How to Invest: No matter your age, here’s how to tell if your finances are on the right track

Individual circumstances make everyone’s journey slightly different, but no matter your age, there’s always a vision. You can change it over the decades, but at least you have something to aim for, and an idea of where you stand in relation to that goal. Include a margin of error because no one knows what life—or the stock market — will bring. 

This path — and the choices you need to make — will look different depending on your age, what life-altering moment you’ve experienced and the lifestyle you want. Someone a few years from retirement shouldn’t have the same mix of stocks and bonds in his portfolio as someone just starting out her career. A baby or an empty nest, a new business or a business failure, divorce or illness can all alter your ability to save.

Retirement, of course, is one of the biggest financial goals. There is no one answer about how much money you’ll need or how to go about it. And saving can be hard and involve sacrifices. But there is an often-underappreciated quality to doing it: that money gives you more control over your life and how you spend your time — which feeds into how happy and comfortable you’ll be. 

These suggestions can help you get there, no matter what stage of life you’re in:

The 20s

Retirement seems so far away. But this may be the most crucial time to start saving for it, as those in their 20s can benefit most from the power of compounding. That’s when an account’s returns and interest grows atop itself every month, year after year, decade after decade.

Paul Merriman has an eye-opening explanation of how you can turn yourself into a multi-millionaire by saving for retirement for just five years if you start at 25 and do nothing after that.

Of course, this is also the time when you’re probably earning the least amount of money in your career and the budget may be tight. You may be balancing a number of money goals and obligations.

Still, here are some tips to get your savings on track:

• Financial advisers typically suggest putting away between 10% and 15% of salary for retirement. If that’s not possible, start with the bare minimum, no matter what that is, even if it’s just $ 5 or $ 10 a month. When you get a raise or a bonus, increase the amount.
• Consider automatic contributions into a retirement account straight out of your paycheck.
• If you have access to a 401(k) with an employer match, try to qualify for the match. There may be some conditions, including how long you need to be working there, but think of it as free money. Why not take advantage of that?
• This may also be the time to invest in a Roth account, which is funded with after-tax dollars, because workers at the very beginning of their careers typically have the lowest salaries and may anticipate being in higher tax brackets when they retire.
• Don’t forget to set aside some money for emergencies!

Money Milestones: This is how your finances should look in your late 20s

Go deeper: Money Milestones: What your savings should look like when you get married

More: Should I use a 401(k) or an IRA to save for retirement? A traditional account or the Roth version? Here’s what to know

The 30s

This is the decade when you may be buying your first home, getting married, building a business, starting a family or some combination of all these. That’s a lot of financial obligations. But that doesn’t mean retirement accounts should be forgotten.

Ideally, a 30-year-old should have twice their salary at this point, according to one guideline from Fidelity Investments. Many say that’s not feasible, not with rent and mortgages, their student loans or kids’ college funds, assistance for their parents and other bills to pay.

Fair enough, but the point remains: retirement shouldn’t be forgotten. If you are living paycheck to paycheck or close, you should still try to allocate something—anything—to a retirement account, and then make a promise to increase that contribution when the budget allows.

Try these tips in your 30s: 

• Reassess your budget and if there’s spending that doesn’t align with your values, cut out those low-priority expenses
• Look for ways to boost your income. Can you ask for a raise? Find a higher-paying job or take on a side gig? Even some one-time cash by selling unwanted belongings, however small, can boost retirement savings.
• Diversify your retirement accounts; if you have access to a 401(k) at work, take advantage of it, especially if there’s a match. If you can save a little extra, consider opening a Roth IRA. 

See: ‘Passion budgeting’ lets you keep what matters most yet still fix your finances

Money Milestones: This is how your finances should look in your 30s

Go deeper: Money Milestones: Don’t forget your nest egg when you’re building the nest

The 40s

This is the decade when you may be seeing more money in your paychecks, thanks to raises or job changes. And retirement suddenly doesn’t look impossibly far away. At some point in this decade, you’ll likely have been working longer than the time you have left until retirement.

Of course, financial obligations don’t disappear in the 40s—there’s likely still a mortgage to pay, children’s college funds, perhaps elderly parents to assist…the list goes on. But the goal should be to put away 10% to 15% of your salary for retirement and throw in a little extra cash from raises or side gigs.

If you haven’t already started investing outside of a 401(k) or IRA, now is the time. There are less-stringent tax consequences when withdrawing money than with a 401(k) or IRA, which provides you with breathing room in a crisis like a health scare or a layoff. 

