Retirement Planning at Every Age.
Do you think about your retirement account? How often do you change or reallocate it? As you get older, your retirement account needs changes as does your risk tolerance. The closer you get to retirement, the fewer chances you should take.
Retirement Planning in your 20s.
In your 20s, you probably think very little about retirement, but this is the best time to do so.
You still have a lot of time before retirement. If the market tanks and you lose it all, you still have time to make it back. If this happens in your 50s, you’d be in a lot more trouble since you may have less than 10 years to make up the difference.
If nothing else, make small contributions to your 401K and/or IRA during this time. The more time your earnings have to compound, the greater your chances of meeting your retirement goals become.
Retirement Planning in your 30s.
In your 30s continue your retirement plan. At this point, you should be more financially secure. It’s a great time to consider ramping up your contributions.
At the very least, make sure you max out the amount your employer will match. Why pass up free money from your employer?
Consider opening a Roth IRA at this point in addition to your 401K and keep your investments aggressive. You still have time to make up for losses, but you benefit from the larger gains. Make sure your portfolio is diversified and make the most of these early years in your life.
Retirement Planning in your 40s.
As you hit middle age, your retirement planning changes, but only slightly. In your early 40s, you still have 20 years or so until retirement. If you haven’t saved for retirement yet, now’s the time to get serious.
Save in your 401K and individual retirement accounts too. Keep your investments somewhat aggressive, but have a decent mix of less aggressive investments too (think bonds or preferred stock). If you have saved nothing for retirement yet, figure out how much you need during retirement and then allocate the necessary amount to your retirement funds.
Retirement Planning in your 50s.
Once you hit your 50s, it’s time to slow things down. You can still contribute as much as you’ve been contributing but change your asset allocation. You no longer have 20 years or more to make up for losses.
In your 50s and beyond, consider a conservative portfolio that allows for some growth, but reduces the risk of loss. If you haven’t saved for retirement yet, consider making ‘catch up’ contributions. In 2020, catch-up contributions for those ages 50 and older are $6,500 for workplace accounts and $1,000 for individual retirement accounts.
Finally, No matter your age, you should always consider your retirement funds. The money you save now will be worth a lot more when you retire if you start early. Consistency is the key. Even if you take a break, make sure you always come back to your retirement savings when your finances allow it again. Make them a regular part of your budget and allow yourself a retirement free of financial worries.