Summary
A good rule of thumb is to save between 10% and 20% of pre-tax income for retirement. If your employer matches your contributions, you may be able to get away with less. Taking more risk usually leads to larger returns, but your losses will be steeper if the stock market tanks.
If you plan to retire early or people in your family often live into their mid-90s, you’ll want to save more. If your company offers a 401(k) plan, a 403(b) plan or any retirement account with matching contributions, contribute enough to get the full match. A dollar invested in your 20s is worth more than a dollar invested.
Building an emergency fund that could cover your expenses for three to six months is a great way to safeguard your retirement savings. Take on as much risk as you can mentally handle, which means you’ll invest mostly in stocks with a small percentage in bonds. Tame Lifestyle Inflation by investing a certain percentage of each raise and then use the rest as you please.
If you earn too much to fund a Roth IRA, or you want the tax break now, you can contribute to a traditional IRA. The deadline to contribute isn’t until tax day for any given year, so you can still make contributions for 2024 until April 15, 2025.
If you’re in your 40s and started saving early, you may have a healthy nest egg by now. But if you‘re behind on your retirement goals, now is the time to ramp things up. Stay invested mostly in stocks, even if it’s more unnerving than ever.
Consider refinancing your mortgage to get the lowest rate. Keep getting that full employer 401(k) match. If you have extra money to invest, consider allocating more to your IRA. Or you could invest in a taxable brokerage account if you want more flexibility on how to invest.
In your 50s, you may want to start shifting more into safe assets, like bonds or CDs. Your money has less time to recover from a stock market crash. If you’re behind on retirement savings, give your funds a boost using catch-up contributions.
Many people are forced to retire earlier than they planned. It's essential that you earn as much as possible while you can. Financial planners generally recommend replacing about 70% to 80% of your pre-retirement income. Someone in their 60s in 2024 could easily spend another two to three decades in retirement.
You can take your Social Security benefits as early as 62 or as late as age 70. The earlier you take benefits, the lower your monthly benefits will be. If your retirement funds are lacking, delaying as long as you can is usually the best solution. If you’ve paid off your home or have significant equity, a reverse mortgage can provide extra income.
If you have a Roth IRA, you can let that money grow as long as you want and then enjoy it tax-free. But you’ll have to take required minimum distributions, or RMDs, beginning at age 73 (previously age 72) If you have 401(k) or a traditional IRA, these are mandatory distributions based on your life expectancy.
If you’re like most people, you”ll work for decades to get to retirement. The earlier you start planning for it, the more stress-free it will be. After all, no one else is going to come to the rescue if you get to retire with no savings.
