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Retirement Planning for The Decades

Whether you're just starting your career or nearing the golden years, planning for retirement is a journey that evolves over time. Here are some general guidelines that you can put in place at every age to prepare for retirement.  

Setting the Foundation - Your 20’s: In your 20’s, retirement can seem distant, but it’s the perfect time to establish good financial habits. Learn to set a budget, stick to it, and pay yourself first.  Aim to save 10% of your gross salary by contributing to your employer 401k. This will allow you to take full advantage of any employer matches and not leave money on the table.  During this stage if you’ve yet to hit peak earnings, a Roth 401k may be the smart choice.  

Keeping the Balance - Your 30’s: In your thirties, family and work obligations increase and you can start to fall prey to lifestyle creep. Being conscious of debt and building your retirement savings should be a priority in your 30’s.  With every increase in your salary, increase your 401k contributions.  Aim to save 15% of your gross salary. You should have the equivalent of 1.5-2.5 times your salary in 401k savings by the end of your 30’s.   Set an emergency savings goal of 6 months of expenses so the inevitable surprises don’t throw you off track.

Continuing the Momentum - Your 40’s: At this point it’s a good time to start reviewing your financial plan to see if you are on track. If the numbers give you pause, you’ve got time to crank up the saving. Don’t forego retirement savings for college funding, there must be a balance between both. Ultimately what your kids really need from you is to be able to take care of yourself in retirement. They will be at a point in their lives when they are in the throes of raising their own family and have their own financial considerations.

The Light at the End of the Tunnel – Your 50’s:  By now, you should have 6-8 times your salary saved in retirement accounts.  At this point, you should start getting a sense of how the pieces of your retirement income puzzle will fit together. Review your retirement goals and adjust your savings accordingly. You should be maximizing contributions to the annual limit in your retirement accounts and funding catch-up contributions that are only available when you turn 50. Consider diversifying your investments to manage risk and adjust your asset allocation as you approach retirement age.

Final Preparations – Your 60’s:  In your 60’s, retirement is on the horizon, and it's time to fine-tune your plans. Plan on a 30-year retirement. Evaluate your projected retirement income and expenses to ensure you have a solid financial foundation. Understand Social Security benefits and when it makes sense to start claiming them. Consider how you'll manage healthcare costs in retirement and explore long-term care insurance options. This is also a good time to create a withdrawal strategy for your retirement savings to ensure your savings last throughout your retirement years

Retirement marks the culmination of decades of hard work and planning. The earlier you start, the more it allows you to overcome the inevitable mistakes along the way. Once you retire, continue to monitor your finances and adjust your spending as needed. Remember, retirement isn't just about financial preparation—it's also about enjoying life and pursuing your passions. No matter which stage of life you're in, it's never too early or too late to start planning for retirement.

DISCLAIMER: Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this (article) serves as the receipt of, or as a substitute for, personalized investment advice from Elmwood Wealth Management. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.