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Saving for Retirement: Tips for All Ages

January 18, 2017


At each stage of life, you'll be taking on different financial responsibilities and setting new goals. Regardless of how old you are, it's important to always view your finances through a long-term lens. Budgeting for a big purchase or a weekend getaway is necessary, but don't let short-term expenses cause you to forget about the bigger picture. For many people, retirement may seem like a very distant destination, but starting a savings plan now will set you up for greater financial security in the future.

To underscore the importance of saving early, Voya Financial recently launched its second annual Voya Born to Save program. This campaign offered every baby born in the U.S. on Oct. 19, 2015, the opportunity to receive a complimentary $500 mutual fundinvestment as a head start on their future retirement savings. While an infant's retirement may be one of the last things new parents are thinking about, a $500 investment today can grow considerably over the course of a lifetime.

Here are a few tips to consider at different phases to make sure you — and your progeny — are on the right track to retirement readiness.

Investing in your 20s: Appreciate the time value of money. If you're in your 20s, you may have just graduated college, left your hometown for the first time or gotten your first full-time job. With so many big life changes happening in the "here and now," don't overlook a very distinct savings advantage that you have over your older cohorts: time. Once you've set a budget and created a plan to pay off any college debts, think seriously about how you can save some of your paycheck for retirement. This is important because you can let compound interest go to work for you. Each dollar you save now has the chance to grow larger over time. To get started, you'll need to identify the retirement plan that is best for you. This may be through a workplace plan, or, if one is not available from your employer, consider an IRA or Roth IRA account. Do some research online or consider meeting with a financial advisor to get started.

Investing in your 30s: Balance spending and saving. In your 30s, you'll start to find your footing. Your career is coming into shape and you may have even hit some milestones, such as buying a house or starting a family. Being more established means having some additional resources — but also greater financial responsibilities. Don't let new expenses like a mortgage put a stop to your retirement savings. Now is the time to think seriously about defining your long term retirement plan. With a growing family, consider how to keep contributing (and increasing when possible) into your retirement savings account, while also setting up a life insurance plan and starting a college fund like a 529 for your children's future education. Doing these things now, in a thoughtful and planned way, can help keep you from dipping into your retirement funds down the road.

Investing in your 40s and 50s: Shift toward retirement income. When you enter these decades, retirement suddenly doesn't feel like such a foreign concept. It's still a ways off, but you can almost see it on the horizon now. At this point in your life, you likely have a stronger hold on your day-to-day finances and general expenses. Take that knowledge and use it to strengthen your retirement savings. Rather than focusing on a big nest egg number, start to think in terms of retirement income. You know how much money you need to cover your costs now, so think about how you should be saving to continue to meet those needs, wants and wishes each month, but without that regular employer paycheck. This may require Adjusting your expectations or even delaying retirement a bit to make sure you can achieve your spending goals. You'll also want to consider how health care costs and Social Security benefits play into the picture. Meet with your financial advisor to make sure your savings strategy will generate the income you need in retirement or use an online calculator to fine-tune your plan. When you hit the big "5-0" and older, you can also make additional catch-up contributions into your retirement account. As you near your target retirement age, you'll also want to make sure your investments align with your risk tolerance. Generally, the closer you get to retirement, the more conservative your portfolio should be.

Investing in your 60s: Make the most of your money. After years of planning and saving, you're hopefully able to reap the rewards of an enjoyable retirement. But just because you're turning in your office keys doesn't mean you can hang up your retirement plan. In fact, it's more important than ever to stay on top of things because people are living longer and your money needs to last. Make sure to monitor your accounts and factor in unexpected expenses so that you can adjust your withdrawals accordingly. Also, make sure you're taking full advantage of your Social Security benefits by understanding when it's best for you to start claiming them. You can elect to start receiving your benefits as early as age 62, but by applying before your full retirement age, you risk receiving a reduced benefit. This is a great time to work with a financial professional or tax specialist who can explain your options. For many years you've been paying into the system. You don't want to miss out now on the money you've worked hard to earn.

By saving early and planning thoughtfully along the way, you'll have a better chance of entering retirement feeling ready for the next chapter. Remember, retirement is truly a long-term journey. Use each life stage as your personal road map for getting there successfully.

This article originally appeared on Tom Halloran is a blogger for The Smarter Investor and president of Voya Financial’s broker-dealer, Voya Financial Advisors.