The complete guide to retirement planning for every age

No matter where you are in life, there is one constant: thinking about and planning for retirement.

The definition of retirement has changed over the years and continues to evolve. It’s no longer about a finish line or the size of your nest egg.

It’s about achieving financial independence – having the freedom and power to choose how you spend your time and your money.

In fact, the happiest retirees today are still working, volunteering, or coaching - doing what they love.

Their secret is that they have put themselves in a position financially where they are in control of the decisions they make. And that freedom is liberating.

All of this is possible with a financial plan that can help you make smart, informed decisions every step of the way.

Life is ever-changing, and you need a flexible and evolving strategy that can adapt to meet your life as it changes over time.

Your path to retirement will be filled with twists and turns and challenges and opportunities.

There will be a lot of decisions, big and small, to make along the way. And each decision will have a profound impact on whether or not you achieve financial independence.

Here are the steps you need to take to navigate retirement planning at every stage with clarity and confidence.

How to use this guide

Find your life stage

While the guide is broken down into decades by age, not everyone follows the same path in life, and retirement plans can vary. So we added brief life stage descriptions for each decade that may or may not fit your situation. Simply find the life stage, ignore the decade, and use the planning information provided as your personal guide.

Follow the formula

To make navigating this guide easier, we used a consistent format for each decade. Here are the four things you will find in each section:

1. A description of what each decade and life stage looks like and the trade-offs you will face
2. The one element that is essential to helping you achieve success
3. Three to five planning tips to help you make important decisions
4. Key numbers on how much of your income to save and how much, ideally, to have saved at each stage

Your 20s - Building your foundation

The typical life stage and the trade-offs to navigate

Unless you are Elon Musk or Tony Stark, you’re graduating from college and something called “a career” is on the horizon. It’s the moment when "adulting" finally makes sense.

You’re making decisions about where to live and what you can afford. You're learning how your salary and workplace benefits work, how taxes affect your take-home pay (who is FICA anyway?), and how to balance everyday expenses with any debt and student loan payments you may have. There’s a lot to consider.

The one thing you have to do

Most people in their 20s think they can start saving for retirement tomorrow, but that's a big mistake.

In your 20s, time is your greatest ally. If you start saving and investing or paying down debt now, you will put yourself on track to financial freedom earlier than most.

And you don’t have to start big. Even small changes, like saving 1% of your salary, can go a long way over time.

Lastly, don't concern yourself with hitting a magic number. Remember, slow and stead wins the race. Your net worth should be of little importance right now (if ever).

Tips: Retirement planning in your 20s

1. Contribute to a workplace retirement plan

If your company offers a plan, like a 401(k), you should contribute to it. Start with saving enough to get your full employer match if one is offered (it’s free money). If you can do more, great. If not, get started and increase your savings over time.

2. Focus on after-tax (Roth) accounts

With a Roth account, the dollars you contribute are after-tax – you pay taxes today but not when you pull the money out (if you meet certain requirements). Your salary will be lower than what it will be in the future so you may not need big tax breaks today, but you will want them in the future when your income is higher. Focus on saving after-tax dollars to a Roth account – either a Roth 401(k) or a Roth IRA.

3. Contribute to a health savings account (HSA)

While young and healthy, try to contribute to a health savings account. You will need to elect a high deductible health plan through your employer, but HSAs have three tax benefits. They are funded with pre-tax dollars (you don’t pay taxes today), the money can grow tax-free, and you can use it tax-free if you spend it on healthcare-related expenses.

4. Have a plan for debt and building healthy credit

Most young professionals have some kind of debt – student loans, credit cards, or personal loans. Your plan for tackling it depends on a variety of factors, but now is the time to create a clear strategy for balancing debt payments, everyday expenses, and long-term investing. The goal is to balance your debt with other priorities all while building a healthy credit score.

5. Focus on career advancement, not just your job

Your 20s are a great decade to explore different careers and to find the career path that may be right for you. Look for jobs that offer advancement opportunities or that let you try something new. Your 20s are a great time to learn, to fail a little, and to create a strong foundation in your professional life.

Key numbers to measure your progress

Keep in mind that no number is right or wrong for you. These are guidelines to help you assess where you stand.

• How much of your income to put away: 5% is good. 10% is ideal. 15% is great.
• Your savings goal for when you hit 30: Aim to have between 1x and 3x your annual household income saved at this point.

Your 30s - Build and raise

The typical life stage and the trade-offs to navigate

You’re advancing in your career or maybe even making a change, getting married, joining finances, starting a family, buying your first (or family) home, saving for a new car, college, and retirement. Phew! What else could you possibly handle? Your 30s are filled with exciting life milestones and a lot of big financial decisions. 

The one thing you have to do

As you advance in your career, make more money, and take on more responsibilities, the most important thing you can do is avoid lifestyle creep. These are the expenses that in a vacuum seem irrelevant, but they start to add up.

And those expenses will continue to expand until you find yourself with little or nothing to save.

