06/07/2013 11:45 am ET Updated Aug 07, 2013

Retirement Basics: Retirement Planning for Different Age Brackets

Welcome back to our Retirement Basics series! So far I've covered different types of retirement accounts in part 1 (401k vs. IRA) and part 2 (traditional vs. Roth) to help you save and invest for retirement most effectively. This post, the last installment of the series, goes in a somewhat different direction. We'll look at the main things to consider for retirement savings and investing given your age.

In your 20's - If you're in your twenties a Roth IRA can be effective. This is especially true if you are making less than you think you will in the future when your career takes off. However, if you are able to save more than the maximum Roth contribution, then do so. I would encourage you to save as much as possible at this age. Because of the time value of money, every dollar put away now has a larger impact later. Define savings in a specific way that is tailored to you. A general rule of thumb is to save 15-20 percent of your income.

In your 30's and 40's - In these decades, people often experience conflicting goals (but hopefully more earning power). It can be a challenge to balance multiple goals, such as saving for a house, children's college as well as retirement. Even small retirement contributions, when made consistently, add up over the years. I recommend setting up an automatic electronic contribution with each paycheck.

In your 50's and 60's - This is the time when the reality of retirement starts to feel immediate. The approach at this age largely depends on the amount set aside up to this point. Catch up contributions to retirement accounts become available at age fifty. This allows you to add additional funds to the maximum contribution. The specific account type will determine the exact figure you are allowed to contribute.

I recommend that you start "practicing" retirement. Be realistic about what retirement looks like; consider your lifestyle, partial retirement or a career change. Also, when will you retire? Some might be able to consider early retirement. You might consider talking to a financial planner to run a number of cash flow scenarios to assess the likelihood you'll run out of money during retirement. "How much money do I need to retire?" is one of the most frequently asked financial questions, which I cover in a webinar.

Retirement Investments - Preparing for retirement is not only about the amount you save, but also about the way you invest. When you are younger and retirement is decades away, you can be more "aggressive" with your investments. This means primarily investing in stocks and including a few bonds too. As you age, the mix of stocks and bonds will change and become more "conservative" over time until you have primarily bonds and less money in stocks. A financial planner can help you choose the mix of stocks and bonds (aka asset allocation). They can also help you select individual funds that are appropriate for you so that you can plan for retirement and continue to SaveUp!

This post was written by SaveUp's personal finance contributing writer, Catherine Hawley, CFP®.