Retirement Planning for All Ages


With the average life expectancy 30 years longer today than it was 100 years ago, saving adequate funds to live comfortably through a long retirement has become more challenging.

Consider the following four snapshots of typical families in their 20s, 30s, 40s, and 50s. Compare their stories to your own to determine whether you're on track to retire with financial security.

20s: Matt, working with wedding bells on the way ...

When Matt graduated from college, saving money was the last thing on his mind. But now that he's about to tie the knot, Matt is taking a careful look at his finances.

Budgeting, eliminating debt and building an emergency fund with three to six months of basic living expenses should top Matt's list of goals. Staying out of debt and having funds in savings provides financial flexibility.

In addition, workers in their 20s should begin contributing to a retirement savings plan, such as a Roth IRA. Military members also can contribute to the government's Thrift Savings Plan (

When deciding how to invest your retirement savings, consider a diversified portfolio with most of your money in no-load stock mutual funds. You should have plenty of time to ride out market downturns; however, determine your market risk tolerance before investing.

30s: Charles, Chief Petty Officer in the U.S. Navy, and his wife Karen, a nurse, with one child and another on the way...

Charles and Karen set aside enough savings to buy their first home, but they have less than $10,000 saved for retirement. Although Charles has a military pension, it won't be enough to replace their two incomes. Like many couples in their 30s, they're faced with dual challenges: saving toward retirement and for their children's college education.

Couples in their 30s should save 10 to 15% of pre-tax income in tax-deferred retirement plans, with anything extra going to college savings. Keep in mind that your child may be eligible for financial aid to help pay for college.

With 25 years or more before retirement to weather the ups and downs of the market, consider keeping stock mutual funds as the focal point of your portfolio to help reach long-term savings goals.

If you own a home and have children, make sure that basic estate planning documents, such as a will, are in place. It's also important to obtain enough life and disability insurance to protect your family.

40s: Frances, teacher and ex-military spouse, with two children and one in college...

More than half of all American marriages end in divorce, yet the financial implications are anything but routine.

During her married years, Frances left the family finances to her husband. Although she returned to teaching full-time after her children were teenagers, she and her husband directed all of their retirement savings to his Thrift Savings Plan account. Half of that account will become hers because of the divorce settlement, but she has saved nothing on her own for retirement.

Creating a financial plan to manage expenses and save for retirement should be a priority. On your own at 40, living expenses are likely to rise because you're establishing a separate household. At the same time, you should budget a minimum of 10 to 15 percent of your pre-tax income for retirement savings, and increase the percentage of fixed-income investments in your portfolio. Also, review your estate plans and update beneficiaries on life insurance policies and retirement accounts.

50s: Vincent, a colonel in the U.S. Air Force, and wife Nancy, part-time entrepreneur, with three grown children and one grandchild...

After 29 years of active duty, Vincent is one year away from military retirement and facing many uncertainties. His biggest question: Can he afford to retire or should he start a new career and continue to save, especially since Nancy has no retirement savings of her own?

Vincent and Nancy must determine exactly how much money they'll need during retirement and whether their income sources and investments will meet this need.

For people in their 50s, there are a few options to make up the difference if savings fall short of retirement goals: continue to work and save, reduce your income goal, or try to increase returns by accepting greater risk with a more aggressive portfolio.

Luckily, Vincent and Nancy have time to close the gap. Vincent can find a new job and contribute the maximum to his new employer's retirement savings plan. And Nancy can open a Simplified Employee Pension (SEP) IRA and contribute 20 percent of the earnings from her part-time business.

On Track At Any Age

Regardless of your age, certain strategies can raise the odds that you'll reach your retirement goal:

  • Learn to live below your income.
  • Consider tax-advantaged savings through plans such as the military's Thrift Savings Plan and/or a Roth IRA.
  • Review your asset allocation annually and make adjustments as needed.
  • Do not borrow against your retirement savings.

The challenges on the road to retirement are great, but persistence and planning, including conducting a formal retirement analysis for your unique goals, go a long way toward building financial security at any age.

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Mitch Swanda served six years in the U.S. Navy and is a salaried Certified Financial Planner with USAA Financial Planning Services, one of the USAA family of companies. USAA is a diversified insurance and financial services organization that has served the military community since 1922.

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