How to Plan for Retirement in your 20s, 30s. 40s, & 50s

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Only about 1 in 4 people in our country have taken essential steps for effective retirement planning.

But it’s a requirement so you won’t run out of money in retirement. You can enjoy your golden years if you can create and maintain a successful retirement plan.

There are a few more reasons why you should make retirement plans well in advance.

● You won’t be able to work forever
● Try not to depend on your family members
● The average life expectancy is nearly 80 now
● It is better not to rely exclusively on social security payments
● You should enjoy your golden years and have the financial freedom to do whatever you want 

The financial experts always suggest planning for your retirement from the time you first draw a paycheck.

So, let’s discuss how you can plan for retirement through the formative decades of your life.

In your 20s
This is the time when you can take more risks about investment.

The experts say that in your 20s you can think of investing in companies “with future growth potential or companies that are relevant in the context of the current market environment”.

Save money as much as you can
This is the best time to save since you don’t have that much family responsibilities at this age. Try to save at least 20% of your income.
You can try the 50-20-30 budget. About 50% of your monthly income is to meet your necessities, 30% is for your wants, and 20% dedicated to savings. 

Start an emergency fund
It is very much a necessity. The experts suggest saving about 5-6 months of your living expenses in your emergency fund. In doing so, you can tackle financial emergencies without falling into debt.

Use compound interest to grow your money
First, start contributing to a 401(k). It is always better to contribute the maximum amount. Start by depositing a small amount and increase it by about 1% every six months until you max out. This will help you save a considerable amount for retirement.

Avoid incurring debts
Repay your credit card balances after every billing cycle. Doing so, you can save the interest payments and invest that money for a better return in the future.
And, when you’re taking out a mortgage loan or buying a car, make sure you can make the required monthly payments on time so that you can repay the loans on time.
Paying back on time will help you build a good credit score that will help you secure debt at suitable terms and conditions in the future.

In your 30s
Now that you might have started a family, you need to increase your net worth.

This decade is the prime time to plan your retirement goals. You have already learned from your mistakes in your 20s; so, you’re much better at managing your finances now.

Build a diversified investment portfolio
Instead of putting all your eggs in one basket, invest in multiple securities or indexes. The experts advise to look for asset classes with low or negative correlations; if you incur a loss in one, profit from anther can nullify it.
If required, seek the help of a financial advisor who can help you invest in volatile markets. Also, invest in an IRA or Roth IRA and save more by having multiple retirement accounts.

Increase your income
The more you earn the more you can invest. Therefore, pick up a side hustle as per your liking and use your leisure time to pursue it. You can choose from various online earning opportunities.
You can also save without doing much. For example, if you have extra garage space, rent it. Likewise, look for other ways to generate extra income every month. However little the amount is, it will help you to achieve your retirement target amount.

Be on the same page with your partner
Your financial goals may not exactly be the same as your partner. However, set a time every month when you’ll discuss money matters.
List both of your financial goals and make a plan to achieve them together. Help each other and motivate each other to achieve your retirement and other financial goals on time.

In your 40s
Do not make any financial mistakes and plan to achieve your goals on time.

Don’t worry if you’re a bit late and haven’t been able to save for retirement the way you planned. There’s still time.

Stay away from debts as much as possible
Yes, do not waste your hard-earned money on paying interest on your credit cards. Swipe your cards for an amount that you can repay comfortably every month. However, if you’re juggling multiple credit cards, you can consolidate these with a personal loan or a credit card with a lower interest rate.
Also, if prudent, refinance your home loan when mortgage rates are favorable to repay high-interest debt to lower your overall monthly payments. 

Purchase adequate health insurance coverage
You may ask how is it related to retirement savings?
“According to a 2018 Gallup survey, nearly 44% of U.S. adults said they were worried about not being able to pay medical costs in the event of a serious illness or accident.”

Also, stay healthy. It will save you a considerable amount of money by avoiding unnecessary health risks. Exercise regularly, eat a balanced diet, prepare meals at home rather than eating out, and manage your stress levels.

Opt for goal-oriented saving
In your 40s, you need to be focused on your investments. One of the best ways to do that is to have a purpose for every investment. For example, if you’ve invested for your child’s education, make sure you achieve the targeted amount by the time they’re ready for college.  You might need to save aggressively at this time. However, do not feel guilty to splurge occasionally. After all, you’re making a considerable effort to save a decent amount for retirement.

In your 50s
Review your retirement plan and make necessary modifications.

At this age, limit your risk. You can seek a financial advisor’s help to assess your portfolio and make modifications if required.

Make your estate plan
If you’ve already made your will, revisit it, and make modifications if required. Create or review your will and power of attorney to be sure that your beneficiaries are mentioned clearly along with the percentage they will receive.

Make yourself a priority over your children’s needs
Instead of supporting your growing child, pay yourself first. Your child can take out a student loan to complete his/her education. They have ample time to repay their student loans. You don’t need to incur new debt at this age.

Continue making your contributions
Make a plan so that you can delay receiving your social security payments for as long as possible. Doing so, you can get the maximum monetary benefit.

It is clear that to create a successful retirement plan, you need to invest a significant amount of money. Also, it is critical that you limit your debt exposure and repay your loans on time. Stay away from certain debts like credit cards, payday loans, and consumer debt, as much as possible. If feasible, you may secure a personal loan with a lower interest rate to repay your existing credit card debt. Whatever your age, if you’re facing problems with multiple unsecured debts, you may consider debt consolidation with low monthly payments to assist in the repayment of these debts. To restructure debt using professional help, you can enroll in a consolidation program. You may negatively impact your credit scores, but you will have a debt repayment schedule that you can live with and maintain. 

Whatever option you choose, the interest rate will be low, thus reducing your monthly payments. And it is always easier to repay multiple bills through single monthly payments at a lower interest rate.

As I mentioned before, seek an experienced financial advisor to help plan your monetary moves. And make sure you choose the right financial advisor for your particular needs. They will assist you in planning for your retirement so you can enjoy your golden years to the fullest. All the best!

Author’s Bio: Good Nelly is a financial writer who lives in Milwaukee, Wisconsin. She started her financial journey long ago and enjoys writing about consumer finance issues. Good Nelly has been associated with Debt Consolidation Care for quite a while. Through her writings, she has helped people overcome their debt challenges and has resolved numerous personal finance related queries. She has contributed relevant content for many other financial websites and blogs. You can follow her Twitter profile.

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