Small Steps to Big Dreams
Retirement Planning for All Ages
Preparing for retirement is a journey. While the true joy is in the destination, ensuring your dreams are fulfilled requires proper planning and investing each step of the way.
In your 20s and 30s, time is on your side. You have many years to weather market fluctuations, and generally can be more aggressive in your investment approach. Equities, which historically have provided greater long-term growth potential than bonds and cash instruments, are a popular choice early on—when laying a solid foundation for your retirement portfolio (one that can compound over time) is the chief objective.
Steps you can take in your 20s and 30s:
- Envision your retirement and establish a savings target. This, along with the partnership of an experienced financial professional, can help you keep an eye on the prize over time.
- Consider target date funds, which automatically adjust your asset allocation as you approach your retirement date.
- Does your employer offer a 401(k)? Run, don't walk, to enroll. Be sure to take full advantage of any company match.
On Your Way
In your 40s and 50s, you may need to balance retirement planning with other significant financial commitments, such as a child's college education. You still have time to grow your nest egg, but may require occasional capital outlays to meet more imminent obligations. A growth and income investment approach, with an allocation still favoring equities for their capital appreciation potential, can be prudent. Investing in dividend-paying stocks can serve both purposes. (Dividend-paying equities are subject to the inherent risks of investing in the stock market and future dividend payments cannot be assured.)
Steps you can take in your 40s and 50s:
- Ensure your retirement visions—and your savings strategies—are aligned with those of your partner.
- Behind on your savings goal? At 50, you're eligible to begin making catch-up contributions.
- Visit www.ssa.gov to preview your eligible Social Security benefits.
As you near retirement, you'll want to reduce risk in your portfolio. There is less time to recover from potential losses. Investors in this stage generally allocate more of their assets to fixed income investments, but you don't want to abandon equities. Bonds and dividend-paying stocks are popular choices here because they offer the income you need once you forgo a regular paycheck.
Steps you can take in your 60s and 70s:
- Consider taking advantage of catch-up contributions to give your savings a late boost.
- Before you announce your retirement date, check your employee retirement benefit plans to ensure you are fully vested and won't be leaving any money on the table.
- Ready to take Social Security? Visit blackrock.com/retirement for ideas to help you maximize your benefits.
With life expectancies on the rise, you could conceivably spend 30 years in retirement. You want to ensure your accumulated assets provide a regular stream of income. Your portfolio will likely be more conservative than ever. While this typically means a heavy weighting in bonds, equities still provide the best means to keep your portfolio growing ahead of inflation. Being too conservative, particularly in today's low-interest-rate environment, can be as risky as being too aggressive.
Steps you can take in your 70s and beyond:
- Make sure your portfolio has the growth mechanisms to protect you from inflation risk.
- Consider dividend stocks for income.
- Watch your withdrawal rate. Withdrawing 6% instead of 5% annually, assuming a 7% return, cuts your portfolio's livelihood by 11 years.
Take the first step toward retirement readiness today by visiting the BlackRock Define Your Retirement™ tool. The tool allows you to visualize your retirement—in just 15 minutes! With your goals in sight, we encourage you to discuss the ideas presented here with your financial professional, who is best equipped to help you craft an age-appropriate retirement investing plan.
Investment involves risks. Stock and bond values fluctuate in price so the value of your investment can go down depending on market conditions. The two main risks related to fixed income investing are interest-rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. A portion of the income may be taxable. Some investors may be subject to Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable. Investments in non-investment-grade debt securities (high yield or "junk" bonds) may be subject to greater market fluctuations and risk of default or loss of income and principal than securities in higher rating categories.
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