If very many of us are going to live to age 90 or even 100, it’s going to be increasingly common for people to work past 65. If we’re retiring later, then all the earlier financial milestones of life can come a little bit later, too. But we do need to maintain some standards about which financial goals you should reach at various ages. So let’s do a quick survey.
In Your 20s
If you have student loans, your number one job in your 20s is to get them paid off. Removing this debt from your life is a key preparatory step for all of life’s next financial steps. If you don’t have student loans, then in your 20s you should, first, build an emergency fund of at least a couple of thousand dollars and, second, address the question of home ownership. If you’re hot to buy a home, then devote your 20s to building as big a down payment as you can.
In Your 30s
If you’re on the home ownership track, you should be situated in your first house by the end of your 30s. In my generation, people typically bought in their late 20s or early 30s. But with prices so much higher today in relation to incomes, saving for a down payment takes longer. No need to worry about retiring with a mortgage: if you take out a 25-year mortgage at 37 and use accelerated biweekly payments, you’ll be mortgage-free by 59. That leaves 10 years to top up your savings for retirement at 69.
One last job to complete in your 30s: start and regularly contribute to a registered education savings plan (RESP) for your kids.
In Your 40s
You should come out of your 40s with a good foundation for your retirement savings, be it through a pension plan of some sort at work or contributions to a registered retirement savings plan (RRSP) or tax-free savings account (TFSA). I could have slotted retirement saving into either of the previous decades, but one of the effects of today’s expensive housing market is that few people will be able to get into a home and save for retirement at the same time. If you’re willing to work past 65, our longer lifespans mean it’s okay to wait until your 40s to start pounding away at retirement saving.
In Your 50s
This is the decade where you position yourself for retirement by doing two things – saving heavily for retirement and paying down debts. Ideally, you’ll be at a point in your career where you’ll have the cash flow to save aggressively for retirement. Your goal should be to hit your 60s with retirement savings that are most of the way to where you need them to be at retirement. Finally, aim to be mortgage-free by 60, and to have an action plan for killing any remaining balance on your home equity line of credit within a year or two.