Your Guide to Saving for Retirement

Your Guide to Saving for Retirement in Your 20s, 30s, 40s, and 50s

Our financial experts weigh in on the money milestones to hit throughout your life.

Most of us dream of the day we can retire from the workforce. That doesn’t mean that we plan to sit around and watch the grass grow all day, but we would love the opportunity to enjoy life without worrying about our finances. And by the time we reach retirement age, many of us have been working for over half a century. We have earned the rest from constant labor. That’s why it is important to begin saving for retirement now. “No matter what your age, or marital status, people should start saving as early as possible,” says Yanela Frias, senior executive for Prudential Retirement. “You’re never too young or too old to start saving.”

People are living longer and expenses are higher than ever, Frias explains, which is why we need to plan to save more for retirement than previous generations. And while it is recommended to begin saving for retirement in your 20s, it’s never too late to start. “Studies have shown that to accumulate enough money to achieve a secure retirement, the average person needs to contribute 12 to 15 percent of their annual salary during their working life. So, for those who didn’t start saving as soon as they entered the workforce, it’s not too late to start,” explains Frias. “If you’re 50 or older, the IRS allows you to contribute more into your retirement savings plan than when you’re under 50. And that is a great way to catch up and make sure your account is growing as much as it possibly can.”

There is also no magic number for a retirement savings amount. It all depends on your goals and your estimated living expenses at retirement. Rich Ramassini, the director of the strategy and sales performance for PNC Investments, suggests asking yourself these questions while working with your financial planning advisor: When do you think you will start your retirement? What do you want your retirement to look like? How much will retirement cost? And, where will the money come from? With the answers to these questions in mind, you can develop a plan to begin saving for retirement.

How to Save Money

It’s critical to practice healthy financial habits throughout your life, not just during times of booms and busts. And it’s important to understand that how we think about money can change dramatically over time. In your 30s, you may be thinking about buying a home or starting a family. In your 40s, you’re probably hitting your earnings peak and maybe want to start a new business or change careers, and in your 50s, retirement is just around the bend. All of those milestones require a shift in how you spend and save.

Michelle Perry Higgins, a financial planner and author of The Everything Binder, College Poor No More and Stocks, Bonds & Soccer Moms, says that following rules of saving are important to help secure your current and long-term financial life, no matter what your age: Keep all documents for your financial, estate, and personal affairs in one location so you—or someone acting on your behalf—can easily access information. Pay down debt, pay your credit card balance each month, and live within your means. And lastly, negotiate for more money—it never hurts to ask. “Your true monetary worth takes into account salary, bonus, retirement plans and employer contribution, stock options, car allowance, and any other benefits a company may offer,” explains Higgins. “Knowing the full value of your compensation package gives you the tools to negotiate wisely.”

In Your 30s

Don’t assume that you can put off saving for retirement or that you don’t need to make a budget if you’re only making a little money. Everything counts, especially when you compound interest early in the game. In your 30s, you should make it a habit to maximize your company’s benefits and contribute to your retirement plan. Your minimum contribution should be the company’s match (so if your employer puts in 50 cents for every dollar up to $3,000 a year, for example, you’ll want to put in at least $3,000 to get the extra free $1,500 from your employer). Increase your retirement savings one percent every year as your salary increases. Start an emergency fund: The goal is six to nine months of living expenses. Other considerations: get rid of student loans and other debt, or consider purchasing your primary home.

In Your 40s

Don’t assume that your retirement contributions can lapse while paying for your kids’ college education. Your retirement comes first. If needed, meet with a financial planner to get on track with retirement planning. If you have children, create or review your estate plan, review beneficiaries, and specify a guardian. If you’re married, talk about money with your spouse. It’s easy to put off thinking about money or hand over duties to someone else, but the person who has the most riding on your financial future is you. “I strongly encourage women to advocate for their financial security, be educated, and take control,” adds Higgins.

Saving For Retirement In Your 50s

Don’t assume you’ll have enough for retirement. Sometimes, people set the process in motion and realize they’re falling short on what they need. Consider downsizing your home or relocating to an inexpensive area in preparation for retirement. Review long-term care needs. Start the catch-up option in your retirement plan—for example, if you’re over 50 you can contribute an additional $6,000 to your 401(k). Evaluate medical needs for retirement and insurance coverage.

Related: Three Financial Stages of Life—Plus, the Goals to Accomplish in Each One

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