Your age-by-age retirement playbook: The right moves for your 30s, 40s, and 50s

Let’s say you are in your 30s. Your career is finally on the rise, you are paying your EMI, and maybe you are even planning your international holiday. Retirement seems like a million years away – we will worry about that later!

But then you hit your 40s. More financial obligations start to pile up. Now there’s kids’ school fees, a home loan, ageing parents to care for and concerns for your children’s future. Without you even realising it, retirement moved from the background of your mind to the front burner.

By the time you hit your 50s, you start the countdown. Retirement isn’t some distant thought anymore; it is an approaching reality. And the question starts to creep in:

Will you have enough money to retire?

The truth is retirement planning isn’t as simple as that. It is not a “one-size-fits-all” exercise. Every phase of life requires a retirement plan strategy that changes or evolves. What works for you in your 30s – investing aggressively and chasing long-term growth – won’t be what you want to think about in your 50s, during the stage where you are trying to consolidate and secure your wealth. But there are many people that delay in planning, thinking they have time, only to find they have to play catchup.

In this article, we will discuss how retirement planning needs to change in your 30s, 40s and 50s, and the different scenarios presented in your different decades of life. The sooner you discover what has changed, and when you need to change it, the more comfortable you will feel in working towards a financially independent retirement – whenever you plan to start!

At Age 30: Get Started Early and Allow Time to Work in Your Favour

Your 30s is the ideal age to build your retirement funds. When you are 30, your biggest asset is time. The compounding effects of even a small, regular investment can create a very significant corpus after 25 – 30 years. The earlier you invest, the less you have to depend on investment throughout the rest of your life.

Investing Through SIPs in Equity Mutual Funds: One of the best ways to get started in your 30s is to invest via Systematic Investment Plans (SIPs) in equity mutual funds. Equity provides the potential for better long-term returns and a SIP can allow you to invest in a manner where you don’t need to always concern yourself with market timing. In addition, you can afford to ride out some short-term turmoil in the market at this age. For instance, a monthly SIP of ₹5,000 that you begin at 30 years old, with a long-term rate of return of 12%, can be worth over ₹1.5 crore when you are 60. (Recommended Reading: If you think SIPs always create wealth, you’re 100% wrong)

Protect Your Life with Term Life Insurance: It is a good idea to take out a term life insurance policy in your 30s and is affordable. Each year you age, the premium will increase and the period of time you are able to have substantial coverage is shorter. Taking out a term life insurance policy, is an important way to plan for your dependents and a key planning step as part of an overall financial foundation.

Open an National Pension System (NPS) Account: The NPS is a government-read retirement scheme that allows you to build a pension corpus while also providing tax benefits. NPS offers tax benefits of up to ₹1.5 lakh under Section 80CCD(1) (within the 80C limit) and an extra ₹50,000 under Section 80CCD(1B), over and above 80C. You can begin the NPS in your 30s, it is easier to accumulate savings for retirement and you will be establishing an important habit over the long-term.

Build an Emergency Fund: Unexpected expenses can have a significant impact on long-term vision. That is why it is essential to build an emergency fund. Manly financial planners will recommend you build an emergency fund to cover 3 to 6 months of living expenses. Aim higher, say 12 months. Find a place to put your emergency fund and it can be a conservative investment option. This will help you avoid tapping into your retirement investments in the event of a financial emergency.

Invest in Yourself to Maximise Your Income: Your ability to earn more is a key feature of long-term success. Investing in your skills, certifications or education will all pay off. With higher income, you will be save even more and invest more as well contributing that much more to your retirement plan.

Don’t Wait. Start Now: Many people in their 30s put off retirement planning because they think they have enough time. Here is the reality, if you start early, you will have to invest less each month, and in the end, you will have more! In the end, time rewards those who start early. Stop waiting for the “right” time and start small today!

At Age 40: Balance Today’s Responsibilities with Tomorrow’s Goals

Reassess Your Financial Goals: Your 40s are a pivotal decade. Retirement is nearing, responsibilities are higher, expenses could peak (the kids’ education, mortgage, parents, etc.). Time to evaluate. Identify and reassess your goals, timeframe, and current financial circumstances. Are you on track? If you are not, start preparing to make adjustments now.

