Christine Byrne is seeing a lot of 20-somethings walk into her office at Back Cove Financial in Falmouth.
Byrne, a longtime wealth adviser, sees it as a good sign that young adults are thinking more about finances and saving for the future at a time when the long-term sustainability of Social Security is in doubt, and retirement can often feel unattainable.
She said her Gen Z clients — defined roughly as people born between 1996 and 2012 — seem to have “better foundations of financial literacy,” which will serve them well in an era that has put the onus on the individual to save for retirement.
“We’re going to be left to our own devices more than past generations,” she said. “The way to do that is to save early and often.”
Between groceries, health care, student loans, rent, property taxes and other everyday costs that seem to keep ticking upward, it can be difficult to think about saving money for retirement at any age. Many people are skeptical that they will ever be able to stop working.
According to a recent study by TruStage, an insurance and finance company, nearly a quarter of middle-class Americans have not started saving for retirement, and low incomes and urgent expenses are cited as the impediments.
We asked financial advisers for their best tips on saving for retirement, and broke down their advice by life stages. The overarching message was save early, but that it’s also never too late to start.
In your 20s? Time is on your side
When it comes to clients in their 20s, “what we stress to them is the biggest thing they have on their side is time,” Byrne said. “The power of compound interest cannot be overstated to folks who are in their 20s or getting started.”
Money that’s put away early has more years to grow before you reach retirement age. Byrne said a Roth IRA, a retirement account where compound earnings come out tax free, “is just a super powerful component to being financially independent when you’re older.”
She said one benefit of starting to save at a young age is it simply gets you into the habit of doing it. Another thing she tells people early on is to have patience; it takes a lot of time for interest on savings to grow.
Ethan Richard, a financial adviser for Investment Concepts in Lewiston, tells clients to think about someone driving steadily in the right lane on the highway. They’ve left themselves enough time, have a plan and probably know the best way to get there.
“That’s how I think about investing with different age groups,” he said. “The earlier on you create a plan and give yourself time to get there, then you can settle for an easier ride realistically.”
He agrees that younger people seem more on top of financial planning. While millennials and Gen X were limited to classes or books, Gen Z has endless information available on more digestible sources like podcasts and TikTok. They’re growing up with stock-trading apps like Robinhood.
“As technology has developed, we just have so many effective resources available to us,” Richard said. “You’ve got 30-second videos that can sum up what a Roth IRA is or how a company match works.”
In your 30s and 40s? It’s all adding up
Life in your 30s and 40s is typically defined by big milestones like marriage, buying a house and having children. Financial experts say hopefully by your 30s one of those milestones is a job with benefits like a 401(k) account.
Byrne said ideally by this point, people have learned the importance of saving, and are using their employer’s benefits to the best use, meaning they are at least getting the maximum match on their 401(k).
She said folks without a retirement plan at work should be making regular payments into a Roth IRA on their own.
Your 40s can be where a lot adds up: day care and child care costs, cars, housing expenses. Byrne said it’s important to keep putting in the money needed to get the maximum match contributed by an employer. Paycheck after paycheck, it will add up.
“One of the things we preach to our clients regardless of age is the most important thing is time in the market as opposed to trying to time the market,” Richard said.
In your 50s and 60s? Set realistic goals
The 50s are often when clients are faced with taking care of aging parents and continuing to raise children.
But Byrne said for people who began saving earlier, their 50s are likely when they begin to see the compound interest take hold. They’ve hopefully had the maximum 401(k) match working for them for years.
“Most all of this really starts to converge into a successful nest egg, but it takes a long time,” Byrne said. “If you’ve done all of this throughout, people between 55-65, they come to me and say, ‘Wow, this is really going to work.’”
She said for most people, if they’ve been saving all along, it’s simply a math equation. If you’ve been putting money away for 40-50 years, the interest earned is going to be more than what you’re adding to it.
Richard said he hears from a lot of people who don’t believe they’ll be able to retire. He said part of the conversation sometimes is tempering expectations and setting realistic goals.
“If you’re someone who has made $50,000 your entire career, you can’t expect to have a luxurious retirement, unless you save and invest aggressively,” he said.
Feeling behind?
Byrne said her outline through the decades would “be the perfect arc” for someone planning for retirement, but she knows it’s difficult for people to save or feel like they are saving enough.
A lot of people are working hard, with sometimes more than one job, and still struggling to meet everyday needs, let alone saving. A recent Wall Street Journal article said Gen Xers are heading toward retirement age despite carrying the highest average balance in student loans of any age group.
For those who may be worried that they started too late, Byrne said, “Everybody starts at zero; it’s never too late.”
“Even just starting a little bit, it makes you feel a little better,” she said, adding that stress over money is the “most visceral stress there is.”
“It’s with you every minute every day,” she said. “Any sort of nest egg that you have that you can rely on in difficult times is going to alleviate stress. Even if it’s $5 a week in a coffee can in case you need new tires, it’s an important place to start.”