Mapping out your financial future can be daunting, especially if you only have a vague sense of what you want to accomplish.
It can be useful to consider financial milestones to help you chart out your journey from college graduation through retirement. Here’s a look at some common savings goals by age to help you orient yourself and build a plan.
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Related: Tips for becoming financially independent
Savings goals for your 20s
In your 20s, people are often just out of school, starting a career, and getting their life in order. As if that wasn’t enough, challenges like student loan debt or credit debt may face them. Now is the time to set financial goals, consider an investment strategy, and start building healthy financial habits.
Paying off high-interest debt
If you have any high-interest debt—debts of 7% or more—you might focus on paying it off. High-interest payments can cost you a lot over the life of a loan.
Credit cards, which often allow minimum payments that are much less than the total balance due, can be particularly costly as interest on the balance accrues. The more money going toward high-interest debt, the less you can focus on your savings goals.
Building emergency savings
At this age, people are often just getting on their own feet and might not have a lot of extra cash to stock away. Establishing a rainy day fund can be a useful savings goal. Generally, emergency funds are about three to six months’ worth of expenses. This fund can help cover emergencies like unexpectedly replacing a car transmission.
Your emergency fund provides a cushion of cash should an unexpected bill come up or should you lose your job. Since you never know when you’ll need to access your emergency fund, consider saving it in an easily accessible vehicle, a cash management account. SoFi Money® is one option, where account holders can save and spend in a single place.
Saving for retirement
The earlier you start investing for retirement, the longer you can take advantage of the powers of compounding interest—the returns you earn on your investment returns. Compounding interest helps your investments grow exponentially. Consider taking advantage of any retirement accounts your employers offer, such as a 401(k). If your employer doesn’t offer a 401(k), there are other options, such as an IRA, where you can save for retirement in a tax-efficient fashion on your own.
Savings goals for your 30s
In your 30s, people are often more settled into a career path and may be thinking about other goals such as purchasing a house or having kids.
More saving for retirement
As your income grows and retirement gets closer, consider increasing the amount you’re setting aside for retirement. If your employer offers a match to your 410(k) contributions, taking advantage of the match is a wise move. After all, this is essentially free money. And these matching funds could be worth as much as 6% of your income.
Buying a home
If you’re thinking about buying a home, focus on saving for a down payment. The amount you will need to save will depend on housing prices in the area in which you’re looking to buy.
A larger down payment can make it easier to secure a mortgage loan and can also mean that you pay less interest, which will save you money over the life of the loan.
Also, lenders may require borrowers to have mortgage insurance if they’re making a down payment smaller than 20%, which is an added expense to the home buying process.
Setting up college funds
For those with children, another consideration is saving for their college education. One possible way you could do this is with a 529 college savings plan that can help you save for your child’s tuition and other education-related expenses. Try not to neglect other long-term goals, such as retirement, while saving for this. It is possible to do both!
Savings goals for your 40s
As you enter your forties, you are likely entering your highest earning years. If you have your high-interest debts behind you, you can devote your attention to building your net worth.
Keeping an eye on your emergency fund
The amount of money you needed to cover six months’ worth of expenses in your 20s is likely far less than what you need if you have a mortgage to pay and children to support. Make sure that your emergency fund grows with you.
Protecting your savings
One way to do this is by making sure that your assets and your person are properly insured. Home and auto insurance protect you in the event something happens to your house or you get in a car accident. If you don’t already have life insurance, this type of insurance can provide a cash cushion to help your family replace your income or cover other expenses should you die. But, it is important to know that waiting until your 40s to take out life insurance could be more expensive than taking it out when you are younger.
Savings goals for your 50s
In your 50s you’re still in your top earning years. You may still be paying off your mortgage, and your kids may now be out of the house.
Taking a closer look at retirement savings
As retirement age approaches, continue contributing as much as you can to your retirement account. When you turn 50, you are eligible to make catch-up contributions to your 401(k) and IRAs.
These contributions provide an opportunity to boost your retirement savings if you haven’t been able to save as much as you hoped up to this point.
But even if you have been meeting your savings goals, the contributions allow you to throw some weight behind your savings and make use of tax-advantaged accounts in the decade before you retire.
Continuing to pay off a mortgage
If you think your monthly mortgage payments may be too high to manage on a fixed income, consider paying off or refinancing your mortgage before you retire.
Goals for your 60s
As you enter your 60s, you may be nearing retirement age. But when it comes to saving, you don’t have to slow down. As long as you have earned income, you might want to keep funding your retirement accounts.
Thinking long-term
Consider long-term care insurance (Just a note: The American Association for Long Term Care Insurance recommends getting LTC in your mid-50s). But if you haven’t already done so, your 60s may be a sensible time to secure long-term care insurance.
Health insurance doesn’t generally cover in-home care or the cost of a nursing home facility if you get sick and can no longer perform day-to-day tasks, such as dressing yourself or bathing alone.
