Your Guide to Planning for Retirement

You've likely heard more than a few times that hindsight is 20/20. It's true. Who among us cannot look in the rearview mirror of life and see things more clearly? While I am determined not to live my life with regret, there are a few things I wish I'd known sooner. Like how the decisions I made in my 20s would throw my 30s into a major tailspin. Had I known or cared, perhaps I could have avoided some very costly mistakes.

What follows are simple guidelines or benchmarks for each decade of life as it relates to preparing for retirement.

In Your 20s

This is your defining decade, and by far the most important decade for retirement planning. You're younger—and probably poorer—than you'll ever be again. Laying the groundwork now can make all the difference for you in the years to come. A few tips:

Start an emergency fund and get out of debt. Build your emergency fund as quickly as you can. This will give you the cushion you need to weather unexpected expenses and emergencies without having to raid your retirement savings. If you're in debt, fix that now—not later.

Open a retirement savings account. Join and participate in your employer's retirement savings plan, at least to the match, as soon as you qualify. Open and fund a Roth IRA as well. Consider yourself on track if you are regularly contributing five percent of your annual income to retirement savings.

Stay physically, emotionally, and spiritually fit. Retirement preparation is not all about money. It also involves building and maintaining physical health by watching what you eat and exercising—both of which are much easier to begin when you're young and filled with energy. Investing in relationships will nurture your emotional health, while deepening your walk with God will keep you spiritually fit.

In Your 30s

Your college loans are probably paid off, and you may be married and starting a family. You have career goals, but haven't reached your full earning potential. If you want to retire by age 67, you have about 30 years.

Fund your 401(k) and a Roth IRA. If your employer offers a 401(k), participate at least to the point of the match (if there is one), so you don't leave any free money on the table. Also open a Roth IRA, and make funding it to the maximum each year a top priority. Set up automatic deposits. Because you now have more financial responsibilities, you may be tempted to forgo saving for retirement, but don't do it. Time is still on your side, but the window is beginning to close.

Buy a home. Siphon off a down payment from the savings you have been growing with 10 percent of your take-home pay. Do not give into the temptation to buy the most expensive home you can afford. Instead, buy half the home you can afford, then make the largest payments you can afford. Your goal is to own this home outright as soon as possible.

Purchase life insurance. If there are people who depend on your income who would be in a desperate situation without it if you were to die, you need life insurance. If you are a stay- at-home mom without a formal paycheck, you too need life insurance that will cover the cost of all the jobs your husband would have to pay someone to do if he were to become a single parent.

Your 30s matter because these are the years that you'll make the big financial decisions of life—kids, house, and career. If you're nearing the end of your thirties and have to admit you've not begun to prepare for retirement, don't despair. But understand that you need to get started right away.

In Your 40s

If you have not yet started to prepare for retirement, this is your make-it or break-it decade. This is a crucial decade for building wealth. Your income is higher than ever, as is your net worth.

Pay off your debts. If you've racked up other debts, you are sacrificing your future joy to pay for all kinds of things you may not even have anymore. This is serious. Do whatever you must to get those debts paid off as quickly as possible.

Make retirement savings your main goal. This may sound counterintuitive when your kids are getting older and college for them is much closer than retirement for you. But beware of that trap. Make sure you are on track to secure your retirement before funding college accounts, or, (gasp!), taking out parental college loans. Do not gut your own future to ensure theirs.

Invest. If your savings have grown beyond what you've needed to cover emergencies, you have a decent cash nest egg. It's time to aggressively build an index fund portfolio.

If you're feeling way behind due to what life has thrown at you over the past decades, it may be time for a serious look at your lifestyle to find all the places that money is leaking out of your life. You still have years to work hard, but they are ticking off fast.

In Your 50s

This is the critical planning time. You still have 10 to 15 years to work, and you're reaching your peak earning period. Now's a good time to sit down with a fee-only planner.

Play catch-up. If you are behind and if you qualify, consider taking advantage of the IRS catch-up contributions. Once you're 50 or over, you can contribute thousands more to your 401(k) plan than your younger colleagues.

Downsize. As your nest empties and those who return finally do leave, it might be time to downsize for convenience but also to cut expenses. The money you save can be funneled into retirement savings.

Buy long-term care insurance. This is the time to consider this kind of insurance. You need to be in good health to qualify, but you don't want to take out a policy too early or you'll pay in for far too many years prior to making a claim.

In Your 60s

Traditionally, this decade will be all about retirement. But you may decide to work more years, either because you want to or because you need to.

Zero in on living expenses. It's time to assess, or reassess, your retirement income needs to see if they are in alignment with the sources of income you'll have available in retirement. One rule of thumb is that once you retire you are going to need about 80 percent (plus more for inflation) of the amount you need to cover your lifestyle now.

Weigh your Social Security options. You are eligible to file for early benefits at age 62, but your monthly check will be reduced by about 30 percent for the rest of your life. Wait until your full retirement age (65, 66, or 67, depending on your birth year) for full benefits, or until 70 to receive 32 percent more each month.

Figure out where you will live. You do not want to have a mortgage when you're no longer employed in retirement, so now is the time to reassess your housing situation. If you cannot see your way clear to repay it in full so that you own your home free and clear, perhaps you should sell the home and move to an area where your equity will be sufficient to buy a home outright.

If there is one thing we all possess as women, (if you ask the men!), is the freedom to change our minds. What you did yesterday is not what you must do tomorrow. The course you set in your 20s is not your destiny in your 40s. Embrace that thought, then determine right now that you'll do whatever you must to get on track with your own personal retirement planning.

Mary Hunt is a syndicated personal finance columnist, and the bestselling author of The Smart Woman's Guide to Planning for Retirement (Revell 2013), from which this article was excerpted from with permission from Revell. For more advice on planning for retirement with confidence, visit http://www.everydaycheapskate.com/. Also connect with Mary on Facebook.

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