As your life and your career evolve over the decades, your lifestyle also changes. Compare what your 20s look like to what your 60s look like. They’re very different.
Planning for each decade requires a specific focus, so let’s take a closer look at what you can focus on in each decade of your life, taking into consideration potential risks and problems, such as when to start planning, how much risk you can tolerate, and how best to manage debt.
Planning in Your 20s
In your 20s, you are probably more comfortable taking career and money risks as you lay the foundation of your retirement, beginning with positive financial and saving behavior.
Invest in You: When starting your career, invest in yourself by going back to school to earn a degree or professional certification. Taking time now to grow your skills and human capital, and gaining life experiences and knowledge, may be easier at this age than later in life.
Positive Financial Behaviors: The most positive behavior you can start is saving money for retirement in your employer’s 401(k) or by setting up an IRA. Automate your savings, even if you’re only able to fund your retirement accounts with a few hundred dollars a year.
Consider Risks: Being young is the optimal time to take risks from both an investment and a life perspective. In your 20s, you can look for equities and not be too conservative with your investments. You have a few decades to let your money grow, so take a few risks such as looking for startups and other opportunities.
Planning in Your 30s
Risk taking is a little tamer in your 30s. Instead of taking risks, it’s best for you to focus on managing debt and planning for the future.
Debt Management: Manage your debt carefully. Have a plan for paying off any student, personal, or car loans, a mortgage, or credit card debt. Determine the order in which you’ll tackle paying off these debts and stick with it. From a financial planning perspective, consider tackling high interest rate debt first. And to really manage your money, don’t over borrow in the first place.
Proper Protection: We often feel invincible in our 30s and then we underinsure. Protecting your financial future means you have the right health care coverage, car insurance, property and casualty for your home, disability insurance, and life insurance. Your insurance needs will change as your wealth grows.
Growing Retirement Assets: In your 30s, with your career blooming, you can set aside more money, increasing the amount you’re saving for retirement each month. If your employer offers a 401(k), consider increasing your contribution. If you’re self-employed, set up a SEP or SIMPLE IRA to put away more money for retirement.
Planning in Your 40s
In your 40s, you’ll be more mindful of your career, mental health, and wealth accumulation. With your responsibilities in life increasing, it helps to check in on your finances regularly.
Wealth Building: Your 40s may be your peak earning years. You start building your wealth and ensuring your investments are aligned with your future goals. This is also a good time to invest heavily in growth assets.
Watch Expenses: Be mindful of any unnecessary spending habits you’ve acquired and pay attention to the cost of things. Keep your finger on the pulse of your overall budget, spending, and costs. Are there spending habits or costs you can change to bring down your overall spending and free up money to put toward your retirement?
Care for You: Be aware of feeling burnt out at work or stressed over finances in general. Take time to focus on your health and financial wellness. Being in control of your finances helps reduce stress so you can take care of you.
Planning in Your 50s
By paying close attention to your retirement planning in your 50s, you’ll have plenty time to make adjustments, especially if you’re experiencing a gap between your chosen lifestyle and expected income.
Retirement Income Planning: Sit down and see how much you have saved for retirement. List out all of your expenses and determine the amount of income you want to generate in retirement. If you see a shortfall, you have time to restructure your plan to save more, cut expenses, and review your investment allocations. You can also look at other retirement income sources like Social Security or a deferred income annuity.
Long-Term Care Planning: Your 50s is the best time to plan for long-term care options. Needing long-term care is one of the biggest risks you will face in retirement and funding strategies are best purchased and reviewed in your 50s. Qualifying for long-term care coverage may be harder in your 60s, so take a look and decide if it makes sense for you.
Family and Next Generation Planning: You may be sandwiched between generations; between your parents and your children. Planning to help all your family is crucial right now and should begin with open and honest conversations at the family level.
Planning in Your 60s
You reap the benefits of all your previous planning and saving in your 60s.
Your Retirement Income Plan: After spending your working career saving, investing, and paying off bills, it’s time to receive your retirement income. Your prior planning should ensure your money will last for the rest of your life, even though you don’t know how long you’ll live.
You might consider working as long as possible while deferring Social Security to help ease any concerns. Your longevity makes risks like health care, long-term care, and inflation more painful to the sustainability of your retirement income, so put a plan in place. That way, you’ll know how much income you’ll generate, and the best time claim Social Security.
Finances are a means to your ultimate Ideal Life goals. Bradley Wealth can help you envision the retirement life you want, and we’ll be by your side each step of the way to make sure you get there.