True, everyone’s financial goals are different, but we should all be thinking about how to save for retirement. By focusing on a key strategy in each of life’s key phases, you can maximize your chances of retiring comfortably. From your 20s all the way to the cusp of retirement, use this guide to retirement savings by age to learn how much you should be saving.
25-35: Start Your Retirement Savings
Now that you’ve graduated from college, hopefully landed your first job and maybe even gotten married, getting your personal finances in shape should be high on your list of priorities. Your goals might be paying off debt, saving for a home, establishing a college fund for your children and putting away funds for retirement.
You would be smart to begin saving for retirement now, as a young adult . A good goal at this stage is to put away approximately 10 percent of your income for retirement, and to increase this amount if you get a raise. Investing in your 20s means your returns will compound for longer. If you put even a small amount of money into a retirement or savings account, you’ll get into the habit early and benefit from compounded interest.
35-55: Increase Your Contribution
These are the peak earning years for your retirement savings. While putting away money for your children’s college education or a bigger house may also be priorities, now is the time when your nest egg can really grow. By this age, you’ll likely be bringing home a larger paycheck, and you may even benefit from bonuses or inheritance that can contribute to your investments. Plan to save as close to 20 percent of your income as possible.
To help cut costs, you might consider downsizing. While a bigger house may seem tempting, something smaller might be your best move. A condo or townhome might be much more affordable than the five-bedroom house where you raised your children. This goes for your vehicle, too. You may not need the gas guzzler anymore, but something smaller and more efficient.
55 to Retirement: Create a Retirement Budget
At this stage, your thoughts are probably turning toward retirement. You may be asking yourself, when should I retire? How much money do I need to retire? On average, a man who is 65 now can expect to live to 84, and a woman who’s 65 can expect to live to 87. Your retirement planning should factor in the possibility of a longer life than past generations.
Draw up a budget for what you spend now, and then do the same for what you anticipate spending upon retirement . Consider the expenses that you’ll no longer incur once you’re finished working, but also think about what you might want to spend more on, such as leisure activities and traveling.
How Do You Want to Spend Your Retirement?
Whether you’re retiring soon or have years to go, your local Farm Bureau Agent can help you put yourself in the best position for retirement.