Retirement Savings by Age: The One Thing You Should Be Doing Now

Everyone’s financial goals are different. But one thing is the same: We should all be thinking about our retirement savings goals. By adjusting your retirement planning strategies in each of life’s key phases, you can maximize your chances of retiring comfortably. 

Three Age Benchmarks to Follow

From your 20s all the way to the cusp of retirement, here are the steps to retirement savings by age, with key retirement savings benchmarks and how much you should be saving.

Step 1: Age 25–35 — Start Your Retirement Savings

Most people finish up their education by their mid- to late-20s and start their careers. Maybe you’ve landed your first job and even gotten married, which means getting your personal finances in shape should be high on your list of priorities. Sure, it’s a great time to have fun and travel, but your goals also might include paying off debt, saving for a home, establishing a college fund for your children and putting away funds for retirement.

It can seem like retirement is a world away. But it will sneak up faster than you think, and thanks to things like compound interest, anything you put away has a chance to grow immensely by the time you’re ready to retire. So, you’d be smart to begin saving for retirement as a young adult.

A good goal at this stage is to put away approximately 10 percent of your income for retirement, and to increase this amount if you get a raise — especially if your employer offers matching funds in a 401(k) or other retirement fund.

Investing in your 20s allows your returns to compound over a longer period. Contributing even a small amount of money into a retirement or savings account, you’ll get into the habit early and benefit from compounded interest.

Step 2: Age 35-55 — Increase Your Contribution

These are the peak earning years for your retirement savings. While putting away money for your children’s college education or a bigger house may also be priorities, now is the time when your nest egg can really grow. By this age, you’ll likely be bringing home a larger paycheck, and you may even benefit from bonuses or inheritance that can contribute to your investments. Plan to save as close to 20 percent of your income as possible.

Step 3: 55 to Retirement — Create a Retirement Budget

At this stage, your thoughts are probably turning toward retirement. You may be asking yourself when you should retire and how much money you need to retire. That’s a question for your financial advisor, of course. But there are some rules of thumb to lean on. 

On average, a man who is 65 now can expect to live to 82, and a woman who’s 65 can expect to live to 85. Your retirement planning should factor in the possibility of a longer life than past generations.

There’s a good chance you may be an empty nester now. To help cut costs, you might consider downsizing. While a bigger house may seem tempting, something smaller might be your best move. A condo or townhome might be much more affordable than the five-bedroom house where you raised your children.

This goes for your vehicle, too. You may not need the gas guzzler anymore, but something smaller and more efficient. By cutting costs, you may be able to save even more money. 

Draw up a budget for what you spend now, and then do the same for what you anticipate spending upon retirement. Consider the expenses that you’ll no longer incur once you’re finished working, but also think about what you might want to spend more on, such as leisure activities and traveling. That will help you decide when to retire and what you can do once you do.

How Do You Want to Spend Your Retirement?

Whether you’re retiring soon or have years to go, reach out to your local Farm Bureau agent to put you in the best position for retirement.