Retirement Roadmap: Financial Milestones You Should Hit by Ages 30, 40, 50 and 60

Climbing a mountain is no easy feat, and neither is retirement planning. It’s hard to even see what the top looks like when you’re standing at the bottom, after all.

But just like any other journey, breaking your retirement planning into individual steps makes it easier to ensure that you arrive safely at the summit and can handle whatever you find there — even if that’s just a poolside deck chair.

Here, organized by decades of your life, are where you need to be in retirement readiness. Our guide runs from the age at which most people need to begin building a nest egg to the eve of becoming a senior – and from stepping away from your worklife.

It includes two key, if approximate, metrics: the amount you should have saved, and how your assets should be allocated, to best balance risk and return at that age.

What to do by age 30

Recommended amount saved: 1X your annual income
Recommended investment asset allocation: 90% - 100% stocks, 0% - 10% bonds

Saving for retirement savings can be especially daunting while you’re young. You’re probably more focused then on growing your income than on savings, and you could be saddled with high levels of debt.

Here, though, are some things you can do early to help set you up for success:

• Hire a financial planner to create a comprehensive plan: No, it’s not too early to hire a financial planner to create an actionable plan that allows you to manage your current obligations and set out a strategy to save.

• Choose how much to save: Experts recommend setting aside 15% of your income for retirement savings, if you can. If your employer offers matching contributions, it’s best to max out those accounts first, since those workplace contributions are effectively free money.

• Choose your retirement savings accounts: You have two broad options when it comes to tax-advantaged retirement plans. There are workplace accounts like 401(k)s or individual accounts like IRAs and SEP IRAs (for self-employed folks). While you can also save through regular brokerage and bank accounts, saving money within a retirement plan gives you preferential tax treatment that will benefit you for decades to come.

• Choose how your money will be invested: You can select your own investments, hire an investment advisor or planner, use a robo-advisor or simply invest all your money in a target-date retirement fund. Each option has different costs, pluses and minuses. If you’re enrolled in an employer’s retirement plan, these plans usually have resources available to help educate investors about their different options.

• Set up an estate plan: Even if you haven’t built a lot of wealth yet, having a will, as a bare minimum, helps to ensure that the money you have saved can go to your partner or other loved ones you choose if you die unexpectedly.

• Establish an emergency fund: Save three to six months’ worth of expenses to minimize the risk, in the event that you lose your job, that you’ll have to dip into your retirement savings – as nearly one in four people do, according to a recent Transamerica study. Such withdrawals not only incur early withdrawal penalties, but cashing out investments when you’re young robs you of years, if not decades, worth of compound interest. This can set you back significantly on your savings goals.

What to do by age 40

Recommended amount saved: 3X your annual income
Recommended investment asset allocation: 90% - 100% stocks, 0% - 10% bonds

By this point in your career, you should have been saving for retirement for a while – although don’t despair if you’re a late starter. Your 30s are likely to be a busy decade. Many people get married, raise kids and focus on growing their careers during this decade.

With so many new responsibilities on your plate, it might be easy to get sidetracked and dial back your retirement savings. Here are a couple of action items to help you stay focused:

• Revisit your retirement savings plan: While your asset allocation should remain aggressively assigned to stocks, it’s wise to review if your mix of investments still align with your retirement goals. More wisely still, consider if you can set aside a little more than you now do for retirement, even if it’s in a non-tax-advantaged account.

• Stay healthy: It’s easy to let your health slide with the demands placed on you from kids, careers and family life. But health issues are the primary reason workers are forced into early retirement, according to a recent study by the Employee Benefits Research Institute. Unexpectedly early retirement can stall your savings progress while also driving up your costs for healthcare. And ill health can make it pricier and harder to acquire life insurance, which can be an important buy for several reasons during this decade.

What to do by age 50

Recommended amount saved: 6X your annual income
Recommended investment asset allocation: 80% - 100% stocks, 0% - 20% bonds

While you’re more likely to be earning decent money in your 40s, you’ll probably also face new challenges, like saving for your children’s college education or taking care of aging parents. Wherever your life’s path takes you, here are some things to check on as you go along:

• Earning more? Save more: Your income might be going up as you get promotions or climb the corporate ladder. With each pay raise comes an easy opportunity to bump up your retirement savings without affecting your current lifestyle.

• Worked at a few places? Consolidate retirement accounts: Now is a good time to roll over retirement accounts from prior employers into your current workplace retirement account, if you haven’t yet done so. Consolidating these accounts can reduce both the hassle and expense of maintaining them. Consider whether it’s worth employing strategies like backdoor Roth IRA conversions, depending on your retirement goals and current financial status.

What to do by age 60

Recommended amount saved: 8X your annual income
Recommended investment asset allocation: 65% - 85% stocks, 15% - 35% bonds

This is the decade when you’ll probably reach your peak earning ability. But it’s also a time when retirement could be only a decade or less away, so don’t become complacent. Here are some actionable steps:

• Check in with a financial planner or advisor: If you haven’t enlisted a planner yet, now could be the time. You may even have access to advisory resources through your employer’s retirement plan. If you already have a planning pro in your court, it’s more valuable than ever to check in with them, so you can adjust your plans as needed.

• Save more for retirement: Starting at age 50, you can start making higher “catch-up contributions” to your tax-advantaged retirement accounts. If you’re able to save more, those extra contributions can give a boost to your nest egg.

• Start researching healthcare: Now’s the time to become familiar with what’s covered under Basic Medicare – and, more importantly, what isn’t, and that you’ll have to buy in retirement. If you plan to retire before you become eligible for Medicare, you might have to find a way to cover healthcare costs until you can enroll in Medicare, at age 65. You should also consider how you’d cover long-term care, which Medicare doesn’t cover. Anticipated long-term care needs might involve long-term care insurance – which, if you need it, experts suggest purchasing in your 50s.

• Consider your retirement income streams: Even if you’ve been diligently saving, you’ll likely need other retirement income streams beyond just your 401(k). You can take Social Security as early as 62, for example, but you’ll get a larger monthly benefit if you wait, with the biggest benefit kicking in when you turn 70. Some retirees use annuities or reverse mortgages to draw an income, while some continue working part-time in retirement.

• Start planning your drawdown strategies: Similarly, even if you’ve been carefully considering the accounts in which to save, the way you take money out matters, too. It’s often best to hold off on tapping your Roth accounts, for example, because your ability to take tax-free withdrawals from them will give you more financial flexibility later in retirement. Also, you will be required to take withdrawals (termed "distributions”) from your 401(k) beginning as early as your mid-70s, depending on your date of birth.

• Pre-game your retirement budget: Some studies suggest that more than half of retirees have to cut back on their spending in retirement. If you start getting an idea of what your retirement expenses and income look like now, it can better prepare you so you can take steps to adjust your expectations or downsize your cost of living.

Stay flexible

Although it can be helpful to look at milestones as indicators of where most people should be, it’s important to remember that everyone’s journey to financial security in retirement is different.

If you’re behind, don’t get discouraged. It simply means you’ll need to explore other options, such as possibly retiring later, working part-time when you do or looking into a less-expensive retirement lifestyle.

Similarly, if you’re ahead, that’s great. But at some point, it’s worth considering whether you’re overpreparing for the future at the expense of under-enjoying life now. Some planners even find themselves counseling against continued and unnecessary frugality once their clients have assembled an ample retirement fund.