How to Be Financially Prepared for Future at Every Age

Have you stopped to wonder how your age and your financial wellness go hand in hand? More importantly, based on that number, are you financially on track to be able to save, retire and have the sort of freedom, money wise, you need?

Not everyone, whether you’re in your 20s, 30s, 40s or 50s, thinks the same when it comes to money. Someone who’s 25 isn’t necessarily considering retirement plans any time soon, but that doesn’t mean it shouldn’t play into their decision making financially.

Much the same way a person in their 50s, who hasn’t done a very good job saving money, might want to adjust, counter Father Time, and start saving a little more consistently if they’re trying to make up for lost time (and money).

Playing catch up is part of it, but for those who are in a younger age group it’s more about planning and persistency, along with a little patience, particularly if those around you aren’t so good at saving.

As much as each age group has their own benchmarks, goals and successes, you’d be surprised to find out that they all have their countless struggles as well.

Take the 18 to 24 age group, one that might not consider saving money a crucial financial piece at this moment. They’re average savings account balance is $1,000, roughly 67 percent of them, with a staggering 46 percent at $0.^[1]

While those numbers might be more relatable to the fact that they are still in college and haven’t found the right job, it’s also equally alarming given that those 18 to 24 year old individuals always have the probability of turning into 55 and older, soon to be retirees who haven’t banked nearly enough to even consider their Golden Years anything but ghastly (more on that age group in a minute).

And even the older crowd isn’t necessarily killing it or even content.

What should someone in their mid 50s have? The general rule of thumb is eight times your normal salary in order to live comfortably. ">[2]

So if you’re someone who makes $40,000 per year, you need $320,000 in your retirement account to survive. Keep in mind that number is to just survive, but what truly does the average person have at that age in a 401K. Chances are, you’d be surprised to find out that it’s not anywhere close, but how exactly can that be fixed.

Regardless of your age bracket, and if you’re falling behind on the financial growth chart as it stands, you can always alter your path and rewrite your future from a saving money perspective whether you’re just getting started or are someone on the tail end of your working schedule.

Here’s where you should be money wise at any age, and how to fix your financial woes if what you’re looking at from a bottom line seems broken (or at the very least) in need of serious repair.

Your 20s: Why starting as soon as possible makes best sense

Financial planning isn’t usually a high priority from the 20-something audience, for a number of reasons.

You might still be in college, living at home with mom and dad, and any paycheck under both of those scenarios seems more about spending, having fun in your youth versus looking into a prospective retirement account before the gap and gown you just wore barely has a speck of dust to its name.

Another reason financial planning and retirement, along with saving money isn’t on the 20-something radar is due to the lack of income you have at that age. The average salary for ages 20-24 is $27,456, or around $528 per week.^[3]

While that seems paltry in comparison to someone who has been at this career thing for much longer, consider again those two “roadblocks” as to why you’re not thinking about saving or retiring.

If you are living at home, take advantage of that situation. Sure, you have student loan debt on the horizon, but use the fact that you don’t have rent or mortgage, and a mountain of bills and start saving what you are making, less a few nights out, car payments and those student loans.

Not only is their opportunity to save and build an emergency fund, but retirement accounts aren’t out of the question either.

Consider the $3,000 example.

A $3,000 per year retirement account at the age of 25 over 10 years (assuming no other dollar figures are added to it and it stops when you’re 35 as far as you contributing to it) will be worth $338,000 when you’re 65 using a 7 percent annual return, and the account is tax deferred.^[4]

The other piece of the equation you can’t overlook is the idea of automating your saving, too. Because in your 20s, you may not be in the house hunting market or about to get married and have a family, so you won’t miss the money particularly if you automatically have it deducted from a paycheck and into a retirement account or even a savings account at your bank.

Bottom line, start as early as possible.

Your 30s: Why this age is all about capitalizing on opportunity

So let’s say your 20s came and went, and saving money and retirement accounts took a backseat to having fun and finding “your way.”

So be it.

Now, it’s time to get serious and cracking down on your future.

A lot of the advice you should have given your 20-something self applies to your 30-something self, too, such automating your deductions, for example.

But your 30s could easily get in the way due to this being the time period when you’re considering (or getting) married, having kids and opting to purchase a house versus putting saving money or retirement at the forefront.

The truth is your 30s is your time to shine, and that includes making sure you don’t overlook one key aspect of retiring: the company 401K. By the time most individuals reach their 30s, two things happen financially: your salary gets better, and you are working for a company that offers a 401K.

