Here's a decade-by-decade guide to retirement planning

An illustration of a person in his 20′s holding a phone that displays her spending breakdown, including savings, college, shopping, and friends.

Josephine Flood | CNBC

How to read this guide

Follow along from start to finish, or jump to the section(s) you want to learn more about.

Introduction

Saving for retirement is the gnarliest of delayed gratification challenges. Tucking money away today in retirement accounts with the intention you won't touch it for decades is not a habit that most brains are hard-wired to embrace.

But save we must.

For most people, Social Security benefits won't cover all the bills in retirement. To land in retirement in solid financial shape, you also want to build your own savings in 401(k) plans and individual retirement accounts.

It's never too early to get started. (Hint: compound growth is your best investing friend.) Nor is it ever too late to make progress. (Another hint: Worried you won't have enough retirement income? Consider ways to reduce your spending needs in retirement.)

Like any big goal, breaking it down into manageable bite-size pieces keeps the task from veering into overwhelming. Focusing on a few key moves in each decade will set you up for a successful retirement.

In your 20s: Cash in on compound growth

Retirement savings goal by the end of this decade:

You should aim to save about 1x your salary

Yes, you've got a lot of competing goals and, yes, retirement is a long way off. Understood. But the powerful math of compound growth means this is the decade where what you manage to save can exploit compound growth to its fullest.

• Aim to save 10% of your gross salary pronto. That's a minimum; crank it up to 15% and you're giving yourself a serious leg up. If you wait another decade to get rolling, you'll need to save at least 20%.
• Focus on Roth options. Retirement accounts come in two flavors: traditional and Roth. The big difference is when you pay tax. At this life stage, when you've yet to hit peak earnings, saving in a Roth can be smart.

• Got a workplace plan? Check what your employer chose for you. If your employer auto-enrolled you into a retirement plan such as a 401(k) or 403(b), chances are your contribution rate was set way too low. Some plans start you at a rate that doesn't even enable you to pocket the matching maximum contribution most plans offer. And most plans choose an initial contribution rate that even with the maximum match won't get you near your 10% target. No worries. You can easily change your contribution rate. Ping HR.
• No workplace plan? Get rolling with an IRA. If you're self-employed, or a contract worker, you can set up an IRA account at any discount brokerage. If you qualify for a Roth IRA, your maximum contribution in 2020 is $6,000. Able to save more? Check out a SEP-IRA; it allows self-employed workers to save more for retirement. Alas, SEPs only are traditional. There's no Roth option with a SEP.
• Check out a target date fund. If you're flummoxed by all the investment choices, a TDF can handle the work for you. A TDF automatically chooses a mix of stocks and bonds deemed appropriate based on how long you've got until you expect to retire.

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An illustration of a person in her 30's holding a phone that displays her spending breakdown, including savings, dining out, shopping, friends, vacations, and rent.

Josephine Flood | CNBC

In your 30s: Stay (or get) focused

Retirement savings goal by the end of this decade:

You should aim to save about 3x your salary

• If you're just getting started, aim to save at least 15% of your gross salary; 20% is even better. You don't have time for baby steps at this point. If you can't imagine immediately revving from zero to at least 15%, that's a sign it's time to — deep breath — commit to budgeting to find the cash to save.

• Hands off what you have already saved for retirement. If you contributed to a workplace retirement plan in your 20s, don't blow it by cashing out when you job hop. An unfortunate feature of workplace plans is that when you leave a job, one of your options is to cash out your retirement account. To be blunt: That's a crazy-bad move. There may be taxes, and there definitely will be a 10% early withdrawal penalty. Moreover, you've just robbed your future self of money you will need in retirement.

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An illustration of woman in her 40's with laptop displaying her financial breakdown, including home, shopping, savings, dining out, vacation, groceries, and car.

Josephine Flood | CNBC

In your 40s: Monitor your spending

Retirement savings goal by the end of this decade:

You should aim to save about4x your salary

The challenge in this decade is to not take on big-ticket spending that can make it hard to keep up with your retirement plan.

