Whether retirement is right around the corner or decades away, being strategic about investing and saving for that time can help set you up for a comfortable lifestyle once you stop working. Unfortunately, research finds that many Americans underestimate their life expectancy and, therefore, don’t save enough for retirement. While the current life expectancy is 77 years, many Americans will live much longer and you want to be sure you have the financial means to do so. Here are key factors to consider as you invest in your retirement in each decade of your career and aim to maximize your savings and retire comfortably.
While retirement might seem too far away to concern you at this point, this is the time you can be most aggressive with your investments. Market ups and downs won’t affect your savings as much because you won’t be cashing out your funds for decades, so you can tolerate some volatility. A target date fund is an option that automatically chooses a mix of investments, with risk calculated based on your expected retirement date.
Another benefit of starting your retirement savings as early as possible is compound interest. When you earn interest on your investments, those earnings begin earning interest, and you can save a significantly greater amount over time. So even investing a small percentage of your income can ultimately yield surprisingly high earnings in the long run.
You also might not yet have financial obligations that come with marriage and a family in your 20s, which could free up some income to set aside for retirement. If your employer offers a matching program, it’s in your best interest to contribute the minimum amount to obtain the match. If you can max out your contribution, however, you’ll be putting yourself ahead of the game before more of life’s major expenses cause you to pull back a bit.