Keeping your eyes on the prize involves more than setting a single retirement savings goal. When you start saving, how you invest your money and the actions you take in each decade of your working life will all help to determine whether your road to retirement is bumpy or smooth. (For more, see Why Saving Money Is Important.)

Retirement Savings in Your 20s

Use this decade to establish good credit, create a modest emergency fund and start repaying student loans. Consider student loan forgiveness options, including public service, income-based and career-based repayment programs.

Learn how tax-advantaged retirement accounts work, such as your employer-sponsored 401(k) plan (with or without matching), traditional and Roth individual retirement accounts (IRAs) and any other types of plans available to you. Start saving 15% of your gross annual income no later than age 25. Fidelity says 50% of your portfolio should contain stocks or stock-based mutual funds. The money you save now is worth way more to your future than what you save later, due to the multiplying effects of compound interest over many decades.

Your 30s

Marriage and family expenses may command much of your income, but it’s important to try to maintain a 15% savings rate. Your income will be on the rise, so the amount saved will grow along with it. Your emergency fund should be enough to last six months or more.

Use this 10-year period to finish paying off non-mortgage debt, such as student loans, credit cards and car loans. Try to max out your 401(k) contributions, at least up to any matching amount. Your accumulated retirement savings should equal a full year’s salary by age 35. 

Your 40s

Get life insurance if you don’t have it. Term insurance is best and less expensive than whole life. Increase deductibles on homeowner’s and car insurance and plan to cover them with your emergency savings fund if needed.

Rebalance your portfolio as needed depending on your risk tolerance. Guard against “lifestyle creep” and instead look for savings opportunities that can be added to your retirement fund. By your mid-40s your accumulated retirement savings should equal three times your annual salary. 

Your 50s

Continue maxing out your 401(k) along with any Roth IRA. Allowances for catch-up contributions to tax-advantaged retirement accounts start at age 50. Take advantage of this opportunity, especially if you are behind in your savings goals. If you think your taxes in retirement will be higher, look for opportunities to roll over a traditional IRA to a Roth IRA. As you will have to pay taxes on the amount rolled over, it’s best to do this in a year when the taxes will be lower.

Rebalance your retirement portfolio again, looking for less-risky investments. Reduce overall spending as you prepare for retirement and use the savings to pay off your mortgage if possible. Maintain a physically active lifestyle to avoid health problems later. Your benchmark accumulated retirement savings by age 55 should equal five times your salary. 

Your 60s

Create a retirement budget and follow it. This will tell you whether your budget is reasonable. Adjust as needed. Sell unneeded assets, such as a vacation condo if you will not be using it in retirement. Create, review and/or update your estate plan. It may be appropriate to put some assets in trusts. If estate taxes apply, seek professional advice on any options to reduce the impact. Sign up on time for Medicare to avoid penalties and consider your options regarding Social Security, including spousal benefits (which can be complicated – see How to Boost Social Security Spousal Benefits).

As you near retirement, your accumulated savings at age 65 should be approximately eight times your annual salary. This amount, along with Social Security, should be sufficient to generate 85% of your pre-retirement income.

Reaching Milestones

Remember that as your income increases over the years, the 15% you save will increase. For the first decade or so most of your accumulated savings will come from the amount you invest. After that the combination of earnings, including dividends, interest and capital gains, will play an increasingly larger role.

If your retirement savings are in tax-deferred accounts – at least for most of your working life – you will not pay taxes on those gains until you begin to withdraw them at retirement or roll them over into a Roth account. (For more, see What’s the Average 401(k) Balance by Age?

The Bottom Line

Every investor is different when it comes to goals, risk tolerance and investment priorities. One thing, however, is clear. The sooner you start saving for retirement, the better. If you can’t save 15% early on, save 10%. When you start is more important than the percentage you save. By checking your progress each decade, you can adjust the amount you are saving and the type of investments you are making to ensure you get as close as possible to your retirement savings goals. Keeping your eyes on the prize will also help inform your conversations with your financial advisor (finding one should also be part of your plan), as you will be setting your own goals and tracking your progress on an ongoing basis.