As you navigate major purchases and life events, commit to saving first – like increasing your retirement plan contributions – and then spending what is left.

Tips: Retirement planning in your 30s

1. Increase your retirement savings

Your goal should be to save 15% of your household income, but not everyone can reach this number. If you can’t quite get there, commit to making a 1% increase and then adjusting that every six to twelve months.

2. Diversify your investment accounts

In your 20s, a Roth IRA was a great choice. But as you make more money and your income tax increases, it’s time to consider other options. It might make sense to fund your 401(k) with pre-tax dollars and then fund a Roth IRA (subject to income limits) or a taxable investment account on the side. Now is a great time to diversify your investment accounts.

3. Keep paying down and building healthy credit

Keep making progress on your debt. Student loans and other forms of debt can take time to pay off, but you can get rid of it if you stick to your plan. And sticking to your plan means you build a healthy credit score which can save you thousands of dollars down the road.

4. Know what’s reasonable for big purchases

As you buy your first (or family) home or a new car, make sure you know what monthly payment is manageable. The rule of thumb is to spend no more than 28% of your monthly gross income on house payments and no more than 36% on all debt payments combined.

5. If you have children, start college planning

The best time to start saving for an education is when your kids are young. If you start early, you can save less as your money has more time to grow. An education savings account – or 529 plan – can be a great option because of its tax advantages.

Key numbers to measure your progress

 Keep in mind that no number is right or wrong for you. These are guidelines to help you assess where you stand.

• How much of your income to put away: 10% is good. 15% is ideal. 20% is great.
• Your savings goal for when you hit 40: Aim to have between 3x and 5x your annual household income saved at this point.

Your 40s - Managing the chaos

The typical life stage and the trade-offs to navigate

Your 40s can be your busiest decade yet. On the home front, you’re entering your highest expense years as the kids are growing up and heading off to college.

At work, it’s a decade of promotions, managing teams, or maybe even starting a new career or business. And your taxes take on a new level of complexity as well.

Amidst the chaos, you’re reflecting on what really matters and how you want to spend your time and your money. There’s a lot to consider.

The one thing you have to do

There is a lot that you could do, but one thing that will have the greatest impact is making your financial health a priority.

It’s easy to get caught up in making sure everyone else is OK, but you need to make saving for your retirement a priority even when there are conflicting priorities (and there are always other priorities).

Tips: Retirement planning in your 40s

1. Assess your retirement readiness with real numbers

For the first time, retirement starts to feel more immediate and real. You still have time to continue (or start) planning and investing, but it’s time to put some hard numbers together. Work on estimating a retirement savings figure – look at where you are and determine what adjustments you need to make. 

2. Avoid thinking your home is an investment

A dream home can be a great purchase if it supports the life you want, but be careful about thinking your home is an investment like your other retirement savings. While it may rise in value over time, it can be hard to turn your home into an income stream.

3. Avoid taking on too much student loan debt for your children

While keeping your kids from being saddled with student loans is important, the college decision needs to be made while looking at your bigger financial picture. Deprioritizing retirement will leave you playing catch-up later on. And in your 50s, you will have little time to do it.

4. Reassess your investment strategy

During this stage, keeping an eye on taxes and fees is key. Investing in different accounts to diversify your taxes is a great first step. This will provide you with greater flexibility to manage taxes when you retire. It’s also important to avoid paying high fees for your investments; they will erode your returns and your investment growth and leave you with less for your retirement.

5. Protect what matters and keep an eye on other risks

Protecting your assets is just as important as growing your assets. Proper insurance coverage (health, disability, life, home, and auto) is critical to have. Lastly, don’t overlook putting estate planning documents in place and checking in with your parents to ensure their finances are in order.

Key numbers to measure your progress

Keep in mind that no number is right or wrong for you. These are guidelines to help you assess where you stand.

• How much of your income to put away: 10% is suboptimal. 15% is good. 20% is ideal.
• Your savings goal for when you hit 50: Aim to have between 5x to 8x your annual household income saved.

Your 50s - Retirement on the horizon

The typical life stage and the trade-offs to navigate

In your 50s, you are in the prime of your life, the kids are out of college, and you’re helping them get started.

Family expenses start to ease, you’re in your highest-earning years, and you start to see retirement on the horizon.

You may also be dealing with parents that are getting older and starting to need a little help now and then. This is when most people become laser-focused on retirement. Now’s the time to get serious, and here’s what you need to consider.

The one thing you have to do

You need to focus on supercharging your retirement savings. Expenses typically start to ease after your 40s, and you need to redirect some of that money to longer-term savings and investments to stay on track to hit your retirement goal.

As you start to get more clarity on what retirement will look like, you can adjust your plan, home in on the right savings strategy, and start making significant progress.

Tips: Retirement planning in your 50s

1. Supercharge your savings with catch-up contributions 

Once you turn 50, you can make “catch-up” contributions to various retirement plans. In 2024, you can contribute up to $7,500 more to your 401(k), 403(b), federal Thrift Savings Plan, and most 457 plans (limits change annually). Traditional IRA and Roth IRA catch-up contributions increased to $8,000 per year ($7,000 + $1,000), up from $7,500. You can also add an extra $1,000 per year to your health savings account (HSA) but you have to wait until age 55. 

