Financial Planning for Every Stage of Life
Posted on July 16, 2019
Topic Categories: Consumer Help
By Brian Bushman - Financial Advisor, Saxon Financial Services
Managing your finances from early adulthood to well after you retire is like running a marathon. You are trying to reach your goal in a desired amount of time. In order to do this, you need to reach smaller goals along the way. As you get older, there are many “milestones” that you can use to evaluate your progress and make sure you’re on the right track. Here are some guidelines to keep in mind based on your age.
In Your 20s
Aside from starting a career, the most important thing you can do in your 20s is to start good financial habits. Start saving NOW! Consider saving 10-15% of your pre-tax income for retirement. Time is one of the most important factors to saving for retirement. For example, saving $100 per month starting at age 20, earning 8% per year would be worth $527,461 at age 65. If you wait until age 40 to start saving the same amount, you would have $95,101 at age 65.
In Your 30s
If you didn’t start saving in your 20s, you should consider saving 15-20% of your pre-tax income starting in your 30s. Contribute to your company sponsored retirement plan. Be sure to contribute enough to receive the full company match. Most company plans will allow you to contribute up to $19,000 of your own money in 2019.
In Your 40s
If you haven’t started already, begin to establish cash reserves and pay off debt. Having an emergency fund can be crucial to prevent running up debt when you need a new water heater or your car breaks down. You should also begin paying off your non-mortgage debt. Credit cards typically charge outrageous interest rates. Pay these off now!
In Your 50s
This is the time to max out your retirement. Turning 50 allows you to begin making Catch Up contributions to your company retirement plan and your IRA. For example, in 2019 you can contribute $19,000 to your 401k or TSP plus a catch up contribution of another $6,000 for a total of $25,000. You can contribute $6,000 to an IRA plus a catch up contribution of another $1,000.
In Your 60s and beyond
One of the toughest decisions for some people is deciding when to start Social Security. You are eligible to start Social Security at age 62, however starting at that age may not be the most beneficial for your situation. Starting at age 62 can result in a 30% reduction in benefits compared to waiting until full retirement at age 67. If you wait until age 67 however, you are missing out of 5 years worth of payments.
It can be a daunting task staying on track with all of these milestones, but don’t get discouraged. Assess your current situation and develop a plan to get or stay on track to reach your goals. It can be helpful to consult with a financial planning professional to put your financial plan together. For information about the services available through Cinfed, see the Investment Services web page.