Smart financial planning is a lifelong process, but the most important step is simply getting started, no matter your age. From leveraging the luxury of time in your 20s to protecting wealth and planning a legacy in your 70s, experts outline achievable moves that build stability decade by decade.
Your 20s & 30s
People in their 20s and 30s, who are likely far from their peak earning years, might find it difficult to prioritize saving for retirement. But Oklahomans who have devoted their careers to helping people thrive financially during retirement say it’s well worth the discipline involved.
“Young people really have one of the most powerful tools on their side: time,” says Dawnetta Moore, assistant vice president and Mustang branch manager for First Fidelity Bank. “Compounding interest means your money earns interest, and then that interest earns more interest.
Luke Preaus, president of Regent Private Wealth, seconds the advice to get started early, adding that “time in the market is better than timing in the market.”
He continues: “Historically, the United States has not been very good at household savings. If you can save between 15-20% of your gross income, you would be considered a world-class saver. If you can do 10%, that’s a huge win. By investing a small amount consistently in the early years, you start building a habit.”
It’s also never too early to start an emergency fund, says John Kiosterud, senior client adviser and senior vice president with Arvest Wealth Management, and the goal should be a savings account with six months’ worth of income.
“When you get too much, move it to an IRA,” Kiosterud says.
It’s also crucial to take advantage of an employer’s 401(k) match, which Kiosterud emphasized is “free money.”
For people who want to start saving and investing beyond a 401(k), “you want to look at traditional versus Roth individual retirement accounts,” Kiosterud adds. “It depends on when you want to pay taxes.”
Contributions to a Roth IRA are made with after-tax dollars, so there is no immediate tax break, but qualified withdrawals in retirement are tax-free.
With the traditional IRA, contributions may be tax-deductible, but withdrawals in retirement are taxed as ordinary income.
Your 40s
Michael Manghum, vice president of Regent Private Wealth, says that by the time people hit their early 40s, “you might have found yourself in the rat-race wheel, or in the comparison game. It’s a great time of life to pause and figure out where you want to go, what you want your lifestyle to look like in retirement. Before you spend the next 20 years working toward a question mark, do some planning now.”
Some people in their 40s might be reaching an elevated point in their careers, Manghum says, “so it’s an opportunity to turn up the dial a little bit” when it comes to saving and investing.
Many people in their 40s are sending their children off to college, and Kiosterud has some advice: “Avoid the 100% trap of paying for your kids’ college,” he says, which can get in the way of saving for retirement. “I raised two kids and I helped my kids through college,” he says. “But they had to work. Both graduated with no debt.”
Moore mentions that she and her husband realized when they were in their 40s that they were not on track to meet their retirement goals. But, she says, “there’s still plenty of time to adjust course. It’s time to assess, not stress. Small adjustments can make a really big difference later.”
A common rule of thumb, Moore says, is to have two to three times your annual salary saved by age 40, and three to five times your annual salary saved by age 50, although personal situations vary.
“Most 401(k) programs have calculators for you to see if you are on track,” Moore says. “And this is a really good time to meet with your banker to identify any gaps, to see where your goals are and what your risk tolerance is.”
Your 50s
By the time they reach their 50s, “most people are getting out from underneath debt, so cash flow is hopefully becoming more positive for them,” says Preaus. It’s also a good time to take advantage of catch-up contributions.
At age 50, Preaus says, employees can apply an additional $7,500 a year in a catch-up contribution to a 401(k), an extra $1,000 to an IRA and an additional $1,000 annually to a health spending account.
The 50s “are typically the bridge between building wealth and protecting it,” says Moore, who mentions that it’s time to “shift gradually to a more balanced asset mix,” such as bonds, certificates of deposit and diversified mutual funds.
“The 50s are about fine-tuning and protecting what you’ve built,” she concludes.
It’s also a time to evaluate the pros and cons of long-term healthcare insurance.
Your 60s
When it’s time for people in their 60s to consider a retirement funds withdrawal strategy, factors to be considered include when you plan to retire and when you plan to start receiving Social Security, says Manghum. A general rule of thumb, Manghum says, is to withdraw first from taxable accounts, then use investments that were tax-deferred, and finally, make withdrawals from Roth IRAs.
How and where you want to live will also affect personal budgeting once the decision is made to retire, says Moore.
“Retirement becomes real rather than theoretical in your 60s,” she says. “You can reduce expenses, and simplify your life.”
Retirees might find that the home in which they raised their children is no longer needed.
“My husband and I have bought property and we are going to downsize in a few years, and build something more efficient in an area with a little less taxes,” Moore continues. “You can save quite a bit by downsizing.”
Selling a larger home, especially if it’s paid for or nearly so, can also free up funds for retirement. Less property upkeep means more freedom to travel, and to volunteer, too.
While relocating can help retirees cut their overhead and allow them to live closer to family members and healthcare facilities, there are financial and emotional considerations, Moore says.
“Moving costs can be significant,” Moore says. “And there can be an emotional attachment to leaving your family home and establishing in a new community.”
Your 70s
For people in their 70s and beyond, Manghum says he likes to use the “paychecks and playchecks” philosophy.
“Look at your guaranteed forms of income, such as your pensions and Social Security,” he says. “If you add them all up and it covers most of your bills, we would call that a retirement paycheck. If that covers at least 90% of what you need, you have your baseline needs pretty much covered. Now your retirement savings are not as much needed.”
With those additional funds, retirees have the freedom to do things such as invest more aggressively, spend money on travel or set aside gifts for their grandchildren.
If it hasn’t been done already, estate planning should be on the financial agenda of people in their 70s, says Kiosterud.
“Estate planning is essential,” he says. “You want to assure that all your wishes and goals are fulfilled.”
One decision to be made is who to entrust with your power of attorney should you become incapacitated. Another is deciding whether to leave a will, which must be probated, versus a trust which is a way to bypass probate.
“There are a lot of situations where a trust is needed,” Kiosterud says.
Kiosterud says he enjoys working with clients of all ages, but especially enjoys his relationships with long-time clients he has helped meet their retirement goals.
“I could have retired a few years back, but I can’t leave my clients,” he mentions.
