They start saving late because theirpaychecks will only stretch so far.
How Much Should You Save for Retirement?
A good rule of thumb is to save between 10% and 20% of pre-tax income for retirement.
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The stock market delivers annual returns of about 8% on average.
Thats free money no investor would ever pass up.
After getting that employer match, focus on tackling any high-interest debt.
There are no judgments.
But when you start investing, youll probably answer some questions to assess your risk tolerance.
Dont worry too much about a stock market crash.
Missing out on growth is a bigger concern right now.
That way you wont need to tap your growing nest egg in a cash crunch.
This isnt money you should have invested, though.
Dont spend every dollar each time your paycheck gets higher.
Commit to investing a certain percentage of each raise and then use the rest as you yo.
You still have about three decades left until retirement, but its essential not to delay any further.
Saving may be a challenge now, though, if youve added kids and homeownership to the mix.
A Roth IRA is a solid bet because youll get tax-free money in retirement.
In 2024, it’s possible for you to contribute up to $7,000 if youre younger than 50.
Your investment options with a 401(k) are limited.
Youre allowed to take a 401(k) loan for a home purchase.
Youre also allowed to withdraw your contributions whenever you want.
That doesnt mean you should.
The obvious drawback is that youre taking money out of the market before its had time to compound.
But theres another downside.
Saving for your own future takes higher priority than saving for your kids college.
But the stock market has a major meltdown like the March 2020 COVID-19 crash about once a decade.
Dont let panic take over.
Commit to dollar-cost averaging and keep investing as usual, even when youre terrified.
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But if youre behind on your retirement goals, now is the time to ramp things up.
You still have plenty of time to save, but youve missed out on those early years of compounding.
Your money still has and needs plenty of time to grow.
you could only afford to pay for your kids college if youre on track for retirement.
Your options for funding your retirement are much more limited.
Mortgage rates vary from week to week.
If you havent already done so, consider refinancing your mortgage to get the lowest rate.
Now is the time to invest even more if it’s possible for you to afford to.
Keep getting that full employer 401(k) match.
Beyond that, take a stab at max out your IRA contributions.
Or you could invest in a taxable brokerage account if you want more flexibility on how to invest.
Youre about halfway through your working years when youre in your 40s.
Now is a good time to meet with a financial adviser.
If you cant afford one, afinancial counseloris typically less expensive.
Theyll focus on fundamentals like budgeting and paying off debt, rather than giving investment advice.
You brew coffee at home, you dont walk into Target and you refuse to order avocado toast.
(Can you sense my millennial sarcasm there?)
Maybe thats an exciting prospect or perhaps it fills you with dread.
In your 50s, you may want to start shifting more into safe assets, like bonds or CDs.
Your money has less time to recover from a stock market crash.
Be careful, though.
If youre behind on retirement savings, give your funds a boost using catch-up contributions.
Your window for catching up on retirement savings is getting smaller now.
So if youre behind, consider your options for earning extra money to put into your nest egg.
Its essential that you earn as much as possible while you could.
Retirement will be much more relaxing if you’ve got the option to enjoy it debt-free.
Saving for Retirement in Your 60s
Hooray, youve made it!
Hopefully your retirement goals are looking attainable by now after working for decades to get here.
But you still have some big decisions to make.
Someone in their 60s in 2024 could easily spend another two to three decades in retirement.
Your challenge now is to make that hard-earned money last as long as possible.
Start planning yourretirement budgetat least a couple years before you actually retire.
Financial planners generally recommend replacing about 70% to 80% of your pre-retirement income.
Common income sources for seniors include:
it’s possible for you to plan on some expenses going away.
But you generally dont want to plan for any budget cuts that are too drastic.
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In 10 days,these 10 practical stepscould help you get back on the right financial track.
you could take yourSocial Security benefitsas early as 62 or as late as age 70.
But the earlier you take benefits, the lower your monthly benefits will be.
Taking your benefit at 70 vs. 62 will result in monthly checks that are about 76% higher.
However, if you have significant health problems, taking benefits earlier may pay off.
These are mandatory distributions based on your life expectancy.
Avoid taking money out of your retirement accounts while youre still working.
Instead, continue to invest in your retirement plans as long as youre still earning money.
But do so cautiously.
If youre like most people, youll work for decades to get to retirement.
The earlier you start planning for it, the more stress-free it will be.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder.
She writes the Dear Penny personal finance advice column.
Send your tricky money questions to[email protected].
