I know, you know, we all know: It's critical to save for retirement. Most of us should maximize our 401(k) plans and should open IRAs, preferably Roth IRAs. We'll have to withdraw some funds from some of these at some time. We'll start receiving Social Security benefits at some point, too.
But if you're anything like me, your poor brain calls out for a little more organization. You need a timeline. Exactly what should you be doing at various points in your life? What can you expect and when can you expect it? Fortunately, we needn't grope in the dark. There are timetables around. Here's one I assembled, partly with the help of Virginia and Kenneth Morris' booklet, Guide to Understanding Retirement Investing.
A retirement timeline
55: This is when you'll likely be able to start taking money out of your 401(k), 403(b), and other plans without a 10% penalty. If you have a pension plan and have worked enough years, you may be eligible for your full pension now, too.
59 1/2: Now is when you can start withdrawing funds from IRAs and deferred annuities and other tax-deferred plans without that 10% penalty.
60: Six months later, you'll be able to get Social Security benefits if you've lost your spouse.
62: This is when you can begin receiving Social Security benefits at a reduced level. You may also qualify now for your full pension, if you have one.
65: Most employers begin full pension benefits for employees at age 65. If you were born before 1943, you can begin receiving full Social Security benefits. And congratulations -- you also now qualify for Medicare benefits!
70: This is the maximum age at which you'll want to begin receiving Social Security benefits. Waiting any longer won't buy you more moolah.
70 1/2: Time's up for your traditional IRA -- you must begin withdrawing funds from it now. Not so for Roth IRAs or employer-sponsored retirement plans if you're still in the workforce.
And there's more!
But what about the years leading up to age 50, and the years after 70 1/2? Let me fill in those blanks:
0-3: It's never too early to focus on preparing for a wonderful retirement. This is a good time to focus on learning to walk and talk. These will be useful skills in retirement.
4-12: This is when you should begin developing an appreciation for and respect for money. Have your parents teach you all about it. Watch them budget household expenses and ask them what companies they've invested in. On family vacations, scout out places where you might want to eventually retire.
13-25: Your schooling is of paramount concern, but that doesn't mean you can't begin investing. You can -- and should. Read our Motley Fool Investment Guide for Teens and visit our Teens and Their Money area. Start thinking about hobbies you'll enjoy in retirement. Perhaps try out for your college's shuffleboard team.
26-50: There's no sense in putting it off. It's time for serious retirement planning. Go ahead and do it on your own -- you can, you know. But there's no shame in seeking out some professional help, either. Learn how to find good help at our Advisor Center -- and perhaps check out our TMF Money Advisor service, which features customized independent advice from a variety of objective financial experts. (You can try it for free.)
26-50: Hey, I wasn't joking. Even at 26, or 30, or 36, you should be thinking about your retirement. If you want to make saving and preparing for your retirement as painless and as productive as possible, start early. If you'd invested in, say, ExxonMobil (NYSE:XOM) 20 years ago, you'd be up 1,700%. Not bad at all. But if you'd done so about 30 years ago, you'd have multiplied your money by more than 100-fold.
With great investments, being able to wait a long time can really pay off. Similarly, if you'd invested in Southwest Airlines (NYSE:LUV) 15 years ago, you'd be up 10-fold, and over 25 years, about 32-fold. Then there's Altria Group (NYSE:MO), long under a cloud of litigation smoke. Despite that, over the past 20 years, you'd be up 44-fold. If you'd started when you were younger (investing in it, not smoking, I mean), 35 years ago, you'd have multiplied your money some 500-fold! In the same time periods, investing in Procter & Gamble (NYSE:PG) would have netted you returns more than 21-fold and 80-fold, respectively. Of course, not all companies' stocks perform so well -- think of Polaroid and Montgomery Ward and Pan Am. But many do really, really well over the long haul. And if you're simply paying attention, you can often smell smoke and get out if a company begins smoldering.
26-70: Let me actually widen this category a little now. That's because just about anyone reading this column needs this advice: Get off your duff and get your financial ducks in a row. Look at your big picture and make a plan. What cash inflows do you expect until you retire and in retirement? How much will you need to live on each year? What can you expect your nest egg to grow to by then? How much will you be able to withdraw each month and year in retirement (hint: perhaps 4%)? And how should your retirement funds be invested?
As I said, don't be afraid to tap an expert for help with this, if you don't want to tackle it alone. It's a big -- and important -- job. We'd love to help. Take advantage now of a free trial of our Rule Your Retirement newsletter. Readable in a single sitting, it arrives in your mailbox each month, chock full of practical advice, investment suggestions, and profiles of people who've retired early and/or successfully, telling us how they did it. Editor Robert Brokamp provides actionable advice in every issue, plus he brings in a host of experts to talk retirement and investing. In a recent issue, he interviewed an accomplished mutual fund manager who recommended Microsoft (NASDAQ:MSFT) stock and shunned Google (NASDAQ:GOOG). And retirement expert John Greaney recently explained why we may want to plan on withdrawing 4% from our nest eggs each year in retirement if we want to make the money last.
Get a taste of Robert's smarts and style in these articles:
- Do You Want to Work Forever?
- Stop Eating Your Retirement!
- Get Rich by Beating the Odds
- Annuities: Who Needs 'Em?
70-130: If you haven't been enjoying your retirement by this age, you'd better start! I hope, though, that you've actually been enjoying aspects of your retirement, and looking forward to them, since age 2. It's never too early to start!
Selena Maranjian 's favorite discussion boards include Book Club, The Eclectic Library, and Card & Board Games. She owns shares of Microsoft, which is an Inside Value recommendation.Formore about Selena, viewher bio and her profile. You might also be interested in these books she has written or co-written:The Motley Fool Money GuideandThe Motley Fool Investment Guide for Teens. The Motley Fool is Fools writing for Fools.
