When to Start Planning for Retirement: Tips for Every Stage of Life

A MassMutual survey from early 2024 states that the average retirement age in the US is 62 years old. This might come quicker than you expect - so are you ready?

While you might retire a bit earlier or later than this, being prepared is crucial. Many people don't know how they should be preparing for retirement or when they should even start. However, understanding these will help ensure you can enjoy your retirement and live a happy life.

In this guide, we'll go over some tips so that you can understand when to start planning for retirement. Keep reading for more.

When to Start Planning for Retirement

While retirement may seem a long way away for many people, it's never too early to start planning. A Bankrate survey from 2021 discovered that 52% of American workers felt they were behind on their retirement savings. Starting early is the best way to avoid this scenario.

Planning in Your 20s

One of the most important retirement planning tips is to begin as early as possible. In your 20s, you may be a long way from your retirement, but putting money away at this point can make a huge difference in the long run.

You'll be able to benefit more from compounding interest if you regularly invest from a younger age. You can also afford to make higher-risk investments, which could result in sizable returns.

Saving for retirement when you're young can help you learn good financial habits that will benefit you for the rest of your life.

Planning in Your 30s

Many people have greater financial commitments in their 30s such as families and mortgages, so saving for retirement can be more difficult. Staying focused is key and you can start to implement effective retirement savings strategies here.

Work on minimizing any debt you have so you can commit more funds to your future financial security. Consider investing in growth assets and try to make regular contributions to retirement plans or investment assets.

Take advantage of any employer contribution schemes you can as these will help boost your savings pot.

Planning in Your 40s

When you're in your 40s, you need to think more carefully about your retirement. Reassess your retirement plans and weigh them up against your goals. Depending on whether or not you're on track, you may need to make some changes here.

Calculate how much you'll need to retire comfortably based on your lifestyle. It may be a good idea to seek professional financial advice if you're not certain about how much you'll need.

You might have multiple pension accounts by this point. It's a good idea to consolidate these as it will make managing them easier. You'll also be able to gain a clearer view of your pension savings.

You'll likely have a higher salary at this point in your life. If so, you may want to increase your contributions as long as you can afford it.

Additionally, you can look into other options to improve tax efficiency. You can consider options like:

• 401(k) plans
• Traditional Individual Retirement Accounts (IRAs)
• Roth Individual Retirement Accounts (Roth IRAs)
• SIMPLE Individual Retirement Accounts (IRAs)

Understanding such options will help you make the best choices for your future.

Planning in Your 50s

By the time you're in your 50s, you're closing in on retirement. At this point, you want to ensure you're on track and can achieve your goals.

If possible, you may want to increase your contributions further. Many people do this by making lump-sum pension contributions. If you do this, make sure you stay within the annual or lifetime allowance limits as exceeding these can make you liable to further tax charges.

Review your asset allocation at this point. The closer you get to retirement, the less risk you should expose yourself to. You can seek out professional financial advice for guidance on your specific assets so you can reduce your overall risk level.

Make sure you're familiar with your current tax allowances. Explore any carry-forward rules that could benefit you further.

It may be a good idea to speak with a professional financial advisor to discuss your plans and your current situation. They may be able to provide tailored advice that could improve your situation and help you get better results.

Planning in Your 60s

Financial planning for seniors is incredibly important, and in your 60s you need to prepare for the decumulation phase. You should have a clear idea of when you're going to retire and whether or not you're ready.

Calculate expenditure levels so you can prepare a long-term budget. Look at the different decumulation options available to you. This can be complicated, so you may want to seek professional guidance here.

With your retirement approaching, you should once again review your asset allocation. Again, reducing your risk exposure can be a good idea here, so you may want to make some changes to your portfolio.

Regularly review your plan in preparation for your retirement. Make any final adjustments to help ensure everything is going to plan.

Enjoying Your Retirement

There are plenty of ways that people enjoy their retirement. One that's becoming increasingly popular is senior living communities. They offer a range of amenities and exceptional service to help ensure seniors live a happy, fulfilling life.

The right senior living community will be dedicated to providing tailored care to meet the needs of each guest with a range of senior living options, including:

• Senior independent living
• Supervised independent living
• Senior assisted living
• Memory care

These communities help create connections and social interactions with other guests. They also encourage both physical and mental well-being, which is incredibly important in later life.

Preparing for Your Retirement

There are no strict guidelines on when to start planning for retirement, but typically, the earlier you do, the better. It will help you set yourself up for a better retirement in the long run.