Kick-Start Your Retirement at Any Age

By Michael Schoonmaker - September 11, 2017

Getting started on anything complicated can often feel like a bigger barrier than the task itself. When it comes to saving for retirement, it's understandable that so many of us put it off to another day. The reality with investing is this: time is precious. Looking back, 66 percent of pre-retirees have at least some regret about not saving for retirement earlier, according to our research.1

So, how should you begin? The answer can vary based on your age and how close you are to your retirement date. To help you jump-start your retirement planning, I've broken it down by four age groups.

In Your 20s: Start Good Habits Early

As you start your working years, this is the time to build your financial foundation and establish good money habits so you can enjoy the life experiences you want, even into your 70s and 80s.

  • Emergency Fund: First off, you should create an emergency fund to cover any unexpected expenses. Most experts say this should be roughly six months of living expenses. Creating this fund can help you keep you from dipping into your retirement money and derailing your savings.
  • Automatic Investments: Next, make saving for retirement a no-brainer with an automatic investment. Deposits are made at periods you determine, for example, once a month. Because it's automatic, it's easier to stick to the plan and avoid the temptation to skip investments when money is tight.
  • Workplace Plan: If your workplace offers a retirement plan, like a 401(k) or 403(b), you should at least start by contributing up to the match. Not doing so means you're leaving money on the table.
  • Individual Retirement Account (IRA): To save on your own, consider a Traditional or Roth IRA, which offer several tax benefits. IRAs have an annual max of $5,500 in 2017. If you can't meet that amount quite yet, start with a smaller amount and bump it up as your pay increases.
  • Investment Mix: The good news is that you've got time on your side, giving your money decades to grow. Additionally, a more aggressive portfolio—typically these hold more stocks, allowing you take advantage of the potential growth they offer—might make sense because you have time to ride out the market ups and downs. Get background on the role of stocks, bonds and money markets in a portfolio.

Use our Retirement Planner tool to help you take the next step in retirement planning, including a suggested portfolio mix.

In your 30s: Rethink Your Budget

Life happens fast. For many, the good intentions of retirement planning in your 20s slipped by just as swiftly as the time. You may have missed a few years, but now is the time to make a commitment.

  • Baseline Behaviors: By now, the habits we described above should firmly be a part of your financial mindset. If you haven't already, set up an emergency account and start an automatic investment.
  • Priorities: Prioritize your savings goals so you start with retirement first and other goals, such as a home or a child's education, second. Keep in mind that there are other options for funding college, including scholarships, work-study programs and loans. But no one is going to give you a grant or scholarship for retirement.
  • Budget Blues: Rework your budget to divert more into your retirement savings. According to our study, 73% of pre-retirees said they could have afforded to save at least a little more than they did.1 We get it—it's important to live in the moment, but think of your "retirement self" who will also be deserving of life's experiences.
  • IRA Max: At this time, many investors are more established in their careers and earning more. Put this additional money to work for you in your workplace plan and in your IRA. If you're not adding the $5,500 annual max to your IRA, consider a stepped approach to get there in a couple of years.
  • Investment Mix: You still have a few decades to take advantage of growth in the market. If you're not yet familiar, review the benefits how stocks, bonds and money markets work together.

Find the right investing mix suited to your situation. Our Retirement Planner tool can help you move your plan forward.

In your 40s: Reprioritize and Ramp-Up

In the midpoint of your working life, you've likely managed to save some for retirement. If you've still been slow to save, don't think it's too late to make a difference.

  • Investment Mix: You've still got roughly 20 years before you need to start using the money, so you can still take some advantage of growth. Plus, you won't use all your savings right off the bat, giving the balance additional time in the markets.
  • Salary and Savings: But the time to stash away your paycheck is growing short. Studies  show that a woman's salary peaks at 39 and a man's peaks at 48. Now's the time to commit to fully funding your IRA and your workplace plan. Consider this hypothetical example: If you were to contribute the IRA max of $5,500 annually for the next 20 years and received a 6% average annual return, you'd have just over $202,000 for retirement.2 3
  • Goal Setting: Until now, many investors' objectives have been to put money aside, but they're missing an important piece of the puzzle—a target. If you're not sure how much you'll need, it's difficult to know if you're making healthy progress toward a comfortable retirement.

Take advantage of our Retirement Planner tool that will help you estimate your retirement income and expenses to see how much you'll have and how long it could last.

In your 50s: Time to Play Catch-Up

Now it's crunch time. In your 50s, your retirement target should be set, and your savings level should be in high gear. If you're feel like you'll be coming up short, consider these options.

  • Catch-Up Contributions: Take advantage of IRA catch-up contributions. To help older investors make up for lost time, the IRS allows those over age 50 to make contributions of a $1,000 on top of the standard $5,500 contribution in 2017.
  • Extended Employment: Plan to work longer. For years, age 65 seemed like the magic retirement number. Now more than ever, many Americans are working into their 60s and 70s .
  • Social Security: Start considering your strategy for Social Security. Just because you can start drawing Social Security in your early 60s doesn't mean that it's the best choice. Starting before your "Full Retirement Age"  will mean a sizable drop in benefits. If you're married, you may have additional strategies.
  • Investment Mix: Keep your portfolio mix in mind. While a more aggressive portfolio may seem attractive for the potential gains it may offer, you're also taking on additional risk. Too much volatility at this stage may make it difficult to recoup losses.

Use our Retirement Planner tool to find the right mix of stocks, bonds and money markets for your investing time frame and tolerance for risk.

Michael Schoonmaker
Michael Schoonmaker

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      1 Who's in the Driver's Seat? 2015 National Survey of Defined Contribution Plan Participants. American Century Investments.

      2 The future value of was calculated with an initial deposit amount of $0.00 and a $5,500.00 annual deposit. Interest was calculated using a 6% rate of return for 20 years 1 day, compounded annually. Future Value Calculator. Financial Calculators from ©1998-2017 KJE Computer Solutions, LLC.

      3 This hypothetical situation contains assumptions that are intended for illustrative purposes only and are not representative of the performance of any security. There is no assurance similar results can be achieved, and this information should not be relied upon as a specific recommendation to buy or sell securities.

      Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

      IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

      This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.