Managing Retirement Throughout Your Life: A by Decade Guide to Financial Organization
Retirement planning is a lifelong journey that evolves as career, goals, and life circumstances change. Whether just starting a career, in peak earning years, or approaching retirement, taking an organized and strategic approach to managing investments is crucial. This article lays out a roadmap by decade for your retirement journey.
20’s: Early Career - Laying the Foundation
It’s all about Compounding. Twenties are the BEST time to take advantage of compounding because there is the most time for it to work. For example, the chart shows, if a person invests $2,400/year starting at age twenty, with a 7% return, by 65 they will have ~$1.4 mill with only $108k of their money invested. At 30, to have the same amount of money by age 65, it requires $5,000/yr with a total investment of $175k; at 40: $11k/yr and $275k invested, and by age 50 $27.5k/yr with an investment of $412.5k. That is a HUGE difference!! You can read more in our compounding article.
Here are some ways to get started.
- Open a Retirement Account: If your employer offers a 401(k) or similar retirement plan, make sure to enroll. If not, consider opening an Individual Retirement Account (IRA) or a Roth IRA.
- Automate Contributions: Set up automatic contributions to your retirement accounts to ensure consistent saving. Even small amounts can grow significantly over time, thanks to compounding.
- Diversify Your Investments: Even if you're just beginning, it's important to spread your investments across various asset classes, such as stocks, bonds, and use of mutual funds. Diversification helps reduce risk and smooth out returns over the long term.
30’s: Mid-Career - Building and Growing
Note: If you have kids make sure to also have a will. Many people put this off until “later”, but that could be too late. If children are minors a guardian must be chosen. Without legal documentation, the court decides where children go and that could be in foster care. See more in our Will article.
- Build and grow investments. Thirties are a great time to build on the foundation set in the twenties OR start!! There is still time to take advantage of compounding. Talk with a financial planner who can education you on new products and opportunities only available to professional planners vs. individuals.
- Forecast what retirement may look like. Find a financial planner or online tool that can help forecast income at retirement based on current savings and investments. Its early enough to change course if needed and create a strategy to implement over the next twenty years. Caution: Many of these tools show actual dollars but fail to take into consideration inflation and taxes, lulling a person into a false sense of security. If it feels too easy… it most likely is.
- Balance between Taxable vs. Non-taxable retirement income. Ideally, you want a balance between income that will be taxed during retirement and income that will be tax-free. This enables more take home money with a much lower tax base. We don’t know what taxes will look like down the road; if taxes will go up or not.
40’s: Retirement Planning Push – Fill in the Gaps
It’s time to do a deep-dive and evaluate your current situation. Do you have a concrete strategy? If so, has it been followed? Does it need catching up. Start thinking about what retirement might look like and what kind of lifestyle you want
- Forecast Retirement Income. In your 40s, it’s crucial to forecast how much your current retirement portfolio and contributions will provide at retirement. Use retirement calculators or, better yet, work with a financial advisor to project your future income.
(Many people forget to factor in inflation, so make sure to include what buying power your future income may have. For a deep dive check out our inflation article.)
- Consider Tax Implications: Diversify your tax exposure by using a combination of tax-deferred accounts (like traditional IRAs and 401(k)s) and tax-free accounts (like Roth IRAs). This strategy can help manage your tax burden in retirement.
- Create a debt reduction strategy: Managing debt is key to retirement planning; focus on paying off high-interest debts and aim to have major loans, like your mortgage, paid off before retirement. Reducing debt frees up cash flow for retirement savings and makes retirement income stretch further.
Find the gaps in your retirement portfolio and
take action! Again, meet with a financial planner and really focus on what needs adjusting in your investments or strategy. Take a good look at spending and look for areas that can be scaled back in order to set up a good retirement. Your future self will thank you!!
50’s: Get up to Speed – Final Push
Retirement is close! For some only a few years away. For others, especially for those that lacked action earlier in life, a bit longer. But either way, it’s coming up fast! Reassess!
- Create a Concrete Retirement Vision & Budget. In your 50s, it’s time to detail what your retirement vision is and how much money will be needed to fulfill it. Create a detailed budget that includes daily living expenses, healthcare, property tax, emergencies, and any planned activities or travel. (Wyman has both a retirement vision form and detailed budget to help get you started. Contact us for more information.)
- Reassess Retirement Forecast: Review and update your retirement income forecast how much money you will receive with your current retirement funds. Take a realistic look at when to take social security, considering the whole picture and the ramifications of taking it too early.
- Forecast the Financial Picture for Each Spouse If the Other Passes Away. If married, forecast the financial picture for each spouse if the other passes away. This catches many people by surprise and may leave the surviving spouse in a poor financial position.
