The biggest retirement planning mistake? Using the same strategy across all decades of your life. Each age requires dramatically different tactics. Here's exactly what to do (and what to avoid) at every stage.
Your 20s: The Compound Interest Decade
💡 The Power Move: Start with Just $200/month
Starting at 25 vs 35 with $200/month makes a $627,000 difference by retirement. That's the price of a house—just from starting 10 years earlier.
Your 20s Action Checklist:
- ✓Contribute 10-15% to 401k (minimum to get full employer match)
Missing employer match = leaving free money on the table. If they match 3%, contribute at least 3%.
- ✓Open a Roth IRA and max it out ($6,500 in 2024)
Tax-free growth for 40+ years. In retirement, you'll thank yourself for paying taxes on $6,500 instead of potentially $500,000+.
- ✓Invest aggressively: 90% stocks, 10% bonds
You have 40 years to ride out market volatility. Play it safe now = guaranteed poverty later.
- ✓Build emergency fund: 3-6 months expenses
Keep this in high-yield savings (4.5%+ APY). Don't let market crashes force you to sell investments.
🎯 Target: Have 1x your annual salary saved by age 30
Your 30s: The Acceleration Decade
💡 The Power Move: Max Out Tax-Advantaged Accounts
Total possible: $29,000/year ($23,000 401k + $6,000 IRA). If married: $58,000/year combined. This saves you roughly $10,000-15,000 in taxes annually.
Your 30s Action Checklist:
- ✓Increase savings rate to 20% minimum
Every raise = immediately increase retirement contributions. Lifestyle inflation is your enemy.
- ✓Optimize portfolio: 80% stocks, 20% bonds
Still aggressive, but slightly more conservative as retirement approaches.
- ✓Get life insurance: 10-12x annual income
Term life insurance costs ~$300/year for $1M coverage. Protect your family's financial future.
- ✓Start mega backdoor Roth if possible
Contribute up to $69,000/year total to retirement accounts if your 401k allows after-tax contributions.
🎯 Target: Have 3x your annual salary saved by age 40
Your 40s: The Peak Earning Decade
💡 The Power Move: Catch-Up Contributions
At 50, you can contribute an extra $7,500 to 401k + $1,000 to IRA = $8,500 more per year. Over 15 years, that's an additional $280,000+ in retirement savings.
Your 40s Action Checklist:
- ✓Maximize everything: 401k, IRA, HSA
This is your peak earning decade. Save 25-30% of income if possible.
- ✓Rebalance portfolio: 70% stocks, 30% bonds
Start shifting toward stability as retirement approaches, but stay growth-focused.
- ✓Plan for kids' college (if applicable)
529 plans offer tax-free growth. But never sacrifice retirement for college—kids can get loans, you can't get a retirement loan.
- ✓Consider Roth conversions
Convert traditional IRA to Roth during lower-income years. Pay taxes now at lower rates.
🎯 Target: Have 6x your annual salary saved by age 50
Your 50s: The Sprint to the Finish
💡 The Power Move: Supersize Your Savings
With catch-up contributions, you can save $37,500/year in tax-advantaged accounts. Plus max out HSA for another $4,550. Total: $42,050/year tax-advantaged.
Your 50s Action Checklist:
- ✓Use all catch-up contributions available
401k: $30,500 total, IRA: $7,500 total, HSA: $4,550 (if 55+: extra $1,000)
- ✓Conservative shift: 60% stocks, 40% bonds
Protect gains while maintaining growth. You can't afford a major loss this close to retirement.
- ✓Create retirement budget
Track current expenses. Rule of thumb: need 80% of pre-retirement income, but validate with your actual spending.
- ✓Maximize Social Security
Delay until 70 if possible. Benefits increase 8% per year from full retirement age to 70.
🎯 Target: Have 8x your annual salary saved by age 60
Your 60s: The Transition Decade
💡 The Power Move: Strategic Withdrawal Planning
The order you withdraw from accounts can save you $100,000+ in taxes over retirement. Generally: Taxable accounts first, then traditional retirement accounts, Roth last.
Your 60s Action Checklist:
- ✓Final portfolio adjustment: 50% stocks, 50% bonds
Balance growth with stability. You still need growth—retirement might last 30 years.
- ✓Plan RMD strategy
Required minimum distributions start at 73. Plan now to minimize tax impact.
- ✓Optimize Social Security timing
Each year you delay from 67 to 70 = 8% higher payments for life. Do the math.
- ✓Healthcare transition planning
Medicare starts at 65. Budget $5,000-12,000/year for premiums and out-of-pocket costs.
🎯 Target: Have 10-12x your annual salary saved by retirement
The Numbers That Matter
Savings Rate by Age
- 20s: 10-15% minimum
- 30s: 20% minimum
- 40s: 25-30%
- 50s: 30%+ with catch-ups
- 60s: Maintain until retirement
Asset Allocation by Age
- 20s: 90% stocks, 10% bonds
- 30s: 80% stocks, 20% bonds
- 40s: 70% stocks, 30% bonds
- 50s: 60% stocks, 40% bonds
- 60s: 50% stocks, 50% bonds