Retirement Milestones By Decade

Written by Michelle Guissinger, CFP?, CPA, CDFA?

Everyone has their own unique retirement timeline, needs and strategies. But thanks to factors like Social Security, Medicare and IRS rules, just about everyone will face retirement planning milestones in approximately the same order and at the same stage in life.

Here are the major milestones you’ll face in retirement and the ages at which you’ll face them.

Right Now

Engage a financial advisor

Navigating your journey to retirement is much easier with a financial advisor at your side. While you can partner with an advisor at any stage of your life, choosing one sooner rather than later is best. Your advisor can then help you evaluate your situation, plan for these milestones, and get you through your retirement years with your best interests in mind.

In Your 40s

Max out your retirement accounts

You need to save a lot of money for retirement—especially in your peak earning years. This is a time when you're likely benefitting from an employer-sponsored health plan, and you may even be enjoying a hard-earned break from the expenses of raising and educating children. Take advantage of it by contributing as much as possible to your retirement accounts.

Make Roth IRA contributions

There are limits to how much you can contribute to your Roth IRA. In 2022, if you’re under age 50, you can only contribute up to $6,000 for the entire year. If you’re over 50, you can contribute an extra $1,000 in catch-up contributions.

Even then, the amount you can contribute is dependent on your income. Once you reach a certain limit, the amount you can contribute starts to phase out. Contributing to your Roth IRA early allows for longer tax-free growth and ensures you don’t lose the opportunity to make contributions.

Start building tax diversification

Tax diversification?is intentionally distributing your assets between various investment accounts that are taxed differently. Just like you should have diversification in your investments, you should also have diversification in how your retirement accounts are taxed.

Essentially, this means you should start spreading your assets around various accounts that are taxable, tax-deferred, or tax-advantaged. This strategy allows a more even distribution of your tax burden throughout your life by allowing you to vary what sources you draw income from based on your circumstances.

In Your 50s

Make a plan for long-term care

It’s estimated that?7 out of 10 people will require long-term care (LTC) at some point in their lives, so you'd be wise to plan how you can pay for it, should you need it. You could pay for it on your own or look into LTC insurance, which can help you pay for services generally not covered by Medicare. If you decide to go the LTC insurance route, your early 50s are a great time to start. The older you enroll, the higher your annual premiums will be.

Catch-up contribution eligibility begins at age 50

There are limits to how much you can contribute to your various retirement accounts each year. However, once you turn 50, the IRS allows you to contribute an additional amount?on top?of the existing limits, called “catch-up contributions." These get adjusted annually, so keep an eye out for them...

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