The cost of long-term care can be thousands of dollars per month, which can quickly eat away even the most robust nest eggs. Long-term care insurance can help cover these costs, protecting the retirement savings you worked so hard to build.
The takeaway
Everyone’s personal timeline is different. The milestones you hit and when you hit them may vary depending on your personal situation. For example, someone graduating from college with $50,000 in student loan debt is at a very different starting point than someone who graduates with no debt.
Or, though someone might be able to buy a house in their early 30s, others may live in a more expensive city and need more time to save. No matter your starting point and your situation, the important thing is to have a plan and stick to it. Having a plan can set you on track to meet your goals at each decade in your life.
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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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How to determine your retirement goals
The median retirement account balance for all working Americans is $0, and half of those households are over age 55 (not a typo). But it’s not just a problem for the Boomers. Research has also uncovered that 95% of Millennials are not saving enough for retirement. (Also not a typo.)
It’s a bleak picture, to be sure. But when reality hits hard, motivation can follow. And no one wants retirement to just become one of those things that our parents and grandparents used to enjoy, back in the day.
On average, Americans spend 20 years in retirement. If you earn $75,000 a year when you retire and want to keep the same salary, you’ll need a total of $1.5 million squirreled away.
This is the part where many people might utter the word “impossible.” But if you start saving for retirement now, and make your retirement contributions just as mandatory as your electric bill, that number can start to look a little less intimidating.
In fact, just using a retirement calculator can put you in a better position than many Americans — fewer than half of them have done the math. And once you have your own enormous number, it can get easier to break it down into smaller, more attainable goals along the way.
To be sure, though, the road to retirement is paved with homework and sacrifice. It’s estimated people need 70% to 90% of their pre-retirement income to maintain the same standard of living after they stop working.
So perhaps more than any other financial decision you’ll make, reaching personal retirement goals takes diligence, preparation, planning for the “what if’s” and lots of willpower.
It may seem overwhelming, but it can help to start by determining your retirement objectives. Then you can find your own personal way to crush them. Everyone’s financial situation is different, and this plan is not the only solution out there, but here is one possible way you might go about determining your goals.
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One step you can take to determine your future is to get a solid picture of your present — somewhat like a personal audit. A careful inventory of your current expenses, income, taxes and savings can give you an honest picture of where you are, as well as a realistic look at where your money is going each month.
Once you’ve determined your day-to-day financial picture, you can create a list of any current retirement savings you already have, such as 401(k) accounts, IRAs, or high-yield savings accounts. Total up that number, because you’ll be able to subtract it from your goal.
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A retirement calculator can help you figure out your overall, 20-year lump sum goal by working with variables such as your current age, salary and savings, your desired retirement age and how much you save per year.
Here’s where you can change up the numbers and consider several scenarios. If you were to retire at 67, for example, how much money will you need? What would happen if you were able to up your yearly savings by just 3%? You might even calculate the amount of money you’d need to save to retire early.
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Take a deep breath. Then plan on.
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One possibly helpful way to tackle anything large is to break it down into digestible chunks. To do this, you could subtract your current age from your intended retirement age, then divide that number by the total. That’s your yearly goal. If it’s still overwhelming, you might divide that number by 12 for your monthly goal. Go as far as you need to make it palatable — those “for as little as 3 dollars a day” commercials make it sound easy, right?
For example, if your total number is $800,000 and you’re 30 years from retirement, that breaks down to around $75 a day. But that doesn’t mean you have to put that much into the bank by yourself. A next step you could take is finding the retirement savings plans that will do the most to grow your money.
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With the drastic decline in the traditional, company-provided pension and the uncertain future of Social Security, a number of different individual retirement savings plans, each with specific benefits, have stepped in to take their place.
If your employer offers a 401(k) matching plan, one of the easiest ways to grow your retirement nest egg is to contribute the max amount of money each paycheck that your employer is willing to match.
The contributions are automatically deducted from your paycheck pre-tax, and since you never see the money, it can be much easier to just pretend like it was never there to begin with.
For the self-employed, or for diversification, traditional or Roth IRAs are also specifically designed to help your savings grow.
The biggest advantages of 401(k) and IRA plans are their potential tax savings. However, they can come with yearly contribution limits that don’t mesh with your retirement objectives.
In this case, a general investment account is another possible consideration for growing your wealth. While it likely doesn’t come with tax advantages, it doesn’t come with contribution limits, either.
If investing in the market leaves you feeling wary, or you don’t like the idea of not having access to your money until you reach a certain age, another option to consider is a high-yield savings account.
It’s a cash-based account that has as much flexibility as a regular checking or savings account, but instead of the paltry 0.09% interest offered by some traditional banks, your money can potentially earn 2% or more.
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You’ve calculated your retirement goal. You’ve determined a plan to reach it. And now it’s time for arguably the hardest part — sticking to the plan.
For as many investment or retirement accounts as possible, you might consider setting up automatic contributions to withdraw every payday. The more you can automate, the less you’ll be tempted to move things around.
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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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