Financial Milestones in Life & Retirement Savings Goals by Age

It can be overwhelming to compare your financial progress with others and be bound by a timeline. But it can also offer you a roadmap for the future and give you something to aspire for. Financial milestones are targets that you aim to achieve by a certain age or stage in your life. For instance, buying a home in your 30s or saving a certain amount of money by your 40s. These milestones can guide you to your goals and ensure that you do not get lost along the way. They can also be a motivating factor, encouraging you to achieve your goals in a timely manner.

However, it is crucial to understand that financial milestones can differ for different people. Your goals are bound to vary from your parents, friends, siblings, and children. Your financial targets can be determined based on your struggles, triumphs, opportunities, and more. The concept of milestones is not to put you in a race but to offer you a path. When you set milestones in life, you have a clear view of where you are headed. This helps you draw a suitable plan to reach your destination within the stipulated timeline. Besides, you can set your own life milestones by age and do not necessarily have to follow in the footsteps of your peers. You can also consult with a professional financial advisor to help you come up with a plan to achieve your goals within a set timeline and ensure that you stay on track to achieve them.

There is no right or wrong approach, and setting financial milestones is a personal choice. However, some goals may be common to all. You can go through the list of life milestones by age given below to get an idea of what you can aim for in each decade of your life. This can help you create a suitable financial plan for yourself and set things in motion.

Financial milestones in life, for every decade:

1. Before you hit 30:

Your 20s are an exciting time in your life that is full of change. These are your formative years where you would likely exit student life from the safe corridors of your school or college and step into the real world. Most people start working in their 20s, which means they have a good number of years ahead of them to sort out their finances by the time they turn 30. Here are some financial milestones that you can aspire to achieve during this time:

Pay your student debt: If you have just finished college, you may have student debt mounting on you with interest. The first goal at this stage can be to pay off your debt. Debt can erode your savings, and the longer you wait to clear it, the harder it can be to settle it. Moreover, unpaid debt can be a cause of worry and can interfere with your financial growth. Paying student debt can be challenging as you may be earning low during these years. However, creating a budget can help. A budget can ensure that you avoid unnecessary expenses and are able to prioritize the more important things.

Paying your student debt early in life also helps you build a positive credit score that makes it easier to get loans at a later stage in life.

Set a savings rate and invest your money: After accounting for loan repayments, the next thing is to establish a savings rate and invest the money you save. This does not have to be too high as you may be struggling with student debt. However, try to find a comfortable balance that ensures you get to save something every month. One of the biggest mistakes you can make in your 20s is undermining the power of time. Starting sooner can offer you a jump start in life. You can start by maximizing your contributions in an employer-sponsored 401(k) retirement account or create an Individual Retirement Account (IRA). Mutual funds can also be a good option as they offer simplified financial solutions that can be ideal for beginners.

Learn personal finances: Getting a grip on your finances from an early age can help you make smart decisions for life. As long as you understand personal finance, you will be able to pick suitable investments for your risk appetite and goals. You will also be able to plan your taxes well and maximize your profits. Try to read as much as you can. You can also take up an online course. Hiring a professional financial advisor can also be beneficial, as these professionals can steer you in the right direction from the very start.

Get health and life insurance: The premium for health and life insurance is the lowest in your youth. This is a time when you are in the prime of your life and are likely to suffer from the least health concerns. Getting a health and life insurance plan in your 20s can help you save a lot of money. Moreover, it keeps you covered against health costs, so your savings do not get impacted in the case of a medical emergency. Likewise, life insurance will safeguard your spouse or children in the future.

Invest in yourself: Your 20s are a critical time. While you invest in the market for your future, it is also important to invest in yourself. Try to learn new skills and explore different options before you settle in on a job. This can benefit you professionally and ensure that you pick a stream that interests you.

2. Before you hit 40:

The transition from your 20s to 30s can present multiple shifts. You may get married or have children during this time. Your parents will likely age and suffer from health concerns, and your siblings may start their own families. Personally, these can be major milestones in life. On the professional front, you may be earning more. You would have gained some experience by now. However, you would also have more expenses and serious financial goals for the future. Here are some financial goals by 40that you can aim for:

Focus on retirement: The savings you started in your 20s can now be given a direction. Retirement savings are crucial at this time. You can continue maximizing your 401(k) and IRA contributions. If your employer matches your 401(k) contribution, you will be on the winning end. However, even if they do not, you can do your bit.

Invest more: Additionally, you may want to focus on other types of investments other than retirement accounts. You can invest in mutual funds, stocks, real estate, exchange-traded funds, and more. You can create a well-diversified portfolio that is ideal for your financial milestones, age, risk appetite, and investment budget. It is important to increase your investment budget from your 20s. As you grow in your career, your investments also need to increase. This helps in ensuring that you reach your goals sooner and are able to beat inflation, too.

