Key Financial Milestones You Should Be Hitting in Your 20s, 30s, 40s, 50s, 60s, and Beyond

In this blog post, we’ll explore some of the key financial milestones you should be aiming for in your 20s, 30s, 40s, 50s, 60s, and beyond.

Financial planning is a lifelong journey. Indeed, as you progress through the various stages of life, your financial priorities and goals will shift accordingly.

Ultimately, most of us want to achieve financial independence. Thus, it’s important to be aware of the key financial milestones you should be hitting at each age, so you know if you’re on the right track toward a secure financial future.

Key Financial Milestones in Your 20s

#1: Build an Emergency Fund

Your 20s may be the first time you experience life on your own without a financial safety net. Therefore, it’s a good idea to start building an emergency fund in case you lose your job or incur a large, unexpected expense.

Unfortunately, more than two-thirds of Americans say they don’t have enough emergency savings to cover one month of living expenses, according to a 2023 Bankrate report. However, most financial experts recommend having at least 3-6 months’ worth of living expenses set aside for emergencies.

To get in the habit of saving, consider setting up automatic transfers from your paycheck or checking account to a dedicated savings account for your emergency fund. That way you don’t have to think about it every month. Plus, you’ll be less likely to use your emergency funds for something else if they’re in a separate savings account.

#2: Pay Off High-Interest Debt

As you build your emergency savings, you’ll also want to focus on tackling high-interest credit card debt. Getting this under control in your 20s makes it easier to prioritize other financial goals as you age.

According to the Education Data Initiative, borrowers under the age of 24 owe an average of $16,500 in student loan debt. If you’re one of the many graduates with student loans, you’ll also want to develop a plan to pay off your debt as efficiently as possible.

It’s important to strike a balance between paying off your debt and saving for future financial goals—for example, homeownership or retirement. Just be sure to pay off your highest-interest debts first so your balances don’t accumulate beyond your control.

#3: Establish a Tax-Deferred Retirement Account and Investment Plan

In addition to building an emergency fund and paying off high-interest debt, saving for the future is one of the key financial milestones you should aim to hit in your 20s.

According to one report from Fidelity, you should aim to save an amount equal to your current salary by age 30 and three times your salary by age 40. Thus, the earlier you can start saving, the better.

At a minimum, be sure to enroll in your employer’s 401(k) plan, if available, and contribute at least enough to receive any employer match. Additionally, consider opening an individual retirement account (IRA) to supplement your 401(k) savings.

Key Financial Milestones in Your 30s

#1: Boost Your Retirement Savings

As your income improves in your 30s, you’ll want to start contributing more money to your savings and investment accounts. As mentioned previously, one rule of thumb is to save three times your salary by age 40.

If you have an employer-sponsored retirement plan, consider bumping up your contribution rate in your 30s. Meanwhile, if you’re self-employed, be sure to evaluate your self-employed retirement account options, such as a Solo 401(k) or SEP IRA, and contribute accordingly.

#2: Purchase Your First Home

According to a report from the National Association of Realtors, the typical first-time homebuyer is in their mid-30s. If homeownership is one of your financial goals, purchasing your first home may be one of the key financial milestones you should aim for in your 30s.

Keep in mind that in addition to your mortgage, there are a variety of costs associated with homeownership—for example, property taxes, insurance, and ongoing maintenance. As you pursue this goal, try to avoid overextending yourself by buying a home outside of your budget.

Of course, homeownership isn’t for everyone. Depending on your lifestyle and other factors, purchasing your first home may not be one of the financial milestones you need to hit in your 30s.

#3: Fund Your Children’s Education

If you have young children, one of the key financial milestones you’ll want to aim for in your 30s is funding their future education expenses.

Indeed, saving for your children’s education can be a challenge, especially if you have competing financial goals. Fortunately, there are tax-advantaged accounts that help make it more manageable.

One option is a 529 plan, a tax-advantaged college savings plan sponsored by states, state agencies, or educational institutions. These plans typically offer a variety of investment options to help your savings grow tax-free. Meanwhile, your contributions to a 529 plan may be eligible for certain tax deductions and/or credits.

Key Financial Milestones in Your 40s

#1: Maximize Your Retirement Contributions

According to research from PayScale, full-time workers tend to reach their peak earnings years in their 40s and 50s. Thus, your 40s are a great time to maximize your retirement savings.

Even if you don’t plan to retire in the traditional sense, taking full advantage of tax-deferred savings accounts can help you achieve financial independence faster.

If you can, try to max out your 401(k) and IRA contributions each year. In 2023, for example, these limits are $22,500 for a 401(k) plan and $6,500 for a traditional or Roth IRA.

#2: Diversify Your Investments

Diversifying your investments is another one of the key financial milestones you should hit in your 40s. Indeed, a diversified portfolio can help you take advantage of market opportunities while minimizing your potential downside risk.

