Investor Education | Retirement savings at different stages

When should you start saving for retirement? The stock answer is "right away." Usually, it is recommended that you begin salting away money for your golden years once you enter the workforce, but that can be difficult and slow. Thus, the manner in which you save for retirement—and the amount you set aside— will often depend on your particular circumstances. Keeping that in mind, here is an overview of what saving for retirement might encompass at different stages of life.

Early years: For most people, their first starting salary does not provide much room for savings. But it is still important to develop good saving habits. For instance, if you work at a company that provides matching contributions to a 401(k), be sure to take advantage of the company match. Otherwise, you are leaving money on the table that may provide valuable income in retirement. Furthermore, you might be surprised to find out the degree of impact that tax-deferred compounding can have over a long period of time.

Middle years: When you are in the middle of your working career, other obligations—such as buying a home, raising your children and building up funds to pay for their educations—often take priority.

Nevertheless, do not take your eye off the ball. To the fullest extent possible, continue utilizing company retirement plans, IRAs and other savings vehicles. Note that in retirement, a Roth IRA may provide tax-free payouts for qualified distributions (e.g., those received after age 59 ½). If you are rewarded with a raise, try to allocate at least part of it to your retirement savings plan.

Late years: If the house is paid off and the kids are out of school, this time of life may provide more opportunity for saving. Also, you may benefit from seniority at work and career advancement, so your earnings could be higher than ever or near their peak. If you have not be as diligent through the years as you would have liked, it is still possible to build a sizeable nest egg for retirement. The basic principles of using retirement plans and IRAs for tax-deferred growth remain the same.

Finally, do not think that saving for retirement ends once you have retired. At this time, you must make some serious decisions and assess both your expected income and expenses. For instance, one major decision is when to take Social Security benefits so you can maximize the payouts. Also, you might choose to keep working past the age for receiving full Social Security retirement benefits (ranging between 65 and 67, depending on your year of birth).

Because of longer life expectancies, due in part to medical advances, you may need more retirement income than you originally expected. If you have not started saving yet, or if you anticipate a shortage, now is the time to spring into action.

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