Retirement Savings Throughout the Decades: Helpful Hints for Each Stage of Life

Americans are both pragmatic and competitive. So, it’s unsurprising that they often wonder, “Am I doing ok financially at this stage in my life? Am I behind? Am I on track?” These are very common and understandable questions to ask oneself. Bottom line: don’t be too hard on yourself, especially when comparing yourself to others. Keep your eye on the big picture and the long-term. To help you out here are some general guidelines to help you out through the decades:

The primary advice for savers of all ages is not to let stock market volatility and talk of a possible recession dissuade you from trying to build wealth and ensure a comfortable retirement. For other pieces of advice, they will largely be based on your age.

In your 20’s, the first thing to do is ensure you have enough cash stashed away for an emergency. If your job is secure, set a savings goal of three to six months’ worth of expenses. You should also start planning for retirement. If your employer has a 401(k) plan and offers a match, contribute enough to get that match. When it comes to the balance of your portfolio, you can have more equities than fixed income since you have more time to recover from any down markets.

In your 30’s, as your career grows and you begin to earn a higher salary, don’t fall victim to the “lifestyle creep” and start spending that newfound money. Instead, put that extra money into your 401(k) plan. After maxing out those contributions, start investing outside your retirement account.

In your 40’s, you may now be in your peak earning years and may also be raising children.

If possible, try to start a college savings account if you haven’t done so already. Don’t divert savings from your retirement account if you can't afford to. Remember: you can borrow for college, but you can’t borrow for retirement. For those who haven’t begun saving for retirement yet, setting aside 15% to 20% of your income is considered a general rule of thumb at this age.

In your 50’s, retirement is potentially a decade away, so it’s time to get serious about how much you are truly spending, and whether you are on track to save enough to support you throughout your life. Once you hit 50, you can also set more aside into your 401(k) or IRA with so-called catch-up contributions. In 2023, the limit is $7,500 for 401(k) plans and $1,000 for IRAs. Assess your assets and make sure your portfolio is balanced to your needs. As you approach retirement age, experts typically recommend reducing risky assets, such as stocks, and increasing fixed income, such as bonds.

In your 60’s, it becomes more about distribution and less about saving. You need to have a retirement distribution strategy, but that topic is for another day.

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.   Investments involve risk and, unless otherwise stated, are not guaranteed.  Multnomah Group does not provide legal or tax advice.  Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.


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