60’s: Pre-Retirement - Fine-Tuning Your Strategy
As you get closer to retirement, your focus should shift from growth to preservation and income.
- Create a Retirement Budget: Take an in-depth look at how much your idea of retirement will cost. Remember to include medical costs, and plan for the unknown as well as every day items and hobbies/interests.
- Reassess Your Risk Tolerance: As you near retirement, you may want to reduce the risk level of your investments to protect your savings from market volatility. When reducing risk, consider having a portion of your portfolio aimed at moderate growth to outpace against inflation over your lifetime.
- Plan for Withdrawals: Develop a withdrawal strategy that aligns with your lifestyle needs and minimizes taxes. Understanding Required Minimum Distributions (RMDs) and how they apply to your accounts is crucial to avoid penalties.
The Importance of Regular Reviews
Retirement planning is not a set-it-and-forget-it endeavor. Regularly reviewing your retirement strategy can help you stay on track to reach your goals. As life events like marriage, buying a home, or having children occur, make sure to update your plan to reflect these changes. Consider setting an annual or bi-annual review with your financial advisor to ensure your investments align with your evolving goals.
Final Thoughts
Managing retirement throughout your life requires a proactive and organized approach. Whether you’re just starting out, in your mid-career, or approaching retirement, taking the time to understand your investments, how to handle job changes, and the pros and cons of investment strategies can make all the difference. By staying informed and regularly reviewing your financial situation, you can navigate your path to retirement.
Remember, retirement is a journey and a destination. The more prepared you are, the smoother the journey will be and the more comfortable once you get there.
Welcome to Part 4 of our Leaking Money series: The Balance of Opposites. Here we dive into the everyday spending decisions that can quietly chip away at financial wellness—often without a person realizing it. Trendy vs. timeless. Cheap vs. quality. Fix vs. replace. New vs. used. Keep vs. upgrade. Most people do one or the other all the time. Always buying new, for example, when used or repaired would work just as well. Most people go about life with whatever the status quo has always been, rather than actively considering other options. It is less about choosing the “cheaper” version of the opposites and more about recognizing when each option will serve best. Rather than money leaking, an active choice is made. Soon, a variety of options are considered and spending becomes intentional vs habitual. And… ideally investing that difference in the future, whether that is debt reduction or retirement. The goal: plug the holes silently leaking money and invest the saved money elsewhere.
Even if the budget is dialed in, retirement saving is being invested, and the big items are being reviewed… those items out of sight and out of mind items may be leaking hard earned money. If left unchecked, it can have long-term consequences, especially for retirement savings. Unlike major financial mistakes, money leaks are typically small, recurring costs that add up significantly over time. Because they’re spread out and relatively minor individually, they rarely trigger alarm bells. A few minutes of awareness and action can save hundreds (or more) over the course of a year! In this four-part series, we explore hidden ways people leak money and cover specific steps to “plug” the holes. This article covers those “out of sight, out of mind” leaks that most people don’t even think about.
In this four-part series, we explore hidden ways people leak money and cover specific steps to “plug” the holes. It's easy to lose track of spending when small habits add up. These seven shopping behaviors might seem harmless, but they're quietly draining your money—and could be holding you back from a stronger retirement: Online Social Boredom Retail Therapy Occasion Impulse Envy Status Money has a funny way of disappearing. You work hard for it, save diligently, and plan for the future—but somehow, there never seems to be enough left at the end of the month. This phenomenon is known as "leaking money," the gradual and often unnoticed loss of funds through unnecessary expenses, inefficient financial habits, and lack of awareness. If left unchecked, it can have long-term consequences, especially for retirement savings. Unlike major financial mistakes, money leaks are typically small, recurring costs that add up significantly over time. Because they’re spread out and relatively minor individually, they rarely trigger alarm bells. However, their cumulative effect can be devastating to your overall financial health. Hidden Ways Money Leaks while shopping (and actions to take) There are many reasons we shop: needs, as an event, socializing, boredom, therapy, impulsive, envy, status. And many of these cause money leak. Not the kind you plan for, like groceries or back-to-school supplies—but the kinds that sneak up and chips away at goals. Here are some common shopping habits that might be costing you more than you think:
What if by making some simple food changes, you could have $62,053 more in your retirement kitty in just ten years? By making simple changes in these five categories, you can make a significant difference. Food Waste Outside the Home Online meal delivery Shopping Composition Shopping Locations Money has a funny way of disappearing. You work hard for it, save diligently, and plan for the future—but somehow, there never seems to be enough left at the end of the month. This phenomenon is known as "leaking money," the gradual and often unnoticed loss of funds through unnecessary expenses, inefficient financial habits, and lack of awareness. If left unchecked, it can have long-term consequences, especially for retirement savings. Unlike major financial mistakes, money leaks are typically small, recurring costs that add up significantly over time. Because they’re spread out and relatively minor individually, they rarely trigger alarm bells. However, their cumulative effect can be devastating to your overall financial health. In this four-part series, we explore hidden ways people leak money and cover specific steps to “plug” the holes. As a bonus, the example savings will be added up for a total amount that could be invested.
