There’s undoubtedly a lot to keep track of when it comes to managing our personal finances. We keep tabs on our spending, savings, investments, debts and even the ups and downs of our credit score.
Making sure we’re on the right track to retirement may not seem as urgent, but it’s arguably the most important facet of our finances to keep an eye on. After all, you don’t want to be nearing your nonworking years and realize that you aren’t financially prepared to stop working.
In your 20s: Save as much as you can
Your 20s are a financially tough decade. You just graduated college, perhaps with student loans, and are embarking on a new lifestyle that entails paying rent, utility bills and more, all on an entry-level salary.
″When you’re just starting out at work, you might find that retirement feels like a lifetime into the future,” Meadows says. “But don’t squander your biggest savings advantage: time.” The earlier you start putting money toward your future, the more it can grow.
Start with depositing a percentage of your paycheck each pay period into a 401(k), if your employer offers one. Many employers also match your contributions up to a certain percentage.
“You might not be maxing your contributions, but saving at least enough to maximize your company match will keep you feeling like you’re on the right track,” Meadows says.
Your goal by the time you turn 30: Have 1X your salary saved. This benchmark includes the money in your savings, retirement accounts, company matches and your investments.
IRAs are a great alternative to a 401(k), and you can set up recurring transfers from every paycheck so you never have a chance to miss saving up for retirement.
When shopping around for an IRA, choose an account that has no minimum deposits and provides a variety of investment options. Some top providers include: Charles Schwab, Fidelity Investments, Vanguard and E*TRADE. Or, consider a robo-advisor that offers IRAs and/or Roth IRAs, like Wealthfront or Betterment, which both create a custom portfolio of investments based on your personal goals.
In your 30s: Save more
As you get older, move up in your career and earn a higher salary, you likely have a greater ability to save than you did in your 20s. Use this opportunity to contribute more to your retirement with every bonus, raise or promotion at work.
“You know you’re on the right track when you’re able to contribute over that match and start getting closer to maximizing how much you put away,” Meadows says. Experts suggest aiming to save at least 15% of your gross salary.
Your goal by the time you turn 40: Have 3X your salary saved.
In your 40s: Watch your expenses
Your expenses will likely rise in your 40s as you grow a family and take on big-ticket items like a mortgage. The key is to continue contributing to your retirement as you have been, but watching your new expenses to make sure they don’t eat away at your progress.
Paying for your kid’s college years can make a big dent later on in your retirement savings. Earmark savings for higher education by investing in a 529 account where your earnings and withdrawals (as long as used for qualified education expenses) are tax-free.
Your goal by the time you turn 50: Have 6X your income saved.
In your 50s: Go over the details
Your 50s are a great time to get down to the nitty-gritty of funding your retirement. Meadows suggests using these years to make a draft of a budget and a list of potential expenses. Soon-to-be retirees may want to also consult a financial planner who can help create a customized plan.
When you turn 50, don’t forget about the additional boost to your savings using catch-up contributions. “Catch-up contributions in 401(k)s are there because you might not have saved enough in the 20 years prior,” Meadows says. Workers ages 50 and older can contribute an additional $6,500 per year in their 401(k) and another $1,000 in their IRA.
Your goal by the time you turn 60: Have 8X your income saved.
In your 60s: Reassess
“Now that you’ve reached your 60s, it’s a critical time to ensure you’ve saved enough,” Meadows says. If you realize you haven’t, it may be worth making last-minute moves that can save you a considerable amount of money, like downsizing your lifestyle.
Matt Rogers, a CFP and director of financial planning at eMoney Advisor, also suggests getting a Social Security estimate from the Social Security administration to confirm expected benefits. “This will help set expectations and make plans more realistic,” Rogers says. “Oftentimes, Social Security is estimated to replace 30% to 40% of pre-retirement income.” Remember to also check that retirement plans and pensions have the correct beneficiary listed.
Keep in mind that delaying collecting Social Security pays off. Though you can start receiving benefits at age 62, you are entitled to 100% benefits at your full retirement age. Waiting to age 70 means your benefit amount increases even more.
Your goal by the time you retire at age 67: Have 10X your income saved.
The Personal Capital budgeting app is another popular option with retirement savers. In addition to being a basic budgeting app, Personal Capital acts as an investment tool that links to your bank accounts and credit cards, as well as IRAs, 401(k)s, mortgages and loans. Its money-tracking dashboard makes it easy to see an overall view of all your personal finances in one place.