Retirement Savings Tips: From Your 20s to Your 60s

Retirement planning is a lifelong journey, and after nearly 20 years as a financial advisor, I’ve often seen people seeking advice that doesn’t quite fit their current life stage. The reality is that your retirement savings and investment strategies need to evolve as you do. What works at 30 likely won’t work at 60. That’s why it’s essential to adjust your approach over time, factoring in your resources, risk tolerance, and shifting goals as life progresses.

I’ve guided clients through this process for decades, helping them create retirement savings plans that adapt to their life circumstances. Here’s a breakdown of what I consider when offering age-specific retirement advice.

Ideal Asset Allocation by Age
You may have heard of the “100 Rule” when it comes to asset allocation. This rule suggests subtracting your age from 100 to determine how much of your portfolio should be in stocks. For example, a 30-year-old would invest 70% in stocks and 30% in safer assets like bonds or cash equivalents.

However, with Americans living longer, this has been updated to the “110 or 120 Rule.” While these rules are helpful for broad guidance, your financial plan should be tailored to your unique situation. I've seen firsthand how important it is to personalize this mix based on individual retirement goals and comfort with risk.

In Your 20s: Balance Saving and Investing
Your 20s are a crucial time to set the foundation for your financial future. Even though your income might be on the lower side, it’s the perfect decade to take advantage of the power of compound interest. I love chatting with the children and grandchildren of my clients as they begin their investment journeys. I often encourage them to invest primarily in stocks, as they historically provide higher returns over time. In fact, a 2016 NerdWallet analysis showed that a 25-year-old earning $40,456 who invests 15% annually in the stock market could end up with as much as $3.3 million more than if they kept their money in a savings account.

Your 20s are also a great time to get your financial house in order. At the same time that you’re starting to fund your investment accounts, it’s important to manage debt wisely and start an emergency savings fund.  

This is the ideal time to learn the basics of investing. I cover five timeless principles every young investor should know in this video.

In Your 30s: Invest Aggressively in Stocks
By the time you hit your 30s, it’s time to start thinking bigger. If you can, contribute 10-15% of your salary to your retirement accounts, especially if your employer offers a match—don’t leave free money on the table. I talk about the benefits of powering  up your 401(k) in this video.

One thing I always emphasize is the power of the stock market during this phase. Even with market dips, you’ve got decades ahead to recover. I encourage aggressive investment strategies at this age for those comfortable with higher risk.

In Your 40s: Maximize Your Retirement Contributions
Your 40s are the prime years to boost your retirement savings. Now’s the time to max out those 401(k) contributions and, if you can, open a Roth IRA. I’ve worked with many clients who were surprised at how much their savings grew once they prioritized contributing the full amount allowed by law each year.  For clients whose income exceeds the standard limits for Roth contributions, I recommend exploring the Backdoor Roth strategy. I break down all the details in this video.

You may want to start incorporating some lower-risk assets into your portfolio, but the key is to stay on track with your contributions. I always remind my clients—if you’ve fallen behind, there’s still time to catch up, and I can help guide you.

In Your 50s and 60s: Start Preparing for Retirement
As you approach your 50s and 60s, your focus should shift towards preserving what you’ve built. This is the time to take advantage of catch-up contributions, allowing you to save even more in your tax-advantaged accounts.

For my clients in this stage, I often recommend adjusting their portfolios to include more stable investments like bonds and money markets. The idea is to protect your assets while still allowing for some growth. Retirement is just around the corner, so it's essential to prepare for unexpected expenses like medical bills while ensuring your investments provide steady income throughout your retirement years.

Tailored Advice for Every Age
While these recommendations are a great starting point, they aren’t one-size-fits-all. I’ve seen over and over that personalized financial planning can make a world of difference, no matter where you are on your retirement journey. Whether you're just starting out or fine-tuning your nest egg, my team and I are here to create a retirement savings strategy that’s right for you.

Feel free to reach out for a complimentary consultation. Let’s make sure your retirement plan aligns with your life, your goals, and your future.

Sources:

Friedberg, B. (2018, May 21) Here’s How You Should Invest at Every Age. [Blog post]. Retrieved from https://www.thebalance.com/how-to-invest-at-every-age-4148023

Leary, E. (2007, November). Best Investing Moves at Every Age. [Blog post]. Retrieved from https://www.kiplinger.com/article/investing/T052-C000-S002-best-investing-moves-at-every-age.html

Kumok, Z. (2017, Jan. 7) Are Your Investments Right for Your Age?. [Blog post]. Retrieved from https://www.investopedia.com/articles/investing/090915/are-your-investments-right-your-age.asp

Frankel, M. (2017, May 28). Here's How to Determine Your Ideal Asset Allocation Strategy. [Blog post]. Retrieved from https://www.fool.com/retirement/2017/05/28/heres-how-to-determine-your-ideal-asset-allocation.aspx

Any opinions are those of Rebekah Faasau and not necessarily those of Raymond James.  This information is intended to be educational and is not tailored to the investment needs of any specific investor.  The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.

Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.Investing involves risk and you may incur a profit or loss regardless of strategy selected, including a long term holding period, diversification, and asset allocation.

Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.