Retirement Planning by Age: Smart Savings, 401(k) Strategy, and the Power of IULs

jmealpha1
May 1
3 min read

Planning for retirement is a journey that evolves with each stage of life. Understanding how much to save at different ages can help ensure financial security in your golden years. Here’s a breakdown of recommended savings percentages and milestones by age group.

In Your 20s: Laying the Foundation

Recommended Savings Rate: 5% to 10% of your annual income

Savings Goal by Age 30: Aim to have saved 0.5x to 1x your annual salary (Money Not Spent)

Your 20s are an ideal time to start saving, even if it’s a modest amount. Thanks to the power of compound interest, early savings can grow significantly over time. Take advantage of employer-sponsored retirement plans, especially if they offer matching contributions.

In Your 30s: Building Momentum

Recommended Savings Rate: 10% to 15% of your annual income

Savings Goal by Age 40: Aim to have saved 2x to 3x your annual salary

As your income grows, so should your savings rate. Balancing retirement savings with other financial responsibilities, like homeownership or starting a family, is crucial. Increasing your contributions during this decade can help you stay on track for retirement.

In Your 40s: Catching Up and Planning Ahead

Recommended Savings Rate: 15% to 20% of your annual income

Savings Goal by Age 50: Aim to have saved 4x to 5x your annual salary

Your 40s are a pivotal time to assess your retirement savings. If you’re behind on your goals, consider increasing your contributions and exploring additional investment opportunities. This is also a good time to consult with a financial advisor to refine your retirement strategy.

In Your 50s: Maximizing Contributions

Recommended Savings Rate: 20% or more of your annual income

Savings Goal by Age 60: Aim to have saved 6x to 8x your annual salary

With retirement on the horizon, it’s essential to maximize your savings. Take advantage of catch-up contributions allowed in retirement accounts for individuals aged 50 and over. Review your investment portfolio to ensure it aligns with your risk tolerance and retirement timeline.

Rethinking 401(k) Overfunding: The Hidden Trade-Off

Many employees are taught to “put as much into their 401(k) as possible.” While contributing up to your employer’s match is wise—going beyond that may not always be your best move.

Here’s why:

You’re increasing your future tax burden. 401(k) contributions are tax-deferred—not tax-free. When you retire, every dollar you withdraw is taxable. The more you put in now, the more taxable income you’ll face later—at unknown future tax rates.
You sacrifice flexibility. Accessing your 401(k) funds before age 59½ comes with penalties and restrictions. This limits your ability to use your wealth when opportunities or emergencies arise.
There are no guarantees. Your 401(k) is exposed to market risk with no downside protection. If the market drops before or early in retirement, you could lose years of gains right when you need stability most.
You’re deferring control. You may lose the opportunity to strategically plan income and tax brackets during retirement. The IRS controls the withdrawal rules—you don’t.

Instead of overfunding a 401(k), many high-earning professionals and business owners are reallocating those extra dollars into tax-free vehicles with more flexibility—like a properly designed Indexed Universal Life (IUL) policy.

The Power of a Properly Structured IUL for Retirement

An Indexed Universal Life (IUL) policy is not just life insurance—it’s a tax-efficient wealth-building tool. At King Legacy Group, we structure IULs to do far more than cover final expenses:

Why clients choose IULs over excess 401(k) contributions:

Tax-Free Income: Properly structured policy loans allow access to income without taxes or penalties. No age restrictions. No RMDs. No future tax-rate guessing.
Downside Protection: The IUL’s 0% floor means your cash value never loses money due to market downturns—unlike 401(k)s.
Annual Growth Lock-In: Market-linked growth is captured and reset annually, so gains are never lost when the market corrects.
No Contribution Limits: Unlike qualified plans, there are no IRS caps—allowing high-income earners to allocate far more than $23,000 per year (2025 401(k) limit).
Liquidity & Control: Need access to capital for business, real estate, or family needs? No waiting until age 59½. No 10% early withdrawal penalties.
Legacy Planning: The policy includes a death benefit, delivering tax-free generational wealth in addition to living benefits.

Let’s Talk Strategy

Retirement isn’t just about saving—it’s about saving smart, avoiding unnecessary taxes, and creating a flexible income plan that works in both good markets and bad.

If you’re currently overfunding your 401(k) or looking for ways to reduce tax exposure in retirement, let’s explore how a properly structured IUL can support your LivingLEGACY™.

Schedule your complimentary consultation today

Sources: