Where retirement should stand
A widely used benchmark is about twice your salary in retirement savings at 35, on the way to three times at 40. Plenty of solvent people miss it, particularly after graduate school or student loans, and the arithmetic still favors you. Money invested at 35 and left until 65 has thirty years to compound, and at a 7 percent average annual return it grows more than sevenfold. The same dollar invested at 45 grows less than fourfold.
The one-hour review
- Log in to every retirement account, including those at old employers, and total them.
- Roll stranded old 401(k) accounts into your current plan or an IRA, using a direct transfer so that no tax is withheld.
- Check your savings rate and raise it toward 15 percent of gross pay, counting the employer match.
- Check the expense ratio of each fund. Broad index funds charge under 0.2 percent a year, and a fund charging 1 percent can consume a fifth of your final balance over thirty years.
- Check the mix. With thirty years to go, most of the money belongs in stocks, and a target-date fund handles the rebalancing for you.
Annual contribution limits rise most years, and the IRS publishes the current figures.
Protect what you have built
Term life insurance is priced on age and health, so a 20-year policy bought at 35 costs far less than the same one bought at 45. Long-term disability coverage matters as much, since a disabling illness is likelier than death during your working years. A will, a durable power of attorney and a health care proxy should exist, and a parent's will should name a guardian. If you are saving for a child's college, fund your own retirement first, because loans exist for tuition and none exist for old age.
Work and health at the midpoint
Thirty-five is late enough to know what you are good at and early enough to change direction. Retraining that takes two years still leaves nearly three decades to use it. Decide whether you want your manager's job, and if you do not, name the path you do want. On the medical side, national guidelines start diabetes screening at 35 for adults who are overweight. Fertility also declines more steeply from the mid-thirties, so if children are in the plan, talk to a doctor now.
Tip Create an account on the Social Security Administration's website and read your earnings record. Errors are easiest to correct while you still have the tax returns to prove them.
