How Much to Save for Retirement in Your 30s, 40s and 50s

Saving for retirement is a long game, but the idea of preparing for something decades away is counterintuitive for many of us.

However, consistent saving is crucial for retirement planning. Here’s expert advice for how to prepare in your 30s, 40s and 50s.

Your 30s

Saving for retirement really should begin in earnest during your 20s. But with the average college debt now soaring to more than $35,000, saving money early is out of reach for many recent graduates.

In your 30s, your career and income likely will grow but so will your financial responsibilities, which makes this a critical time to kick-start your retirement savings. If you didn’t begin in the previous decade, ramp up your savings and put away at least 10 percent of your earnings each pay period into a company-sponsored 401(k), traditional IRA or a Roth IRA that you open on your own. Also take advantage of any company match to maximize your retirement savings.

“The younger you start, the better,” says Bruce Elfenbein, a retirement planning expert and president of SecuRetirement Incorporated in South Florida. “There’s no substitute for compound interest and the effect it has. It’s incredible how a small contribution can turn into a great deal of money down the road.”

Elfenbein says you also should sign up for a permanent life insurance policy, establish an emergency fund and save four to six months worth of expenses. He recommends a money market account for this purpose, because it often pays a higher interest rate than a typical savings account.

Your 40s

In your 40s, it’s crucial to focus on increasing your contributions and the best way to do this is to pay off any debt.

Student loan and mortgage debt is one thing, but high-interest credit card debt can cripple your long-term financial plans. Pay off as much of it as you can and reallocate these funds to retirement. Also spend more time managing your portfolio. Talk to a financial planner and review your investments and savings to ensure your money is in the right vehicles and aligns with a level of risk you’re comfortable with.

Elfenbein says it’s important to put money in vehicles, like a fixed-index annuity, that will give you secure and guaranteed income. A fixed-index annuity provides tax-deferred growth and can protect you from downturns in the market. Anything left over should be invested to combat taxes and inflation, Elfenbein adds.

In your 40s, also consider how much you need to cover your health care expenses in retirement. If you haven’t already, open a Health Savings Account (HSA) to save for this cost. HSAs are a great option (link to previous article here) because any contributions you make are tax deductible and roll over from year-to-year.

Your 50s

In your 50s, your retirement strategy should “shift from accumulation to preservation,” Elfenbein says. People tend to become more risk-averse as they age, and this is no different as you approach retirement. In this decade, stay away from variable products and shift more of your money away from stocks and into secure vehicles like high-quality bonds or annuities.

Also use the savings options the government provides — like a 401(k) or IRA — to make catch-up contributions that will maximize your retirement income. In 2016, you can contribute $6,000 above IRS limits for 401(k) plans.

If you’ve already started funding an HSA, look into insurance plans for long-term care, which can help cover your ongoing health care, assisted living or nursing home costs later in life.

When it comes to retirement planning, the main question you need to ask is what kind of lifestyle do you want to live in your later years? If you expect to maintain or exceed your current standard of living, you need to save more — and start early. Being consistent and actively managing your portfolio will pave the way for a secure retirement.

Updated May 5, 2016 and originally published May 4, 2016.