Planning for Retirement Through Life’s Changes

There’s no single way to go about planning for retirement. That’s not just true from person to person, but it’s also true for you through the years. A good approach for you at 25 probably won’t be the same as when you’re 40 or 60 years old. In fact, it will probably look a lot different, and it should.

When you’re just starting out, you’re still learning about getting on a budget, managing your money and figuring out where and how to save for the best return. More sophisticated retirement planning comes with time, and it’s built on the foundation of everything else that you’ve already set in motion.

Your 20s: Hello 401(k)

When you’re fresh from College and just getting started out in the world, your whole saving experience is probably limited to a childhood piggy bank and a simple savings account at your financial institution. This is the time when things begin to change a lot, and the 401(k) might be the first plan that you meet. More and more businesses offer them, probably some that you might not expect.

A 401(k) is an employer-sponsored savings plan that lets you set aside some of your pay into savings before it’s taxed, which means you have more available to save. Taxation doesn’t happen until much later, or if you withdraw early. Early withdrawal usually comes with a hefty fee.

Your employer can also contribute to your 401(k) in what’s known as matching contributions, says Investopedia. Your savings and everyone else’s in your company is often invested mutual funds with stocks, bonds and money market funds, says the Wall Street Journal.

You can’t withdraw from your plan until you reach 59 1/2, at least not without paying a 10 percent penalty at tax time. And if you’re worried about a company going under and taking your savings with it, don’t. The Wall Street Journal explains that in most cases, 401(k)s are “off limits” and would be terminated. You can roll it over into your new company’s 401(k) or open a personal IRA.

You can start either a 401(k) or an IRA at any time. If your company doesn’t offer a 401(k), then an IRA is the way to go. Your IRA contributions are taxed before you contribute, but that also means you can access your money at any time after an initial 5-year holding period.

Your 30s: Branching Out Into Emergency Savings

You’ll always work on planning for retirement. But in your 30s, you’ll probably want to think long and hard about building up an emergency savings fund that can catch you when something doesn’t go as expected.

By now, you’ve learned that no job really lasts forever, and sometimes a job can evaporate with almost no warning. And if you’ve been fortunate enough to secure a job that has a strong foundation, you’ve seen that other things can go wrong to rattle your best-laid plans.

If your car breaks down, you have an unexpected medical emergency or anything else comes up where you need a large sum of money but can’t afford to dip into your pay, an emergency fund keeps you on your feet until the emergency is handled.

An emergency fund might not seem like retirement planning on it face, but it it is part of your whole plan. It’s what helps you keep the rest of your plans on track. Bankrate says that you should start building it with a single goal in mind. You should aim for 3 to 6 months’ worth of your regular monthly expenses (including food and transportation), and then grow it larger if you can. With a years’ worth, you know you have a comfortable safety net.

Start small, with about $1,000. That can buy a new set of tires or pay an expensive hospital copay, then work up until you have what you need. All the while, keep contributing to your 401(k) or IRA as usual. Now you have retirement planning plus emergencies well in hand.

Your 40s: Your Time to Shine

Your 40s are like no other time in your earning career. Although it varies by person, in general this decade comprises your peak earning years, says Fox Business. You’re more likely get healthy raises, and you need a strategy to save that additional money for retirement.

If you’re like most people, you started your 401(k) with a modest amount set aside from every paycheck. You probably knew that there was a max that you could save, but you might not have taken advantage of that. Now is the time.

When you get a raise or move to a new job with higher pay, make the switch to max out your 401(k) plan contributions. And Fox Business also recommends that you diversify. You can have a 401(k) and a Roth IRA, which give you similar benefits in two different types of plans.

Wells Fargo also says that this is a good time to step back and review your retirement plan and make adjustments as necessary. Are you on track for what you’ll need at retirement? If you’ve been saving but also running on autopilot, you might not even know. Check out a retirement calculator now to see where you stand and where you need to be. NewRetirement’s retirement calculator can make that part easy.

Instead of just thinking about saving, start thinking about retirement goals. Where and how do you want to live? Do you have family that you want to care for? Is your emergency fund still adequate in case something major comes your way? And is your debt under control? These are questions to ask yourself before you reach the decade of your 50s.

Your 50s: It’s Time to Finesse Your Plan

By the time you reach your 50s, you’ve got money management, debt and retirement savings all well in hand. But chances are you could still make some changes to maximize what your retirement income will be.

Now is the time to really hone in on all of the elements of your retirement plan to be sure that everything is working at top efficiency. For example, Wells Fargo says that you can now take advantage of catch-up contributions with your 401(k). That means your former max allowable contributions go up, so you can save more tax-deferred. Catch-up contributions are also allowed with you IRA. 401(k) catch-up contributions are $6,000 over and above your usual contributions in 2015, and your IRA lets you save $1,000 more than usual.

If you haven’t yet gotten a good handle on debt, now is the right time to tackle that. The less you carry with you into retirement, the better off you’ll be. Debt, or lack thereof, will also affect how much retirement income you’ll need later.

Annuities are another possibility. There are several different types of annuities, and no single one is right for everyone. Some retirees don’t want an annuity at all, because they do come with some limitations. But for others, they offer permanent, safe income that will never change for as long as you (and perhaps even your spouse) live.

Your 50s are when you start winding up your plan and getting it ready to set into action. Revisit a retirement calculator to be sure that you’re still on track. If you’re using one like the NewRetirement calculator, you’ll also see options, such as different ways to invest and save, that you might not have thought about. A chat with a financial planner might also be in order.

Retirement planning is never one single thing. It’s a living, growing, changing entity that evolves through the years as you do. When you’re very young and just starting out, saving anything at all is a good start. That’s when you learn about money management, find out what’s available to you and start trying your hand with all of the different possibilities.

As you learn and grow through your career, you’ll find more ways to save more efficiently, make the most of your money, and carve out a plan for retirement income that suits what you will need. You don’t have to be a financial wizard or have a fancy stock portfolio. With a solid plan and the determination to stay on track, your retirement can be as solid as anyone else’s. And NewRetirement is here to help you get there.

If all of this still seems a little overwhelming, we’ll help you find the right retirement advisor for you. Planning for retirement might seem confusing now. But once you’re on your way, it’s just one more way that you take care of your money and your future.