Saving for retirement is one of the most critical aspects of financial planning. Still, many people often feel unsure if they are adequately prepared for the future. Assessing your retirement savings at different life stages is vital to ensure a secure and comfortable retirement. Each decade of life presents unique financial challenges and opportunities, so taking stock of your progress, refining your strategy, and making necessary adjustments can keep you on track. Here’s a decade-by-decade guide to help you confidently evaluate and plan your retirement savings.

Your Retirement Savings in Your 20s

The 20s are all about laying a solid financial foundation. While retirement may seem like a distant dream in this stage of life, starting early offers a significant advantage because of compound interest. Compound interest allows the money you save to grow exponentially over time. For example, if you save $5,000 annually starting at age 25, earning 7% annual returns, you'll have over $1 million by age 65. Starting a decade later at age 35? That number shrinks to about $540,000. The earlier you start, the more your money works for you.

Begin by contributing to a 401(k) or similar employer-sponsored retirement plan, especially if your employer offers a matching contribution. Free money? Don’t leave it on the table! If a 401(k) isn’t an option, consider opening an individual retirement account (IRA). A Roth IRA can be particularly appealing since your withdrawals in retirement will be tax-free.

Beyond formal retirement accounts, focus on building an emergency fund—typically three to six months’ worth of living expenses. Having this safety net in place protects you from dipping into retirement savings should unexpected expenses arise. Creating and sticking to a basic budget is also crucial at this life stage. Apps and tools can help you track income, spending, and savings while ensuring you’re setting aside money toward long-term goals.

Your Retirement Savings in Your 30s

Your 30s often come with greater financial responsibilities, like buying a home, starting a family, or advancing your career. These competing priorities make it tempting to put retirement savings on the back burner, but it’s essential to stay focused on your goals.

A good rule of thumb in your 30s is to aim to save at least one to two times your annual salary by the time you turn 35. For example, if your salary is $60,000, your retirement accounts should ideally hold around $60,000-$120,000. If you’re falling short, take a closer look at your budget to see where you can increase your contributions.

This stage of life is also a good time to think about long-term expenses like your children’s education. While saving for your kids’ college is important, remember that your retirement should come first; there are loans for college, but there aren’t loans for retirement. Consider opening 529 plans or education savings accounts for your children while consistently contributing to retirement accounts.

To maximize potential growth, take a slightly more aggressive investment approach if you’re comfortable with risk. Financial advisors often recommend a portfolio mix of equities and bonds weighted toward stocks at this stage, as they offer a higher average return over time.

Your Retirement Savings in Your 40s

The 40s bring clarity to your financial future. By now, you’ve likely solidified your career, started paying down debts, and built up a more significant retirement portfolio. However, retirement may feel close enough to plan but far enough away to fine-tune your strategy.

By age 40, you should aim to have somewhere between three and four times your annual salary saved for retirement. This is a good decade to ramp up contributions further. For instance, if you’re not already maxing out your 401(k) or IRA contributions, now is the time to seriously consider it. For 2023, the annual 401(k) contribution limit is $22,500, with an additional $7,500 catch-up allowance starting at age 50.

Diversification becomes particularly important during this period. A well-balanced portfolio should include a mix of domestic and international stocks, bonds, and other asset classes like real estate investment trusts (REITs). Beyond diversifying your investments, think about diversifying income streams for retirement. Rental properties, stock dividends, or part-time gigs in retirement can reduce your dependence on savings alone.

Your Retirement Savings in Your 50s

Your 50s mark the home stretch before retirement, making this the time to ensure you’re on a solid path. Ideally, you should have six to seven times your annual salary saved by age 55. If not, use catch-up contributions to supercharge your saving efforts and close any gaps.

This decade is perfect for collaborating with a financial advisor. A professional can help you calculate your expected retirement income needs versus your savings, giving you a clearer picture of whether you’re on track. Don’t overlook the importance of healthcare expenses in retirement, either. Consider opening a health savings account (HSA) if you have a high-deductible health plan. Contributions are tax-deductible, withdrawals for medical expenses are tax-free, and funds can grow like a retirement account.

Additionally, begin strategizing your Social Security benefits. While you can claim them as early as age 62, delaying benefits until age 70 maximizes your monthly payouts.

Your Retirement Savings in Your 60s and Beyond

By the time you reach your 60s, you should have a concrete retirement plan and a portfolio that reflects your anticipated needs. This is when you begin transitioning from accumulating savings to withdrawing from those funds. Planning that transition well is crucial to ensuring your money lasts through retirement.

Consider downsizing your lifestyle, if needed, to ease the financial burden. Assess whether your mortgage is paid off, reallocate investments to safer products like bonds, and ensure that your withdrawal strategy meets your lifestyle demands—but doesn’t deplete your nest egg too quickly. Budget for healthcare and long-term care when planning your expenses; these costs often escalate with age.

Reflect on other income streams that complement your savings. For example, do you have annuities, rental income, or plans for part-time work?

Throughout your life, it’s important to remember the role of inflation. Over decades, inflation erodes the purchasing power of your money, meaning that what feels like a comfortable nest egg today might fall short tomorrow. Keeping your investments diversified and revisiting your plan regularly helps mitigate this risk.

Assessing your retirement savings at every life stage ensures you’re prepared for a financially secure and enjoyable retirement. By contributing early, making strategic adjustments in your 30s and 40s, and fine-tuning your financial plans as retirement nears, you can achieve peace of mind and the freedom to make the most of your golden years. Regularly review your plan to ensure it aligns with your goals, and don’t hesitate to seek professional guidance when needed. Remember, diligent preparation brings the reward of a worry-free retirement.