How to Build a Retirement Income Stream at Every Life Stage

While most people expect to spend less money in retirement, that may no longer be the case. A recent analysis by the Investment Company Institute and the IRS found that spending rose for more than half of taxpayers during the first three years after claiming Social Security.*

You’ve heard it before, but it bears repeating: it’s never too early to start saving! The best way to ensure you will have a sufficient retirement income stream is to begin saving and investing as soon as you’re handed your first paycheck. Life changes will likely impact your finances, including your expenses and amount of disposable income. Therefore, it’s important to have a retirement savings plan that takes your age into account. Here’s a guide to help you plan at every life stage for a work-free retirement.

In Your 20s

While it might seem a little early to start planning for retirement when you’re just starting your career, it’s not. Think about it, money stashed away and invested when you're in your 20s will enjoy four decades or more of market gains and compounding interest. As Albert Einstein stated, “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it. ” Here’s how to get started:

  • Tackle your debt – A common mistake made by people in their 20s is waiting to pay off debt until they make more money. Whether it’s student loans or credit card debt, a startling number of millennials are struggling to find a balance with their financial stream. Be upfront and realistic about how much you can afford to repay at once, determine a timeframe, and then stick to the plan.
  • Start an emergency fund – Life happens and the best thing you can do is try to be prepared. While you work to pay down debt, remember to build up an emergency savings for unexpected expenses. Consider setting up an automatic transfer into your savings before you have the chance to spend it.
  • Wrap your head around retirement
    • If your employer offers a 401(k) retirement plan start contributing a percentage of your paycheck from day one – and take advantage of an employer match if your company offers one. If you can’t make the maximum contribution at first, don’t worry, even small amounts can make a big difference over time.
    • If you don’t have an employer sponsored 401(k) or other retirement plan available consider opening a standard IRA or Roth IRA plan and making annual contributions.

In Your 30s

Whether you are still tackling your personal debts, looking to purchase a home, or considering starting a family, your retirement savings may start to take a backseat during this life stage. Try to avoid falling into this trap. Determine your top three goals and prioritize your basic financial security needs.

  • Continue paying off your debt – Whether it’s credit card balances or student loans, paying off debts that carry the highest interest rates should be your top priority. This will help free up your finances and allow you to pay less in the long run.
  • Growing your family – If there is a baby in your future, now is the time to plan for child care costs, as well as start to save for college. At Lakeland Bank, our financial advisors can help you allocate your funds accordingly to meet your new and existing financial goals.
  • Revaluate your insurance needs – Buying a house, getting married, and having children can all be trigger points for determining whether your insurance needs are being met. To protect yourself and those you love, consider opening a health insurance account in the event you experience an unexpected injury or illness that prevents you from earning income.

In Your 40s

In this stage of life, your student loans are likely paid off and you’re nearing the end of the credit-card-debt cycle. With these hurdles behind you, it’s important to stay focused on your savings. You should be padding your emergency and retirement funds, and keeping an eye on the market to explore other ways you can invest.

  • Make saving for retirement your top priority – For those with a family, this may be the time you begin to feel the need to put retirement savings on hold to save for college tuition. However, it’s important that your emergency fund and retirement savings remain the top priority. If you’ve paid off all existing debt, and can comfortably make payments into your retirement fund, then you can consider setting money aside for a college fund.
  • Focus your investments – Your 40s are your high-earning years, making it a great time to be more thoughtful about whether you’re investing the right way. Every investment you make should have a purpose associated with it. Your goals and financial timelines will help to determine how aggressive your investments should be.
  • Don’t be distracted by a higher paycheck – You’re probably making a higher salary than you were in your 30s. While it’s great to reward yourself, don’t overlook your financial obligations. Before making any high-priced decisions, such as a pricey home renovation, make sure your funds are in tip-top shape.

In Your 50s

Welcome to the sandwich generation, where you may begin to feel stuck between supporting your kids and taking care of your parents. During this time, it’s important to remind yourself that it is OK to put yourself financially first. Follow these three tips to help keep your money spend in check.

  • Revaluate your savings and investing goals – Whether you are five years away from retirement or 15, you should be saving your money as aggressively as you can. Portfolio management is key, as well as reducing your investment risks.
  • Be financially selfish –You may not like to admit it, but you won’t be able to work forever. At this age, you must make sure you have a secure financial footing to prepare and plan for retirement and any unforeseeable expenses.
  • Get educated on retirement options – Learn about what long-term care costs look like and compare them to your current financial standings to prepare for the impact. Don’t put this stage off, the longer you wait, the more expensive it becomes. You’ll also want to revisit your estate plan and confirm that all your beneficiaries are up-to-date on your life insurance and retirement accounts.

Your community bank is a great resource to learn about planning for retirement. Our financial advisors can complete your personalized retirement income plan to give you new insight and ideas to help you pursue your retirement objectives. For more information or to set up an appointment, visit our website, call 866-224-1379 or visit any of our office locations.


*Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC, and are not insured by bank insurance, the FDIC or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank, and are subject to risks, including the possible loss of principal. Lakeland Bank and the investment center are not registered broker/dealers and are independent of Raymond James Financial Services. 

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