Retirement Planning Through Your 20s, 30s, 40s, and 50s

piggy bank in the sand with sunglasses symbolizing preparing for retirement

When it comes to preparing for retirement, Americans often fail to plan. In fact, forty percent have no retirement plan at all. The average person has only about 12 percent of what they actually need for a comfortable retirement. These are disconcerting statistics, especially since none of us can be certain Social Security will always be available. Therefore, if you’re wondering when to start saving for retirement, the answer is now!

Of course, preparing for retirement varies based on a number of factors. The lifestyle you want in retirement affects your savings and approach. Likewise, your current debt, income, and budget also play a role. And your age, or length of life you expect to live, also factor into the equation. Thus, with each decade of life, the approach you take in preparing for retirement often changes.

Preparing for Retirement in Your 20s

Many in their 20s never think to ask how or when to start saving for retirement. With many decades of life ahead, this might be the last thing on your mind. But in reality, this is the best time to start preparing. By taking advantage of compounding growth, retirement savings can increase tremendously over time. This provides a great way to attain a very secure future by merely putting aside smaller amounts of savings early.

After ensuring you have three to six months of income saved for emergencies, retirement savings should be the next priority. Using tax-deferred growth through a 401(k) or IRA is ideal for those in their 20s. Aggressive stock investments accounting for as much as 90 percent of a portfolio should be entertained. Most importantly, new debt should be avoided as much as possible while old debt is eliminated. This places you in the best position in preparing for retirement.

Where to Start: 

  • Ensure three to six months of income saved for emergencies
  • Use tax-deferred growth through a 401(k) or IRA (ideal for those in their 20s)
  • Consider aggressive stock investments accounting for as much as 90% of a portfolio
  • Avoid new debt while eliminating old debt

Preparing for Retirement in Your 30s

For those entering their 30s, thinking about when to start saving for retirement may not be a priority. Though income has often increased and debt decreased, home mortgages and other life priorities tend to get in the way. But this remains an important time for retirement preparation. With ample time to still benefit from the compounding growth of your savings, retirement planning is an important consideration.

Regarding your finances in your 30s, you should make sure you’re “maxing out” any contributions made to your retirement accounts. For 401(k) accounts, this means being sure you are getting the highest amount of matching funds from your employer. At the same time, investments should continue to be relatively aggressive in stocks. With several decades of life left, you will ride out any downturns in the market.

Where to Start:

  • “Max out” any contributions made to your retirement accounts
  • For 401(k) accounts, make sure you are getting the highest amount of matching funds from your employer
  • Investments should be relatively aggressive in stocks

Preparing for Retirement in Your 40s

Many believe their 40s is when to start saving for retirement. While the ability to take advantage of compounding growth is less, there remains ample time still. In addition, most people enjoy higher income levels in their 40s, which allows them to put back more each month. Though it’s tempting to spend more as a result, maintaining a budget in line with your retirement plans is important.

In addition to maximizing your income and retirement savings accounts, you will also need to consider saving for other items. Children’s college funds, weddings, and other life events may require saving efforts. By considering those expenses, you avoid the temptation to take money out of your retirement savings. And making arrangements to pay off your mortgage and other debts also helps. Plenty of time still remains to make wise investments that can make your retirement years quite comfortable.

Where to Start:

  • Maximize income and retirement savings accounts
  • Plan savings efforts for other priorities: children’s college funds, weddings, and other life events
  • Make arrangements to pay off your mortgage and other debts in preparation for retirement
  • Consider a financial planner to help make wise investments

Preparing for Retirement in Your 50s

Ideally, most have already started planning for retirement before their 50s. But there are many things that you can do in your 50s to prepare for retirement if need be. For one, annual contribution limits for IRA and 401(k) accounts increase. This means you can “catch up” for prior years when retirement saving was difficult. Likewise, other debts may have been eliminated, allowing you to save larger amounts each month.

While saving more for retirement is encouraged during your 50s, investment strategies should be less aggressive. Lowering your risk in the stock market and choosing bonds might be a good option. Also, paying for your child’s college at the expense of your retirement savings may not be ideal either. After all, they have a lifetime to pay off student loans, but your time in preparing for retirement is limited.

Where to Start:

  • Investment strategies should be less aggressive
  • Lower your risk in the stock market and consider choosing binds
  • Do not pay for your child’s college at the expense of your retirement savings—explore other options for funding college instead
  • With debts lessening as you age, continue to save larger amounts each month

One Size Does Not Fit All

When to start saving for retirement varies for everyone based on their unique situation. The lifestyle desired, your income, your debt, and other life demands affect these decisions. But as a general rule, the best time to start saving for retirement is as early as possible. Even if you start preparing for retirement later in life, there remain many effective strategies to pursue. And in terms of your specific situation, getting professional advice about your retirement preparedness is encouraged. In any case, doing something is always better than doing nothing.

About the Author

Dawna is a mom of two young kids, puppy lover, ice cream lover, chocolate lover, and lover of any ice cream with chunks of chocolate in it. She is the author of seven books, a business owner, certified health coach, motivational speaker, and creator of the 5-Day Detox and the 14-Day Clean-Eating Program. Dawna appears regularly on local and national television. She has appeared on the Today show, Martha, MSNBC, HSN, and morning news programs on NBC, CBS, ABC, and Fox. Dawna is a highly sought-after speaker and has done speaking engagements for Chobani, Disney, American Heart Association, Mass Mutual, Wharton Business School, Women’s Entertainment Television, PGA Tour, Super Bowl Leadership Forum, Susan G. Komen, and many more.
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