2. Reassess your investments and risk

Approaching retirement means your investment priorities start to shift from growth to protecting what you have saved. This doesn’t mean being too conservative as you will still need your money to last decades into retirement, but assess your overall level of risk to make sure you are comfortable with it. And don’t forget the trade-off between investing more or paying off debt – like your mortgage. There is no right or wrong answer, but it’s an important decision to make.

3. Tax diversification for investments

Having various accounts that are taxed differently puts you in control of how you create income in retirement and helps you minimize your taxes. You want to invest in different types of accounts like a 401(k), Roth IRA, and a taxable investment account. And with kids out of the house, a health savings account (HSA) could be a great way to save for retirement healthcare costs due to its tax advantages.

4. Assess your retirement readiness

Take a good look at what your expenses may be in retirement and size up your income sources and your investments. You’ll want to determine how much income you will need, what you are on track to have, and identify any gaps. This assessment can help you develop a strategy to reach your retirement goal. If you’re feeling behind, that’s OK. There are still planning moves you can make, but you need to act now.

5. Focus on health and well-being

Retirement healthcare costs are one of the biggest expenses you will face. Making sure you are in good shape physically can substantially reduce your costs. And now is the right time to begin planning for long-term care (LTC). Not everyone needs LTC insurance, but everyone needs a plan for the costs of ongoing care that health insurance doesn’t cover.

What is a traditional IRA and how does it work? Learn more 

Key numbers to measure your progress

Keep in mind that no number is right or wrong for you. These are guidelines to help you assess where you stand.

• How much of your income to put away: 15% is good. 20% is ideal. 20%+ is great.
• Your savings goal for when you hit 60: Aim to have between 8x to 12x your annual household income saved at this point

Your 60s - Reflect and transition

The typical life stage and the trade-offs to navigate

At this point, you're thinking about your golden years daily. It’s exciting and frightening at the same time. Transitioning from 30 or 40 years of work to a new chapter that can last another 30 to 40 years can be an emotional journey as well as a financial one. There are a lot of important decisions baby boomers need to make, and the wrong ones can be very costly. Here’s what you need to know to navigate the transition with clarity and confidence.

The one thing you have to do

Get crystal clear on retirement. Where will you live? How will you spend your time? How will you create the income you need to support the life you want to live? These are critical questions you need to answer. And, remember, retirement can last 20 to 30 years or more so things will certainly change. You need a strategy to make important decisions before you retire to free yourself from worry and stress and to put yourself in control of how you spend your time and your money.

Tips: Retirement planning in your 60s

1. Have a plan for Social Security benefits

Delaying social security benefits, if right for your plan, can materially increase your retirement income.

Your social security payments, from your full retirement age (which varies based upon when you were born) to age 70, increase by 8% per year assuming you haven’t taken them.

Waiting only a few years can mean more income for decades. To get an estimate of your future benefit amount, visit the Social Security Administration (SSA) website and create a "my Social Security" account.

Once set up, you can login to see your estimated Social Security payments at any time (based on the year you claim them).

2. Have a plan for healthcare

According to studies, a couple retiring at 65 may need roughly $315,000 in retirement (after taxes) to cover healthcare costs. And this doesn’t include the cost of long-term care, which Medicare coverage only covers a small portion. Start to plan for healthcare, and long-term care, today.

3. Create a plan for retirement income

At least a year before you retire, you need to create a strategy for how you will create income from your investment accounts. This includes knowing how much you will need, the accounts from which you will take withdrawals, and how to minimize taxes when you do so.

4. Adjust your investments for retirement

Running out of money, rising healthcare costs, and market volatility are just a few things you need to plan for. You need an investment strategy that balances your need for investment growth with the right level of risk to make sure your money lasts.

5. Identify your biggest risk

Everyone has a unique set of risk factors in retirement. From health issues to supporting family members to the premature death of a partner, you need to identify the biggest risk that could throw your retirement plan off course. And then you need to develop a strategy to protect yourself against it.

Key numbers to measure your progress

Keep in mind that no number is right or wrong for you. These are guidelines to help you assess where you stand.

• How much of your income to put away: 15% is good. 20% is ideal. 20+% is great.
• Your savings goal for when you retire: Aim to have between 12x to 15x your annual household income saved at this point.

Final word

Everyone’s journey in life is different, but there is one thing that holds true for all of us: Life is ever-changing and dynamic, not to mention a little messy now and then.

Every decade and life stage brings with it its own unique set of life events, challenges big and small, and exciting opportunities.

A financial plan, one that can adapt and evolve as life changes, is essential to helping you see all of your options, identify trade-offs, and make smarter, more informed decisions.

With the right strategy, you can navigate life with greater clarity and confidence and put yourself on track for the retirement you’ve always imagined.