Consider doing this: 

• Pay attention to lifestyle creep. Salaries often go up with age, but if you can avoid growing your expenses in line with those higher earnings, you can supercharge your retirement accounts. Again, review subscriptions and memberships, reduce spending on items and services that aren’t worthwhile and put that extra money to work for your future. 
• Set up important documents, such as wills and healthcare proxies. A lot of Americans think they don’t need estate planning if they’re not millionaires, but that can’t be further from the truth. Without this, a judge will decide how your assets are distributed or who cares for minor children should you die. If you already have these documents, take the time to review them.
• Look over listed beneficiaries on retirement accounts and life insurance policies too; you don’t want those benefits going to the wrong person (like an ex).

Money Milestones: This is how your finances should look in your 40s

Go Deeper: Money Milestones: A divorce doesn’t have to be the end of your retirement funds

The 50s

Now retirement really isn’t that far away. So spend more time thinking about when you want to retire and what your expenses might be. Take an honest look at your finances. Estimate your Social Security benefits using a My SSA account with the Social Security Administration, and run a few scenarios of retirement income and needs.  

Retirement accounts allow catch-up contributions for people 50 and older, so take this opportunity to increase your savings.

Your retirement accounts should still have a healthy amount of stocks as that money needs to grow for decades to come, but build up funds that you can tap in the event of a market downturn at the start of your retirement instead of being forced to sell investments.

Read: When is it worth hiring someone to manage your money?

Try these tips in your 50s: 

• Keep analyzing your spending (this is one of those perpetual rules of thumbs in the personal finance world!) 
• Talk with a financial planner, or even an adviser at the firm housing your retirement accounts if you don’t want to work with a professional more closely, to review your asset allocation; are you properly invested for the future, or too heavily in equities or bonds? 
• Create a My SSA account, which allows you to see an estimate of your Social Security benefits as well as review your work history. As a bonus, this can protect you against identity theft. 

Money Milestones: This is how your finances should look in your 50s

Go deeper: Money Milestones: How to save for retirement while you’re building a business

The 60s and 70s 

These are the decades when most people want to stop working. While you may not control the timing, you still can do plenty to secure your finances.

Don’t go into retirement blindly. Analyze your income sources in retirement: Social Security, savings (including retirement accounts), pensions and anything else. Should you look into an annuity, after careful consideration and guidance from a trusted professional?

Think carefully about when you will claim Social Security. People can begin receiving their Social Security benefits at age 62, but not everyone should. Americans who paid into the system and are fully covered get 100% of their benefits at their Full Retirement Age, which depends on their birth date. Those who claim prior to their FRA get a reduction for every month before that FRA, while people who delay their benefits up until age 70 get a bonus. 

Not everyone can afford to delay Social Security benefits, even for one year. Just know that the decision, whatever it is, also impacts spousal and dependent benefits.

More: The messy math of Social Security, spousal benefits and when to claim 

This is also the time to investigate the cost of healthcare. After all, Medicare, which becomes available at age 65, is not free. People retiring prior to 65 should build health insurance into their budgets while waiting to be covered under Medicare.

Read: You could unwittingly triple your Medicare premiums—here’s what to watch for

And just because retirement is here doesn’t mean portfolios should become mostly invested in bonds. Yes, retirees do need the protection fixed assets provide, but retirement can last another two or three decades. Without a healthy mix of stocks and bonds, you may run the risk of running out of money in old age.

Do this in your 60s and 70s: 

• Take account of all of your assets and liabilities — and the type of any debt you have. For example, a reasonable mortgage isn’t necessarily bad in retirement if it fits into the overall budget and spending plan, but consumer debt should be squashed before retiring. 
• While in your early 60s and healthy, consider long-term-care insurance. Not interested in that type of policy? That’s fine, but have a plan for how you’ll pay for at-home aides, a nursing home or other long-term care needs. 
• Focus on your health, not just your finances. Stay active, learn a new skill, take on a hobby, call up family and friends. 
• Maintain a comfortable portfolio mix, one that isn’t so conservative that investments no longer grow over the next few decades but one that isn’t so risky you could lose all your hard-earned savings. 

Read more: Money Milestones: This is how your finances should look in your 60s

Plus: Money Milestones: Your 70s is not the time to wind down retirement savings

Check out MarketWatch’s columns to help you plan your retirement, including “Where Should I Retire?” and “Retirement Hacks.” Curious what other people are asking themselves about their retirements? Follow along with “Help Me Retire”