Simple Decade By Decade Retirement Planning


One thing about retirement planning is that it isn't necessarily an enjoyable topic to discuss or think about but it is obviously a crucial aspect of adulting. I love this stuff but there is still plenty of content that make my eyes glaze over. The idea with this post is to make it very simple such that maybe you don't account for every variable but if you can hit certain age related milestones even without becoming a planning expert you'll be in good shape for when you do want to start getting serious about planning.

Twenties: If you go to college, continue to live like a college student for as long as you can. This probably means having roommates and living in a cheap place. This will allow for putting more into a 401k and if you can swing it, set some aside for a first home purchase. If someone can make it 30 with $50,000 set aside they will make the rest of their life much easier. They will have gotten used to saving and have a financial cushion which is either the start of a retirement plan or a source of flexibility for a life event.

Thirties: Living like a college student is probably in the rearview mirror by now but hopefully with a higher salary, contributions to savings vehicles have increased. In addition to a 401k and a fund for a downpayment if you've not already bought a house, think about putting some into a Roth IRA if you can. I would not put downpayment money into the stock market or anything that can go down in value. Someone planning to buy a house in spring 2009 who had their downpayment in the stock market probably didn't buy their house. If you can make it 40 with $200,000 you will make the rest of your life much easier in term of retirement planning or as a source of flexibility for a life event.

Forties: If you've bought a house by now, refinance into a 15 year mortgage if your original mortgage was 30 years. You will want the flexibility/freedom that goes with being mortgage free in your mid-50s. Saving ever more, hopefully you can make it to 50 with at least $500,000. If you do you will make the rest of your life much easier in term of retirement planning or as a source of flexibility for a life event.

This is also the decade where you need to start learning a little bit more about retirement planning and thinking even if just a high level what/when/if you want to retire. Even if you don't think you want to retire you could change your mind later and you should be prepared to retire all the same. Start to learn about Social Security. The longer you wait to take it the larger the benefit will be. I wouldn't worry about strategies at this point just know it gets bigger if you wait and start to track what your projected benefit is likely to be. This is easy to do at

Fifties: It is very common to want to retire in your fifties and to start pondering how quickly this can happen. Ducks to line up include when your mortgage will be paid off, that is obviously a big expense. Similar situation with car payments. If you have kids when will you be done paying for their school or anything else? Will you need to get health insurance on your own until medicare kicks in? These days that could cost $1500-$2000/month or should you forgo health insurance? If you're going to retire in your 50's and have zero earned income you need to understand the impact that could have on Social Security. Your Social Security benefit is based on your highest 35 years worth of earnings. If you have a bunch of zero earnings years it will reduce your benefit or maybe if you have 35 years worth of earnings, maybe retiring at 53 means that your college jobs making $5000/yr will go into your benefit calculation versus more peak earning years.

In terms of understanding whether you have enough money for retirement if you have 20-25 times your expenses you are probably in good shape, there is no guarantee of course but that multiple is connected to a 4-5% withdrawal rate from the portfolio. The 4% rule says that a 4% withdrawal has a 93% chance of lasting without running out of money and in hindsight there has never been a period that it has failed but that is for a 30 year retirement which might be too short for someone retiring in their 60's let alone their 50's.

Sixties: With each decade covered in this post they've all gotten more involved, required more work or more things to think about, it is possible that your 60's will have less to think about. You do need to figure out Social Security. The longer you wait the larger the payout but it isn't obvious that you should wait to 70 to take it. If you die at 71 you'd have collected more taking it early. Usually people start to come out ahead from waiting in their late 70's. There are countless variables here and plenty of valid justifications for taking it early and for waiting. Something that resonates with me is that if I die early my wife will get a larger spousal benefit.

At 60 years old with a plan to retire at 68 or even 66 you can still add meaningfully to retirement vehicles; $24,000/yr to 401ks, $7900 to HSAs until age 65, $6500 to a Roth, $6500 to a spousal IRA and of course taxable accounts. That might be difficult to swing but there is the opportunity to add a lot to your savings.

Health insurance is less of an issue at least in terms of time, you get Medicare at 65. Getting your own health insurance until you're 65 will be expensive.

Will you have expenses related to your kids or grandchildren? These can be good circumstance or bad but you need to know.

One final point regardless of when you plan to retire is to think about what a bear market in equities would do to your retirement plan. As an extreme example someone who was 100% equities in the summer of 2007 with a plan to retire in 2010 may have seen their portfolio cut in half by early 2009. If your portfolio cut in half one year before you planned to retire would that impact your timing? What would you do if you retired in the summer of 2007 and 18 months later your portfolio was down 50%?

Bear markets last on average 18-30 months. As you approach retirement it might make sense to raise 2-3 years of expected cash needs so that a bear market like above doesn't create a problem from which there is no recovering.

This post was not meant to be comprehensive, that would be a book, not a blog post. Zooming back out, save as much as you can and live below your means. You will mitigate all sorts of potential issues that way.