• Get a ballpark of how you're doing. After a decade (or, it's hoped, two) of saving for retirement, it's a good time to plug in what you've got saved up into an online calculator to get a rough estimate of what that might grow to by the time you're ready to retire. If the numbers give you pause, you've got time to crank up the saving. Can't see your way to do that? Keep reading.
• Be on high alert for lifestyle creep. One of the challenges of moving into your prime earning years is the tendency to spend more as you make more. Lifestyle creep has upended many a well-intentioned retirement plan. These are the years where buying the less expensive cars, taking the restorative vacations that don't break the bank and checking your tendency to always choose upgrades for whatever you're buying are all conscious ways to spend less so you have more to save.
  It's also helpful to commit to a strategy for how much of every raise, bonus and one-off windfall, such as an inheritance, you will plunk into your retirement savings accounts.
•  Don't back up the truck for college. This is a decidedly hard notion to consider, but insanely important. Ultimately what your kids really need from you is to be able to take care of yourself in retirement, so they don't need to chip in, at a point in their lives when they are likely in the throes of raising their own family. Start the college planning early, and focus on schools where your kid has a good shot at aid that will keep your family's net price manageable.

An illustration of a man in his 50's holding a tablet displaying his financial breakdown, including home, family/pet, groceries, car, vacation, shopping, dining out, and savings.

Josephine Flood | CNBC

In your 50s: Plan your retirement income

Retirement savings goal by the end of this decade:

You should aim to save about 8x your salary

Saving as much as possible remains Job One. But now's also the time to start getting a sense of how the pieces of your retirement income puzzle will fit together.

• Estimate your retirement income. Online calculators will give you a ballpark of the income your retirement savings can generate over a 30-year retirement. (Yes, you should plan that long. More on this in the next decade). You'll also be asked to plug in an estimate of your Social Security payout. You're too close to retirement to spitball this.
  Take a few minutes to log in to the Social Security Retirement Estimator to get estimates based on your earnings history. Scribble down what you might qualify for at your full retirement age (somewhere between 66 and 67) and if you wait until age 70. Plug those into the retirement calculator to see how it impacts your retirement income.
• Put downsizing on the table. If the first pass at estimating your retirement savings caused some serious agita, convincing yourself you will just work longer can be dangerous magical thinking, especially when a recession hits. Downsizing sooner than later can transform your retirement outlook from nerve-wracking to flush.
• Save even more. Once you turn 50, Uncle Sam allows you to save even more in 401(k) plans and IRAs. The catch-up contribution for 401(k) accounts is $6,000 per year. For IRAs, you can add another $1,000.
• Get a pro's input. Head spinning a bit? That's understandable. Saving for retirement is the easy part. Figuring out how to live off your savings and optimize Social Security is anything but. There are plenty of certified financial planners who work on an hourly or project basis to help you sort through your retirement options and hatch a plan.

An illustration of woman in her 60's holding a laptop showing a breakdown of her expenses, including shopping, groceries, home/pet, hobbies, savings, and dining out.

In your 60s: Focus on your age 90-plus future self

Retirement savings goal by the end of this decade:

You should aim to save about 10x your salary

You've rounded the bend, with retirement in your sights. The big win this decade is to assume that you will live until 95.

• Plan on a 30-year retirement. Tune out the life expectancy numbers that make it into the news from time to time. That's the average from birth. What matters now is your life expectancy from where you're at today. Make it into your 60s and there's a good chance you will still be alive in your 90s. The Society of Actuaries' Longevity Illustrator may be the most important retirement planning tool at this life stage. Take a spin through the free tool to get a sense of how long you may need your retirement income plan to last.
• Respect inflation. With a potential 30-plus year retirement runway, you likely will want to keep some of your investment portfolio invested in stocks, which historically provide the best inflation-beating gains. Even at a low 1.5% annual inflation rate, what costs you $1,000 today will cost nearly $1,350 in 20 years and more than $1,550 in 30 years.
• Wait until age 70 to start collecting Social Security. The best investment move you can make in your 60s is to plan to delay taking Social Security. You can start as early as age 62, but you will get 25% to 30% less than if you wait until your FRA, when you are entitled to 100% of your earned benefit. Manage to delay past your FRA and your benefit will increased a guaranteed 8% each year until you reach 70.
  Might you earn more if you took the payout earlier and invested in stocks? Perhaps. But you could also lose plenty, too. The higher payout from delaying when you start Social Security is guaranteed. For couples in good health, the strategy should be for the highest earner to delay until 70. It is less important when the other spouse claims.
• Consider covering essential spending from guaranteed sources of income. If your Social Security benefit won't cover all your fixed expenses (and you don't have a pension), a single premium income annuity can close the gap and make it easier to sleep at night, knowing you've got what you need regardless of what is going on in the markets.

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