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PERSONAL FINANCE
Retirement

Smart ways to save for retirement at every age

Nanci Hellmich
USA TODAY
Retirement savings is important at every age.

Most people worry about having enough money in retirement. But you can roll up a substantial nest egg — even if you don't make a lot of money during your working years.

The keys include learning to budget early in life, sticking with it, saving aggressively during your peak earning years and investing your money wisely and diversely.

"You have to realize that saving for retirement is a marathon and not a sprint," says certified financial planner Wes Moss, author of You Can Retire Sooner Than You Think.

Some folks are overwhelmed by the idea of trying to save because they have so many expenses, says Lynnette Khalfani-Cox, founder of AskTheMoneyCoach.com and author of Zero Debt. "Sometimes people tell me they can't afford to save, and I say, 'You can't afford not to save.' "

Here's a look at how experts recommend saving for retirement at different ages:

Advice for 20-somethings

• Develop healthy financial habits, Khalfani-Cox says. That means learning how to budget and how to spend less than you earn. These healthy habits will put you on the road to saving for retirement later and help you financially throughout your life, she says.

Get out of credit card and/or college debt, Moss says. Once you have a little bit of free money, you should start investing in a 401(k) or other retirement plans, and "start a Roth IRA as soon as humanly possible," he says.

In an ideal world, Khalfani-Cox would like to see 20-somethings contribute to retirement plans. "The earlier the better, but I don't think we should beat young people up if they haven't started."

Encourage parents to give their young-adult children a leg up, says Mark Fried, president of TFG Wealth Management in Newtown, Pa. "Most of my younger clients are the children of existing clients. I often find that between living expenses, college debt and saving for a home it can be extremely difficult to save for their retirement. I will often talk to my clients (their parents) to see if for a few years they will fund a Roth IRA for their children — even if it is only $1,000 a year."

The combination of tax-free investing and compound interest can have a real impact on their savings, he says.

For 30-somethings

Do a budget. Moss recommends that people try to allocate 50% of their income to living expenses; 30% to taxes and 20% to savings. That savings rate may seem high, but couples who save that amount think of it as normal, he says. If you can't save 20%, then at least save 10% and try to work up to 20%, he says.

Make sure you are contributing to your 401(k) or other retirement plans by this age, Khalfani-Cox says.

Avoid taking on too much debt so you can save, she says. Often people in this age group are getting married, buying a house and having children so it's tempting to take on too much debt.

Have your retirement savings taken automatically from your paycheck, says Eleanor Blayney, consumer advocate for the Certified Financial Planner Board.

Save the max in your plan and don't worry about market volatility, she says.

For 40-somethings

Save aggressively. Many people in their 40s are headed toward the peak period for earning and saving, Khalfani-Cox says. "This is the all-business time. You should be thinking about accumulation."

See a financial planner, she says. This professional can make sure you are on track and tweak your allocation mix.

Coordinate your retirement savings with your spouse, she says.

Put raises and bonuses toward your savings, Moss says.

Focus on smart investing. Make sure you own both U.S. and international stocks in a diversified low-cost manner, Moss says. "You want to be heavily weighted toward stocks as opposed to bonds."

Figure out out how much you'll need to maintain your lifestyle in your golden years, which can be "a very powerful motivator" for saving, Blayney says.

Save up to the max in your workplace retirement plan, she says.

Turbocharge your saving in other ways, including getting Roth IRAs and mutual fund accounts, Blayney says. "You should have (after-tax) money in accounts that you can use when you are retired and not pay taxes on the money."

For those who are 50 and older

Save even more than 20% of your net income to make up for the years when you weren't able to save enough, Moss says.

Start thinking about when you're going to take Social Security, Khalfani-Cox says. "The later, the better."

Consider reducing your expenses, she says. You might consider downgrading your lifestyle, perhaps selling your house and moving to something smaller or moving to a less expensive part of the country, she says. You can even do a trial run, renting an apartment in the area where you plan to move, to see if you like the lifestyle.

Get into the habit of living on a fixed income and saving the extra money, Blayney says. "This helps you get ready for managing your spending in retirement."

If all goes well and you've saved enough, you may be able to retire comfortably in your 60s, Moss says. "If not, you've got to continue to play catch-up on savings and come up with ways to earn an income."

Achieving full financial independence so you don't have to work isn't easy, he says. "However, armed with enough knowledge and time, it is possible."

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