- If you’re married or have a significant other, it’s essential to approach planning from a “household” perspective, rather than an “individual” one.
- All financial goals are not created equal. Retirement should normally rank first.
- Because of their growth potential, it’s important to maintain appropriate exposure to equities for your age.