In many cases, a well-balanced portfolio includes a mix of stocks, bonds, and other assets. As your net worth grows, it’s important to review your asset allocation and adjust as necessary to maintain an appropriate level of risk for your age and financial goals.

Consider working with a financial planner, who can help you develop a long-term, tax-efficient investment strategy.

#3: Create a Comprehensive Estate Plan

In your 40s, you may have accumulated substantial assets, such as a home, investment properties, retirement accounts, and life insurance policies. Without an estate plan, your assets may be subject to probate, which can be a costly, time-consuming, and emotionally draining process for your loved ones.

Therefore, developing an estate plan is one of the key financial milestones you should consider hitting in your 40s. Basic estate planning documents generally include a will or living trust, healthcare directive, and durable power of attorney.

Be sure to work with a financial planner and/or estate planning attorney, who can help you develop an estate plan that aligns with your financial goals. In addition, be sure to review and update your estate plan periodically as your family dynamics and financial circumstances evolve.

Key Financial Milestones in Your 50s

#1: Prepare for the Next Phase of Life

In your 50s, you may be considering retirement or an encore career. Whether you plan to stop working altogether or pursue a new dream like starting your own business, you’ll need to make sure you have the financial resources to fund your lifestyle goals.

By age 55, a good rule of thumb is to have about seven to 10 times your annual salary set aside in savings. If you’re behind on your savings goals, consider taking advantage of catch-up contributions.

The IRS allows individuals aged 50 and above to save additional money on a tax-advantaged basis prior to retirement. In 2023, you can contribute an additional $7,500 to a 401(k) plan and $1,000 to an individual retirement account.

#2: Pay Off Your Mortgage

Another one of the key financial milestones many people aim for in their 50s is paying off a mortgage. Indeed, paying off your mortgage in your 50s offers several advantages that can help you achieve financial independence.

For example, eliminating your mortgage can free up a significant amount of cash flow, which you can then redirect toward other financial goals or lifestyle expenses. It can also provide a sense of security and peace of mind, as many people prefer to enter their golden years debt-free.

Thus, you may want to explore strategies for paying off your mortgage faster, such as making extra payments, refinancing to a shorter-term loan, or downsizing to a more affordable home. However, keep in mind there may be opportunity costs associated with paying off your mortgage early. Be sure to consult a financial planner to help you determine if it’s the right move for you.

#3: Revisit Your Emergency Savings

As you near retirement age, it’s important to review your emergency savings and increase your cash reserves if necessary. Emergencies and unexpected setbacks can happen at any time, and having a robust emergency fund can help you avoid tapping into your retirement savings prematurely.

In your 20s, most experts recommend having at least three to six months’ worth of living expenses in your emergency fund. But in your 50s, you may want to double this amount. This can help you cover unexpected expenses, such as medical bills or home repairs, without selling your investments at a potentially inopportune time.

Key Financial Milestones in Your 60s and Beyond

#1: Transition into Retirement

Retiring in your 60s can be an exciting and fulfilling new chapter in your life. With more time and freedom, you can pursue hobbies, travel, or spend time with loved ones.

However, it’s important to ensure that you have enough savings to support your retirement lifestyle. Thus, you should assess your retirement readiness by reviewing your investment portfolio, estimating your retirement income needs, and exploring options for Social Security and Medicare.

If retirement is one of the key financial milestones you hope to achieve in your 60s, consider working with a financial planner to ensure you’re financially prepared.

#2: Manage Required Minimum Distributions (RMDs)

If you’re age 72 or older, the IRS requires you to take distributions from your traditional IRA each year. Required minimum distributions (RMDs) can increase your taxable income and potentially push you into a higher tax bracket.

You can withdraw more than your RMD amount in any given year—but be prepared for the potential tax consequences. On the other hand, the IRS imposes a penalty of up to 50% if you fail to take your full RMD before the deadline.

Both scenarios can be costly, so proper tax planning is essential as you approach this key financial milestone.

#3: Plan Your Legacy

As you age, legacy planning often becomes an increasingly important financial milestone. Not only can a legacy plan help ensure your assets are managed and distributed according to your wishes, but it can also help preserve your values and memories for future generations.

By taking the time to develop a legacy plan, you can leave a lasting impact on your loved ones, your community, and the world. A financial planner can help you develop a gifting and legacy plan that considers your values and long-term financial goals, as well as the potential tax implications for your beneficiaries.

SageMint Wealth Can Help You Work Towards Achieving Your Key Financial Milestones

Setting financial goals and monitoring your progress towards them on an ongoing basis is a key component of the financial planning process. An experienced financial advisor like SageMint Wealth can help you reach key financial milestones at every stage of life so you can achieve your long-term goals and aspirations.

SageMint Wealth is a wealth management firm for high-net-worth individuals, families, and business owners with a passion for supporting women, the LGBTQ+ community, and individuals in the technology space. If you’d like to speak with a member of our team about developing a plan for your future, please contact us. We’d love to hear from you.