Here are some tips that I found in “The Costco Connection” magazine a while ago on saving for retirement starting in your 20’s:
In your 20s and 30s…
- Don’t waste time. Money you save today will be able to compound for decades.
- Pocket the maximum match. If you have the option, take it. Always contribute enough to qualify for the maximum employer match.
- Fund a Roth IRA. If there is no match opportunity, focus on funding a Roth IRA. Anyone under the age of 50 can contribute $5,500. Set up an automatic monthly or quarterly transfer from your checking account into a Roth to ensure you follow through on your good intentions.
In your 40s…
- Keep the petal to the metal. By your 40’s you should be depositing a minimum of 10% of your annual income into retirement accounts. If you didn’t start saving in your 20s, push yourself to get to 15%.
- Roll over your old 401(k)s. If you have changed jobs over the years, your 401(k) may still be with your old job. You can likely reduce your investment expenses by doing what is called a direct 401(k) rollover.
In your 50s…
- Consider accelerating your mortgage payments. If you are planning on staying in your current home after retirement, a smart move would be to get your mortgage paid off before you stop working. It’s one monthly expense you won’t have to worry about.
- No early withdrawals. Reducing your retirement assets in your 50s can be very dangerous if you live well into your 80s or 90s. You may run out of money when you get to that age.
- Size up long-term-care (LTC) insurance. If you are interested, purchase LTC insurance when you are younger so that you don’t have a hard time qualifying or ending up having to pay too costly of premiums.
In your 60s…
- The longer you wait for your Social Security retirement checks, the bigger your benefit will be.
- If you are married, one smart strategy is to consider having the higher earner delay retirement while the lower earner claims earlier to generate income.