Mileposts for your financial journey

Do you ever have those nagging doubts in the back of your mind whenever the subject of money comes up?  Ever ask yourself if you’re saving enough money, if it’s growing fast enough, or if you’re where you need to be at your age?

It’s a feeling of uncertainty that can turn into a full-scale panic if you don’t get those questions answered.  To help you do that, I’ve put together some very general mileposts to give you something to shoot for, whether you’re just getting started on your lifelong financial journey or nearing the finish line:

• In your 20s:
  • Start saving with your first paycheck; aim for 15% of your take-home pay
  • Build an emergency cash reserve equal to 30% of your annual net income
  • Put enough in your employer’s retirement plan to earn the full match
  • Fund a Roth IRA while your income and tax bracket are still low
  • Invest for long-term growth, but diversify
  • Savings goal: 1x your annual salary by the time you turn 30
• In your 30s
  • Try to save the maximum in your company retirement plan, plus your Roth or traditional IRA
  • Eliminate all student loan and credit card debt
  • Make sure you are adequately insured: health care, disability, auto, home, and life (especially if you’ve started a family)
  • Open 529 plans for your children
  • Create a will
  • Savings goal: 3x annual salary by the time you turn 40
• In your 40s
  • This is your wealth-building decade, try to boost your savings rate
  • Keep frivolous spending under control
  • Eliminate all non-mortgage debt
  • Have a full financial plan put together to keep you on track
  • Save more for your kids’ education, but not at expense of your own goals. You can borrow for college, but not for retirement.
  • Start a health savings account (HSA) and max out contributions each year
  • Savings goal: 6x salary by the time you turn 50
• In your 50s
  • These are your peak earning years. Take advantage of retirement savings catch-up provisions starting at age 50
  • Do some detailed retirement planning: what it will look like, and what it will cost
  • Start exploring retirement health care options
  • Rethink your long-term housing options once the kids leave the nest
  • Create a comprehensive estate plan
  • Savings goal: 10x salary by the time you turn 60
• In your 60s
  • Create a retirement income/spending plan
  • Enroll in Medicare at age 65 and start drawing Social Security by age 70
  • Eliminate all debt
  • Update financial and estate plans regularly
  • Savings goal: 15x salary by the time you retire
• 70s and beyond
  • Start required minimum distributions (RMDs) from traditional IRAs and other retirement plans by age 72
  • Start designing your legacy. Who will ultimately benefit from your financial success, and how?
  • Be grateful for what you’ve achieved – and enjoy it!

Again, these are general guidelines designed to give you a rough idea of how you’re doing financially; they are no substitute for a serious plan that considers your specific goals and circumstances.

If you feel behind, let me offer three simple pieces of advice:  1) set some priorities and put a plan together to achieve what’s most important, preferably with the help of a qualified financial advisor; 2) break your top goals into small, manageable tasks and start picking them off one at a time; and 3) get started right away – because time and compounding are the best friends you’ve got.