The average salary between the ages of 30-39 is between $40,000 and $50,000.^[5]

That’s a sizable jump between the aforementioned 20-something salary, so you should be maximizing that extra income. Putting more in your 401K is a start, and that would include the maximum amount you’re allowed to contribute, roughly $18,000 per year as of 2017.^[6]

While that number might seem high, consider things like increasing your contribution each time you get a raise. If you’re budgeting on what you make now, a few extra dollars in your pay should be allotted to your retirement account. You're already getting by without the money at the moment, so what you didn’t have before, how can you possibly miss?

If that $18,000 figure scares you away a bit, think of it more as a percentage per day. The goal should be to save approximately 15 percent of your pay into a retirement account.^[7]

There, that should make you a little less worried about the dollar amount.

Your 40s: If you’re not saving now, then when do you plan on it?

If 40 is the new 20, then that means you’re spending money like wildfire, and aren’t thinking a whole lot about retiring.

Let’s hope that adage has more to do with being young and heart, not young and foolish. The average 40 year old has about $67,000 saved in a retirement account.^[8]

How do you stack up to that?

Truth be told, about 37 percent of employees between 35-44 have less than $1,000 saved for retirement, while 45-54 is 34 percent.^[9]

In your 40s, you may be thinking about sending kids off to college, refinancing a home or putting money back into that same house with remodeling. Maybe you’re considering going back to school as well, or are just in the midst of that proverbial mid-life crisis.

Rather than spend too much (or overspend for that matter), you may want to consider following the lead of your 30 something year old self, and start upping your 401K contributions. This also is the age when you’ll want to start really getting yourself out of debt, because the more you can push debt down, the more you an up said contributions to your retirement.

You also want to ensure you’re saving as much to your 401K as possible, and if that means cutting your current budget then so be it. If you’re saving $17,000 per year at the age of 40, given that you have $0 saved, you still can be a millionaire with a seven percent annual return by the time you reach 64.^[10]

See, who said it would be impossible?

Usually around your mid-40s is when you really start concerning yourself with retirement and if you have enough saved, and if you’re not where you want to be, begin the process of reasoning followed up rational thought and then finally with really fretting about where you’ll be in the next 20 years or so.

Your 50s: So now you’re really behind the eight ball, savings wise

Here we are, just the two of us. The 50 year old worker, still hard at work and probably 15 years or so away from retiring staring down the barrel of a retirement account that isn’t exactly in the best of fiscal shape.

Now what?

When you were in your 20s, and you thought you had all the time in the world to save, you kept putting off retiring or thinking about retirement.

There is good news for those procrastinators who are 50 and older: you can max out your 401K more so than someone who isn’t of that age. For those 50 plus people, you’re allowed to contribute $24,500 per year into a retirement account, and that number is up from $24,000 in 2017 and well ahead of the $18,500 for everyone 49 and younger.^[11]

Again, if that number seems huge, it is, but that only means you should be adjusting how you spend and what you’re doing with your money.

For example, if you get a yearly bonus, stop worrying about what you’re going to do with it, and just reinvest it into your retirement. The days of using that money for vacations, buying something extravagant or even just fixing up the house should be tempered with a taste for working quickly to save between 50 and 65 to maximize your savings.

You’re never too old to start something new, even if that “new” is simply starting to save for retirement.

And if you’re 50 and “maximizing” your retirement, don’t forget about your IRA, too. That max is $6,500 per year, which would otherwise be $5,500 if you’re not of that age.^[12]

Sadly, those closer to retirement, in general, have very little if any comfortability about how much they have saved. A recent study showed that only about 18 percent of individuals feel comfortable about how much they have set aside to retire.^[13]

That isn’t exactly a ringing endorsement for the progress they’ve made while working, or lack there of. But even if you’re part of the minority who isn’t overly thrilled with how much you’ve saved, that can change in the blink of the proverbial eye.

Even if you’ve started late or not at all, at any age, you can easily turn thing around with a few money moves that can maximize your savings, boost your 401K and make the transition from working person to retiree an easier one that you’d expect.

The old adage that “age is only a number” is suggestive more from a personal health and fitness perspective, meaning no matter how old you are, you’re not defined by a number but rather your well being.

The same could easily be said from a financial perspective, too.

Demographics aside, age is still just a number financially too. So no matter what digits are staring back at you, either your account balance or how old you are, it’s never too late to turn your nose up at a number and consider action over apathy as far as how much you can save in spite of age.