Plan for individual goals: If you have children, this may be the right time to start planning for their higher education expenses. You can consider child plans like the 529 education savings plan. You can also invest in stocks. These can carry high risk, but since you have a long-term investment horizon ahead, you can consider them as long as you have a high-risk appetite.

Likewise, if you are planning to buy a home, you may have to apply for a loan. If you paid your student loan in time and are paying your credit card bills regularly, you would be able to get a reasonable interest rate with a stable credit score. You can use your savings and investments to pay for the down payment. Real estate investment can be one of the most important milestones in life. This can be a great family asset, too.

Save up to twice your annual income: Some financial experts believe saving at least twice your annual income can be one of the financial goals by 40 that you can plan for. Saving up such a sum will make sure you have enough to fall back on in your hour of need. Further, it will ensure that you are on the right track and are able to reach your retirement goal by your 60s. This is also a good amount to have by this age as far as tackling the rising inflation is concerned.

3. Before you hit 50:

Your 40s can be a stable time in your life. The chances are that you would likely be living in your home by now. Your children would also be older, and you would have been saving for them for all these years. With steady professional growth, you can be in a great place financially. However, it is important to meet some retirement savings milestones in these years as you would be inching close to your golden years.

Here are some financial milestones for your 40s:

Get a financial advisor on board: If you have not already hired a financial advisor, now would be an excellent time for it. A financial advisor can review your financial plan and confirm if you are on the right path to financial freedom. If there are any changes to be made for a secure retirement, they can be made in your 40s when you still have 20 years to retire and are earning enough to cover up for the past mistakes.

Create an estate plan: Estate planning can be critical to protecting your spouse, children, and other loved ones in your absence. You can start by creating a will. Make sure that the names of the beneficiaries on your will match the ones on your life insurance plan, 401(k) and IRA, and other investments and savings. This avoids confusion and ensures that you are able to secure the financial future of your family members. You can also create trusts for minor children and assign a guardian for them. Estate planning can be a morbid component of financial planning, but it is vital to ensure that your family members have something to rely on in your absence.

Save up to four times your annual income: You can consider yourself running at a good pace if your savings and investments equal four times or more than your annual income by now. Setting up such milestones in life and being able to achieve them can be a reassuring factor, given that retirement is just around the corner.

Clear your debt: If you took a loan in your 30s to buy a home, try to pay it off before retirement. You can prioritize clearing your home loan debt in your 40s.

4. Before you hit 60:

Your 50s are perhaps the last of your working years. Most people retire in their 60s. This means this could be the last decade to prepare for retirement savings milestones. Here are some things you can do during this stage of your life:

Maximize your retirement contributions: Retirement accounts like the 401(k) and the IRA offer catch-up contributions every year for people aged 50 and above. You can considerably increase your retirement corpus by taking advantage of these catch-up contributions. As of 2022, you can contribute an additional $6,500 per year towards your 401(k) and $1,000 per year towards your IRA.

Clear all debt and take no more loans: It is never a good idea to step into retirement with debt. The high-interest rates can eat into your savings in the absence of an active income. So, it can help to prioritize settling all your dues, including credit card bills.

Save up to six times your annual income: Having savings and investments up to six times your annual income can be one of the financial milestones for your 50s. Since you would be on the cusp of retirement, having such a sum can offer you peace of mind to quit working and settle into your golden years comfortably.

To conclude

These life milestones by age are not the rule book of financial planning. However, they can serve as a guide for you to consider from time to time. You can compare your growth by these financial milestones and can see where you stand. Accordingly, you can take the necessary steps to keep moving in the right direction. Also, remember that financial planning does not stop at the age of 60. It continues for as long as you live. Hiring a financial advisor can help you plan your finances in retirement.

If you wish to learn and understand how to create a suitable financial plan to achieve different financial milestones as per your age and life stage, use WiserAdvisor’s free advisor match service to find highly qualified and vetted fiduciary advisors who can guide you on the same. Answer a few questions about yourself and get matched with 1-3 fiduciary advisors that are suited to meet your financial requirements. For further information on the most suitable financial goals and saving strategies for different stages of your life, visit Dash Investments or email me directly at dash@dashinvestments.com.

About Dash Investments

Dash Investments is privately owned by Jonathan Dash and is an independent investment advisory firm, managing private client accounts for individuals and families across America. As a Registered Investment Advisor (RIA) firm with the SEC, they are fiduciaries who put clients’ interests ahead of everything else.

Dash Investments offers a full range of investment advisory and financial services, which are tailored to each client’s unique needs providing institutional-caliber money management services that are based upon a solid, proven research approach. Additionally, each client receives comprehensive financial planning to ensure they are moving toward their financial goals.

CEO & Chief Investment Officer Jonathan Dash has been profiled by The Wall Street Journal, Barron’s, and CNBC as a leader in the investment industry with a track record of creating value for his firm’s clients.