How you should prepare for retirement often varies significantly by age. Here’s how to improve your retirement readiness at any age:
30s. In your 30s, additional responsibilities are likely to enter your life. Families are often started and careers evolve. You have probably left behind the unencumbered life of your 20s and changed into a parent and provider. Retirement is still a long way off, but planning for your future begins to make more sense. Along with figuring out how you will put the kids through college, you will hopefully begin to take advantage of a 401(k) plan or other savings vehicle offered by your employer. Pre-tax investments become very attractive at this age because your investments are able to grow tax free until you take the money out in retirement. With a seemingly endless stream of bills, you will begin to learn how to control your spending and budget. Retirement planning probably won’t be your main focus during this decade, but it becomes more important than deciding what you will do when Saturday rolls around.
40s. By this decade your kids are getting older, and probably starting to think about college and graduate school. Once you reach the end of the education process, you may be able to focus on reducing debt now that you actually have some money available to do so. Perhaps you will take a vacation with your spouse to celebrate successfully putting the kids through school. Retirement is getting closer and starts to come up in discussions, especially with those a bit further down the road in age. It is not too early to begin preparing, but there is still a lot going on to keep your mind and efforts otherwise occupied.
50s. Next you enter the fabulous 50s and begin to realize that retirement is no longer some distant dream. If you plan on retiring at 65, you have only 15 more years to build a nest egg to the point where you will not have to work if you so choose. Now is the time to begin to look more closely at how much you will need to live a fulfilling retirement. Determine where your money will come from and how much you will have accumulated by retirement age. If you are on track, you only need to continue what you are doing. If you fall short of what you will need to live the lifestyle you desire, you still have a little time to make adjustments. The longer you wait to ramp up your savings, the more difficult it will be to retire.
In addition to the financial aspects of retirement planning, your 50s should be a time to begin considering the essential elements that will allow you to live a meaningful and exciting second act. It is not too early to begin thinking about what you will do to stay mentally and physically active and avoid boredom in retirement. The time is right to explore hobbies and interests that will fill your daily life when you are no longer working. Now is the perfect time to rediscover the passions you ignored while tied to the working world. Think about what excites and thrills you and makes you want to get out of bed each morning. Retirement will be a time to focus on those satisfying endeavors. And you don’t have to wait until retirement to begin these activities. Retirement could be a much smoother transition if you start testing out these activities before you clock out of work for the last time.
60s. When you get to your 60s, retirement becomes a central focus. You are almost there. Hopefully you adjusted your savings strategy in your 50s to make sure you will be able to retire at your desired age. With fewer years left to make adjustments, you may be forced to live within the world you have created up to this point. Some people may have to consider extending their working days to fill in any deficits.
A fulfilling retirement has the best chance of being achieved over a lifetime of planning and preparation. Although 20 may seem too early to start, the sooner you get under way, the better chances you will have to end up happy in the end.
Dave Bernard is the author of "I Want To Retire! Essential Considerations for the Retiree to Be". Although not yet retired, he focuses on identifying and understanding the essential components of a fulfilling and meaningful retirement. He shares his discoveries and insights on his blog Retirement-Only The Beginning.