How to Start Saving for Retirement at Every Age (20s, 30s, 40s, 50s)

Savings Strategies | by Jules Buxbaum | Friday, January 03, 2025

How to Start Saving for Retirement at Every Age (20s, 30s, 40s, 50s) is a question on the minds of professionals, business owners, and anyone striving for a secure future. Saving habits often start late, and many people overlook the common pitfalls that can stall long-term goals.

Whether you’re fresh out of college or just a few years from leaving work, retirement planning remains essential. This article explores savings strategies across various decades, highlights the importance of risk allocation, and shares how you can apply these tips right now.

Why Saving Early Matters

Starting young offers two key benefits: more time for compound interest to grow your money and extended flexibility for experimenting with investing styles. Compound interest means you earn interest on both your contributions and prior gains.

For instance, a one-time $10,000 deposit earning 8% annually could exceed $217,000 after 40 years, while waiting a decade to deposit the same amount results in far lower potential growth. Extra time truly boosts your final nest egg.

Saving in Your 20s

Those in their 20s benefit most from the long runway of compound growth. Even small monthly contributions can become substantial over four decades, so it’s wise to prioritize consistent deposits.

Use a workplace plan if available, particularly if there’s a matching program. To learn more about matching programs, check out our guide on how to maximize employer 401(k) matching contributions. Every percentage point helps when time is on your side.

It’s also helpful to open a Roth IRA if you qualify under income guidelines. Roth contributions can be ideal for younger earners who expect higher tax brackets down the road. While you’re at it, start an emergency fund to protect your retirement accounts from unexpected withdrawals.

Saving in Your 30s

The 30s often bring growing salaries but also more obligations, such as a mortgage or expanded family. At this stage, raising your contribution rate becomes a top priority. Experts often suggest increasing savings to about 10–15% of your earnings.

Many people in their 30s weigh the advantages of after-tax versus pre-tax retirement contributions. See our resource on how to choose between Roth IRA and Traditional IRA for deeper insights on tax differences. Balancing risk is still reasonable here, as you have decades of potential growth ahead.

You can also explore tools that adjust your savings strategy as your life changes. Some individuals turn to advanced software like 2Pi’s Financial Planning Engine, which personalizes scenarios based on your retirement age, risk level, and current wealth.

Saving in Your 40s

The 40s are typically a peak earning period, making it crucial to invest more aggressively if you’re behind schedule. While higher income provides room for bigger deposits, don’t ignore your retirement timelines and lifestyle targets.

According to John Hancock (2023), the median retirement account balance for individuals in their 40s is roughly $63,000, which may be insufficient if your desired retirement is only 20 years away. If you suspect you’re lagging, explore strategies in our article on what to do if you’re behind on retirement savings.

This is also a good age to revisit your asset allocation. Some people reduce stocks too quickly due to traditional advice about lowering risk with age. In reality, personal factors—like how much future earning power you still have—matter more than a simple age-based formula. Equities can be valuable for long-term growth, thanks to the equity risk premium that has historically rewarded patient investors.

Saving in Your 50s

By your 50s, you're closing in on your goal. Take advantage of catch-up contributions, which allow those aged 50 and older to deposit additional money into IRAs and 401(k)s each year.

This is also the time to consider potential healthcare expenses and your likely retirement timeline. Assess long-term care coverage and be prepared for unexpected costs. If you own a small business or earn freelance income, plan for self-employment retirement options, too.

Despite conventional wisdom that you should dramatically reduce risk in your 50s, holding some equities can still be beneficial, especially if you need higher returns. 2Pi Financial generally believes that the usual approach of drastically moving to bonds at a specific age might be flawed. The key is how your future earnings compare to your current wealth, not just the year on your birth certificate.

A Note on Risk and Glide Paths

You may have heard about “glide paths,” which typically reduce stock exposure as you grow older. However, 2Pi’s viewpoint is that this rigid formula overlooks individual situations. A 55-year-old with strong earning potential may withstand more equity exposure than a 25-year-old with limited future income.

Consider tools that analyze both your current assets and future income potential. That approach goes beyond a standard “age in bonds” mindset, letting you optimize your mix based on your real financial capacity and family obligations.

Key Takeaway

Your age is a starting point—not a final instruction. Early savers should focus on compounding, while those in their 30s and 40s might boost contributions dramatically to catch up. Even in your 50s, there’s a path forward to strengthen your nest egg with catch-up deposits and equity exposure.

For even more guidance, visit our resource on choosing the right retirement financial planner. Reliable advice can help shape your future, whether you’re just starting out or rejuvenating your plan.

2Pi’s Financial Planning Engine is also worth considering for a personalized look at retirement possibilities. It helps you see how changing retirement dates, savings percentages, and risk preferences might affect your overall outcome, all while factoring in inflation and other market variables.

References

1. T. Rowe Price. (2023). “Retirement Savings By Age: What to Do With Your Portfolio.” Available at: https://www.troweprice.com/personal-investing/resources/insights/retirement-savings-by-age-what-to-do-with-your-portfolio.html

2. John Hancock. (2023). “Retirement Strategies for Every Age.” Available at: https://www.johnhancock.com/ideas-insights/retirement-strategies-for-every-age.html

3. Harbor Life Settlements. (2023). “Retirement Statistics.” Available at: https://www.harborlifesettlements.com/retirement-statistics/