Maximise your SIPs: If you have invested before – good. Now, time to maximise. If not – time to start. Now you will have to invest more aggressively in order to hide the time you’ve lost. For example, if you start a SIP of ₹15,000 at age 40 with a return of 12% you’ll have ₹ 1.4 crore when you reach 60. Use a step-up SIP to keep increasing your investments with advancements in your income. You are never too late but the later you start, the less flexible you will be.

Maximise your Retirement Accounts NPS, EPF: Maximise your National Pension System (NPS), Employee Provident Fund (EPF) and Public Provident Fund (PPF) in your 40s. At this stage of life and if you can afford it, look to make voluntary contributions, you should be modifying your consumers equity or debt allocations but if you’re just about to retire, you may be thinking about some partial debt exposure – but too conservatively, you still have another 15-20 years of working life ahead of you.

Stick to Your Health Insurance: As you age, your health insurance premiums are going to go up, and you may not have an individual health insurance policy completely separate from your employer. If you don’t, it’s time to get one; coverage for a family floater plan of ₹10-₹15 lakh is advisable, but with a top up plan for an additional say ₹50 lakhs to ₹1 crore. Health events are one of the biggest reasons for delayed retirements – get prepared!

Make a Plan for Paying Down Your Debt: If you have or can make a payment plan on your long-term debts, namely mortgage or personal loans; if so, now is an ideal time to start aggressively paying down your debts. When you enter 50 with little debt, you will have peace of mind, and your living situation upon retirement will be more sustainable – pay off your highest interest debt first.

Remember Emergency / Education Funds: You still need an emergency fund. If your ‘kids’ are off to college, set up a separate account for their education fund, rather than part from your retirement fund (which is what you will ultimately be using). Don’t even consider co-signing for loans without a ‘backstop’ for repayment in case they ‘don’t’, you are limiting your own future.

Engage a Financial Planner: If you are feeling out of your depth when it comes to managing your finances, your 40s is a great time to engage the services of an expert. A financial planner will not only help ensure you are not sacrificing one goal, such as retirement, children’s education or a tax-savings strategy while trying to dutifully achieve several others.

At Age 50: Protect, Preserve, and Prepare to Retire

Move From Growth to Stability: If you are in your 50s or older, retirement is only 5 to 10 years away. This is your decade to protect the gains that you have made. Start to gradually shift part of your equity investments into “safe” debt instruments. But don’t exit equity completely. You really need some growth in your portfolio in order to hedge against inflation.

Estimate Your Retirement Corpus: Answering difficult questions: how much do you need monthly when you retire? How long will your funds last? Remember to use retirement calculators or you can use financial advisors. This is the final lap. Make sure your targeted corpus is achievable and realistic!

Maximise All your Tax-Saving Opportunities: Maximise your tax-saving schemes such as NPS, PPF and tax-saving fixed deposits that will lower your taxable income. Use tax deductions under Section 80C, Section 80CCD(1B) and health insurance. Tax efficiency should consider how much money you will have invested and growing before retirement, as many of the tax-saving schemes have long lock-in periods.

Upgrade Your Health Cover, Consider Critical Illness Plans: Needless to say, the older you get, the higher the health risks. Upgrade your health policy if you need to. Review critical illness plans that pay a lump-sum on diagnosis. Protect you retirement savings instead of using them up on a health crisis.

Review All Your Investments—Sift Out The Noise: Consolidate your portfolio. Clear out of funds not performing. Duplications or multiple investments can confuse the best of us. Confirm that your investments are aligned to your objectives and your age. The more funds you have, the noisier it becomes. Shorten instead to make it easier and more efficient.

Plan for Lifestyle Changes: Downsize if possible. You may consider moving to a more affordable place or selling your assets that won’t be of much use when you retire. You should have a big meeting with your spouse regarding your retirement lifestyle and expected spending, as it is best for both to have aligned pictures in their heads about expectations and money.

Draft a Retirement Plan & Will: Start forming a withdrawal strategy from your retirement portfolio, including how much to withdraw from which account and in what order (in terms of tax-efficient strategy). Draft or update your will and nominee information on all the accounts. Estate planning while you are alive and healthy alleviates disputes and confusion after you have passed away.

Disclaimer

The information provided in this article is for general awareness and educational purposes only. It should not be considered as financial, investment, or tax advice. Please consult a certified financial advisor or tax professional before making any investment or retirement-related decisions, as individual needs and circumstances may vary.