We all procrastinate in some areas of life—putting off that dentist appointment, delaying the gym membership, or avoiding that home repair project. But when it comes to financial planning, procrastination can have serious long-term consequences. The cost of waiting can translate into lost opportunities, higher expenses, and increased stress. So why do people put off financial planning, and what does it really cost? More importantly, how can you take simple steps today to set yourself up for a more secure future? Let’s break it down.
When you think about advice from a financial advisor, you probably expect tips on budgeting, retirement planning, or investment strategies. But in today’s digital age, financial security goes beyond managing your money—it also means safeguarding your personal data from hackers and fraudsters. Cybersecurity may not be the first thing that comes to mind when you think of financial health, but the two are closely linked. A data breach can lead to identity theft, drained accounts, and long-term financial damage. That’s why this article isn’t just about building wealth—it’s about protecting it. Let’s explore how you can defend your finances from hackers, RFID theft, and data leaks, and take steps to ensure your hard-earned money stays safe.
When you’re in your 20s or 30s, retirement might seem like a distant future, something to worry about later. But the truth is, the decisions you make now can have a massive impact on your financial well-being in the years to come. The key to building a secure financial future lies in understanding one of the most powerful concepts in investing: compounding. In this article, we’ll break down how compounding works, why it’s so crucial to start saving early, and provide examples that illustrate its transformative power. What is Financial Compounding? Compounding is the process where your investment earns returns not just on the original amount you invested (the principal), but also on the returns that investment has already generated. It’s often referred to as “interest on interest,” and it’s what can turn a small initial investment into a substantial sum over time.
As you approach your 40s and 50s, retirement is no longer a distant dream—it's rapidly becoming a reality. Whether you’ve been diligently saving and investing for years or just started to take retirement seriously, now is the critical time to review, reassess, and realign your financial strategies. Your future self will thank you for taking the time to make sure you're on the right track. 1. Evaluate Your Current Situation The first step in your retirement planning push is to take stock of where you stand financially. By now, you’ve likely accumulated some savings in a 401(k), IRA, or other retirement accounts. But do you know how much you’ve saved so far and how it aligns with your retirement goals? Example: Let’s say you’re 45 years old with $300,000 saved for retirement. A rough estimate might suggest that you’ll need at least $1 million to $1.5 million to retire comfortably, depending on your lifestyle, health, and desired retirement age. This might seem like a big gap, but with the right planning and adjustments, it’s not insurmountable. Action Step: Calculate your current savings and compare them against a retirement savings benchmark. Use online retirement calculators to get a more personalized estimate of how much you should have saved by now and what you’ll need to save in the coming years.
Inflation is a term we hear often, especially when the prices of goods and services seem to creep upward over time or the size of a commodity gets smaller for the same price. But what exactly is inflation, and how can we protect our retirement savings from its effects? To build a strong retirement plan, it's crucial to understand how inflation works, what constant dollars mean, and the strategies you can employ to safeguard your hard-earned savings. How Inflation Works Inflation refers to the general rise in prices over time, which reduces the purchasing power of money. In simpler terms, the dollar in your pocket today won’t buy as much in the future as it does now. One of the causes of inflation is the imbalance between supply and demand in an economy, often fueled by factors like increasing costs of production, labor, and demand for goods. Economists generally distinguish between two types of inflation: Demand-pull inflation occurs when the demand for goods and services exceeds supply, driving prices higher. Cost-push inflation happens when the cost of producing goods increases, prompting businesses to raise prices to maintain profit margins. Both forms lead to the same outcome: your money becomes less valuable over time. Inflation is often measured using the Consumer Price Index (CPI), which tracks the price changes in a basket of commonly used goods and services, like cereal, lumber, toothpaste, medical costs. The Concept of Constant Dollar
As a parent, your primary concern is the well-being and future of your children. You work hard to provide for them, nurture them, and ensure they grow up in a safe and loving environment. But have you considered what would happen to them if you were no longer around? It’s a difficult thought, but planning for the unexpected is one of the most important responsibilities you have as a parent. This is where having a will becomes critical—especially when it comes to the guardianship of your children.