Retirement Planning by the Decades

Retirement Planning by the Decades


Whether you plan to retire in a few decades or a few years, you can take steps to make yourself retirement ready. Use this checklist to build a strong retirement plan, no matter your age.

20s: Establish Good Saving Habits

  • Make a budget (and stick to it)

Live frugally and avoid racking up high interest credit card debt.

  • Start saving early

Compound interest can be your friend. Even if you can only save a little initially, compound interest may increase the value of your investment over time.

  • Sign up for a 401(k) through your employer

You can start saving for retirement early with a 401(k) through your employer. Try saving at least 4% of your salary into a 401(k).

  • Build your emergency fund

In the case of an emergency, you should have liquid assets (cash). A rainy day fund should ideally contain three to six months’ worth of expenses. Try putting 10% of each paycheck toward an emergency fund.

30s: Ramp Up Your Savings

  • Contribute to your 401(k)

If your employer matches a percentage of your 401(k), contribute the maximum your employer can match. Contributing as little as $500 more per year can greatly impact your retirement savings.

  • Don’t cash out your 401(k) if you switch employers

If you switch jobs, consider rolling your 401(k) into an IRA or your new employer’s program.

  • Pay off your debts

Pay off as much high interest debt from credit cards, student loans or medical bills as quickly as possible.

  • Start an aggressive investment strategy

At a younger age, you can afford to take more risks in your asset allocation strategy. Consult with your financial advisor, and consider putting as much as 85% of your investments in stocks and 15% in bonds.

  • Balance competing expenses

In your 30s, more expenses compete for your money. You may be saving for a down payment on a house or starting a college fund for your children. Don’t forget to keep saving for retirement.

40s: Take Advantage of Your Peak Earning (and Saving) Years

  • Max out your 401(k) and IRA contributions

You can contribute up to $18,000 per year to your 401(k) and $5,500 to your IRA. If you can’t immediately contribute the maximum, increase your contribution rate by 1% each year to build up to the maximum contribution level.

  • Review your retirement plan

Meet with your financial advisor to make sure you are on track with your retirement savings. You can also review your asset allocation strategy and adjust as needed.

  • Keep your retirement fund protected

Continue building your emergency fund with at least six months’ worth of expenses, and pay off any outstanding high-interest debts.

50s: Make the Most of Catch-Up Contributions

  • Make catch-up contributions toward your 401(k) and IRA

At 50-years-old, you can start contributing an additional $6,000 per year to your 401(k) and $1,000 to your IRA.

  • Review and update your retirement plans

Meet with your financial advisor to make sure you are still on track with your retirement savings goals to help ensure you can maintain your lifestyle in retirement.

  • Move toward a more conservative investment strategy

As you get closer to retirement, you may want to move to more conservative investments to protect against market volatility.

  • Investigate and purchase long-term care insurance

With yearly nursing home costs averaging more than $80,000 per year, consider long-term care insurance to offset out-of-pocket nursing home costs. The earlier you purchase long-term care insurance, the lower your premiums will likely be.

60s: Get Retirement Ready

  • Review your Social Security benefits

If you choose to start receiving Social Security benefits as early as 62-years-old, you will only receive 75% of your benefits. If you wait until the full retirement age of 66, you receive 100% of your Social Security benefits.

  • Develop a retirement income plan

Consult with your financial advisor to create a retirement income withdrawal strategy and find additional income sources for when you retire.

  • Continue contributing to your retirement accounts

As long as you are working, continue to take advantage of catch-up contributions to your 401(k) and IRA.

  • Enroll in Medicare

You can enroll in Medicare when you turn 65-years-old. Before then you will need to have alternative health insurance coverage.

  • Create a retirement budget

You can estimate your retirement expenses and plan a budget accordingly. Typically, you can expect to need 80% of your current annual income in retirement. Test how your retirement income would handle extenuating financial circumstances such as a decrease in your investment returns, moving to a nursing home or medical emergency.

To begin your retirement planning process, contact a Fifth Third Bank financial advisor today.

The information contained herein is for information purposes only, is not designed to address your financial situation or particular needs and does not constitute the rendering of tax or legal advice. You should consult with your tax advisor or attorney for advice pertinent to your personal situation. Asset Allocation, Alternative Investment and Hedging/Diversification strategies are intended to mitigate the overall risk within your portfolio. Some strategies may be subject to a higher degree of market risk than others. An investor should understand the costs, cash flows and risks inherent in a strategy prior to making any investment decision. There are no guarantees that any strategy presented will perform as intended. Fifth Third Private Bank is a division of Fifth Third Bank offering banking, investment and insurance products and services. Fifth Third Bancorp provides access to investments and investment services through various subsidiaries, including Fifth Third Securities. Fifth Third Securities is the trade name used by Fifth Third Securities, Inc., member FINRA/SIPC, a registered broker-dealer and registered investment advisor. Registration does not imply a certain level of skill or training.