How to prepare for retirement through the decades — your 40s, 50s and 60s

When you’re young, retirement can seem a long ways off. It’s intangible and too far in the future to be a concern. In many cases, people don’t start taking it more seriously until their 40s when they see their parents living in retirement.
“At some point, it’s almost too late,” says Adam Spiegelman, wealth management advisor at Northwestern Mutual. “You have fewer options as you get older because there is not as much time to make up any shortfalls in your plan.”
Smart Business spoke with Spiegelman about how to prepare at each stage of life before the planning window narrows.
How far out should people plan?
Take advantage of tax-deferred savings your employer provides as soon as you start working. If you’re self-employed, use tax favorable options such as IRAs, SEPs and other pension plans that allow you to put money away in a tax efficient manner. The best advice is: early, often and automatic. Most people spend more time annually planning for their next vacation than they do for their own retirement.
Yes, it’s hard to save for retirement when you’re also trying to fund your children’s education or buy a house, but it’s important to strike a balance. Try to put away 10 to 15 percent of your salary on a monthly basis. If you can’t manage that, start somewhere and increase it by 1 or 2 percent each year.
What are some important items to consider by the time you get to your 40s?
In your 40s revisit the planning that you have done in your 30s and make sure you’ve checked the box on the following:

  • Estate planning documents including, but not limited to, a will/trust, medical directives and powers of attorney.
  • College savings. Estimate the amount it will cost and how much you’ll need to put away. Many people include several years of graduate school as well.
  • Retirement planning. Get as detailed as you can about your budget today and what you’re spending. Translate that figure into future dollars using inflation to calculate how much you’ll actually need in retirement. Then determine how much you must put away on a monthly basis.
  • Life and disability insurance, to protect yourself and your family.

Start as early as possible and create a vision for you financial future. What does retirement mean to you? What does financial security mean to you? You can look at those questions in your 30s, 40s and 50s and find that your answers change over time.
How does this change when you’re a little older, say in your 50s?
Your perspective changes because of what you’ve experienced in life. Maybe a friend or relative has had an illness or accident, you’ve become an empty nester or you’re helping your parents tend to their needs. You’re staring at retirement, saying, ‘I’m aging. My parents are getting older. This is real.’
Don’t panic, however. It’s a matter of revising your retirement projections and budget again and ensuring your estate planning documents still are accurate. Of course, you’re not waiting 10 years to do this, but it’s more detailed now and you’re also strategically thinking about things like Social Security and long-term care planning.
What key actions should you take in your 60s, just before you retire?
Finalize your bucket list — what you want to do, the places you want to go or any major goals you want to accomplish. The majority of your planning should be complete, so just refine any projections and update documents. You also may want to start thinking about leaving a legacy or charitable causes to contribute to.
This is a good time to fine-tune your Social Security plan, and meet with a Social Security consultant and your financial adviser.

The retirement planning process shouldn’t be like going to the dentist. It should be fun. If you do it right, you’ll have a whiteboard where you can fill in all of your dreams. If you want a Ferrari in retirement, you can have a Ferrari, if you plan early enough. You can essentially do anything. It’s just a question of starting early and planning.

 
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities) and its subsidiaries. Spiegelman is an insurance agent of NM and Registered Representative of Northwestern Mutual Investment Services, LLC (securities), a subsidiary of NM, broker-dealer, registered investment adviser, member FINRA and SIPC.
 
Insights Wealth Management is brought to you by Northwestern Mutual