Here's a decade-by-decade guide to retirement planning


An illustration of a person in his 20′s holding a phone that displays her spending breakdown, including savings, college, shopping, and friends.

Josephine Flood | CNBC

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Saving for retirement is the gnarliest of delayed gratification challenges. Tucking money away today in retirement accounts with the intention you won’t touch it for decades is not a habit that most brains are hard-wired to embrace.

But save we must.

For most people, Social Security benefits won’t cover all the bills in retirement. To land in retirement in solid financial shape, you also want to build your own savings in 401(k) plans and individual retirement accounts.

It’s never too early to get started. (Hint: compound growth is your best investing friend.) Nor is it ever too late to make progress. (Another hint: Worried you won’t have enough retirement income? Consider ways to reduce your spending needs in retirement.)

Like any big goal, breaking it down into manageable bite-size pieces keeps the task from veering into overwhelming. Focusing on a few key moves in each decade will set you up for a successful retirement.

Retirement savings goal by the end of this decade:

You should aim to save about 1x your salary

Yes, you’ve got a lot of competing goals and, yes, retirement is a long way off. Understood. But the powerful math of compound growth means this is the decade where what you manage to save can exploit compound growth to its fullest.

  • Aim to save 10% of your gross salary pronto. That’s a minimum; crank it up to 15% and you’re giving yourself a serious leg up. If you wait another decade to get rolling, you’ll need to save at least 20%.
  • Focus on Roth options. Retirement accounts come in two flavors: traditional and Roth. The big difference is when you pay tax. At this life stage, when you’ve yet to hit peak earnings, saving in a Roth can be smart.
  • Got a workplace plan? Check what your employer chose for you. If your employer auto-enrolled you into a retirement plan such as a 401(k) or 403(b), chances are your contribution rate was set way too low. Some plans start you at a rate that doesn’t even enable you to pocket the matching maximum contribution most plans offer. And most plans choose an initial contribution rate that even with the maximum match won’t get you near your 10% target. No worries. You can easily change your contribution rate. Ping HR.
  • No workplace plan? Get rolling with an IRA. If you’re self-employed, or a contract worker, you can set up an IRA account at any discount brokerage. If you qualify for a Roth IRA, your maximum contribution in 2020 is $6,000. Able to save more? Check out a SEP-IRA; it allows self-employed workers to save more for retirement. Alas, SEPs only are traditional. There’s no Roth option with a SEP.
  • Check out a target date fund. If you’re flummoxed by all the investment choices, a TDF can handle the work for you. A TDF automatically chooses a mix of stocks and bonds deemed appropriate based on how long you’ve got until you expect to retire.

An illustration of a person in her 30’s holding a phone that displays her spending breakdown, including savings, dining out, shopping, friends, vacations, and rent.

Josephine Flood | CNBC

Retirement savings goal by the end of this decade:

You should aim to save about 3x your salary

  • Hands off what you have already saved for retirement. If you contributed to a workplace retirement plan in your 20s, don’t blow it by cashing out when you job hop. An unfortunate feature of workplace plans is that when you leave a job, one of your options is to cash out your retirement account. To be blunt: That’s a crazy-bad move. There may be taxes, and there definitely will be a 10% early withdrawal penalty. Moreover, you’ve just robbed your future self of money you will need in retirement.

An illustration of woman in her 40’s with laptop displaying her financial breakdown, including home, shopping, savings, dining out, vacation, groceries, and car.

Josephine Flood | CNBC

Retirement savings goal by the end of this decade:

You should aim to save about4x your salary

The challenge in this decade is to not take on big-ticket spending that can make it hard to keep up with your retirement plan.

An illustration of a man in his 50’s holding a tablet displaying his financial breakdown, including home, family/pet, groceries, car, vacation, shopping, dining out, and savings.

Josephine Flood | CNBC

Retirement savings goal by the end of this decade:

You should aim to save about 8x your salary

Saving as much as possible remains Job One. But now’s also the time to start getting a sense of how the pieces of your retirement income puzzle will fit together.

An illustration of woman in her 60’s holding a laptop showing a breakdown of her expenses, including shopping, groceries, home/pet, hobbies, savings, and dining out.

Retirement savings goal by the end of this decade:

You should aim to save about 10x your salary

You’ve rounded the bend, with retirement in your sights. The big win this decade is to assume that you will live until 95.



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