Most of us look forward to those golden years when we can quit work and enjoy a little free time to start a hobby, become more involved in our community, or volunteer with our favorite organization. To achieve a financially secure retirement that will allow us this freedom, it’s imperative that we plan, save, and invest throughout our lives. Statistically, when it comes time to evaluate the bottom line, investing over a lifetime is more important than the type of investment vehicles we use. Below are tips to help guide you through each decade of your life to financial independence.

Your 30s

In your 30s, you should focus on four areas. First, make sure you limit your consumer debt, such as credit card bills and auto loans.

“If you have $1,000 in credit card debt at 18 percent to 19 percent interest and make the minimum monthly payments, it will take about 21 years to pay off that $1,000, and you’ll pay about $2,350 in interest charges,” says Phil Dyer, CFP and deputy director for financial education in MOAA’s Benefits Information Department. “That can be very damaging to your financial future.”

Second, have a retirement savings plan in place.

“If you save 10 percent of your pretax income annually, you can achieve financial independence within about 35 years,” says Dyer, assuming you’re saving at about an 8 percent annual rate of return. Beginning that process at age 30 will give you that independence by age 65.

The military Thrift Savings Plan (TSP) is the best place to begin. It’s a tax-deferred, low-cost way to invest, Dyer says, and contribution rates and caps now conform to options found in civilian employer savings plans. You also have the option of funding an IRA or a Roth IRA, whichever is appropriate to your needs. Fund both the TSP and the IRA as close to the maximum as you can.

Third, set aside approximately three to six months’ worth of living expenses for emergencies. That money should be invested in short-term instruments, such as savings or checking accounts, high-yield deposit accounts, or short-term CDs.

Finally, start saving for your children’s college fund. One of the best vehicles is a Section 529 plan. You can put away after-tax dollars and later use them for tuition, room and board, and books. Although funded with after-tax dollars, if the funds are used for qualified education expenses, distributions are income-tax free. For more information about 529 plans, visit www.savingforcollege.com or www.finaid.org.

Your 40s

Military personnel typically face their first retirement and begin a second career during this decade. But keep in mind that your second career might not pay as much as your military career had — especially when you consider that parts of your military pay, such as housing and subsistence allowances, were tax-free. But with your military retirement pay plus your civilian salary, along with possibly having the children out of college and off your “payroll” by this age, it’s time to really start saving.

“Military people retire around age 42 and have two incomes until they retire from their second career,” says Col. John Miller, USAF-Ret., CFP and former director of Contract Services and Marketing for MOAA. “That 20-year period is where they have to really fund their retirement.”

Fund IRAs and 401(k)s to the maximum. Many companies match a portion of the funds you put into your 401(k) — that’s free money you don’t want to pass up. Put approximately 80 percent of your investments in a diversified portfolio of equities and 20 percent in fixed-income vehicles. As to your equity portfolio, choose mutual funds or exchange-traded funds that offer a diversified mix of small-, mid-, and large-cap stocks with a portion of international investments. At this life stage, you should weight your portfolio toward growth rather than value stocks.

Also, the transition from military to civilian life is a perfect time to talk to a financial planner who can develop a formal plan and help you determine the proper amounts of life insurance and disability insurance you might need. And before you leave the military, use the free services of the JAG to develop or update your estate plan, including wills and living wills, powers of attorney, and health care powers of attorney or advance directives.

Your 50s

If you’ve not yet been serious about retirement planning, now is the time to buckle down. Starting in 2006, to help those in the over-50 crowd catch up, the IRS will allow them to fund an additional $5,000 annually to their retirement fund. Fund all tax-sheltered accounts to the maximum. In your 50s, consider altering your investment allocation to 70 percent equities and 30 percent fixed income. Of course, that’s a general guideline.

“Some people consider military retirement pay a pot of money that’s invested in cash,” says Miller. “Under that scenario, if you have the risk tolerance, your other investments could be 100 percent equities, which would give you a fifty-fifty balance.”

Another issue you should consider near the end of your 50s is the possible need for long term care insurance. If you decide you need it, don’t wait to obtain it. Premiums begin increasing rapidly after about age 60. Plus, you must be healthy to be issued a policy.

Finally, start thinking about your retirement housing needs. Where will you live when you retire from your second career? Will you downsize? Is the real estate market such that it would be prudent to buy your retirement home now and use it as rental property until you’re ready to move in? If you think the real estate market where you currently live is at a peak, you might want to downsize now and lock in the gain on your current property.

Your 60s

This is the beginning of your years of retirement. As a retired officer you remain eligible for TRICARE health benefits until age 65, when Medicare kicks in. However, you are eligible to begin drawing Social Security payments as early as age 62. Anyone born in 1960 or after won’t get full Social Security benefits until age 67. You must determine when the best time is to start drawing your payments.

“As to when to take Social Security,” says Dyer, “the break-even point is about 14 years. Let’s say for example you take Social Security at your earliest eligible age, incurring the penalties that reduce the amount of monthly Social Security income, and live 14 years. You would have been better off waiting and taking full Social Security at your full retirement age. If most of your family members live past 80, you might want to defer drawing your Social Security until that full retirement age.”

Miller says you generally shouldn’t start taking your Social Security payments until full retirement age if you’re still working. If you have earned income from employment at age 62, you will lose a dollar in Social Security payments for every two dollars you earn. Again, you’re probably better off waiting until you’ve reached full retirement age, when the penalty is eliminated.

As to investment allocation, be more conservative — maybe 60 percent equities and 40 percent fixed income. Think about moving equity investments into mutual funds that focus on large-cap stocks and on value rather than growth stocks. You also might want to consider your current financial needs and keep those funds more liquid.

“You don’t want to have to cash in stocks for immediate income needs, because you could get caught in a down market and end up taking a bath on your equity investments,” says the recently retired Miller.

In your 60s, if you haven’t already downsized your home, now may be the time. And don’t forget that in each decade you should reassess your estate plan and insurance needs.

Your 70s

Because both your military pension and Social Security payments are indexed to inflation, you’ll receive annual COLAs. But you don’t want to outlive your money! Determine your spending limits, which will be based on how well you did saving early on.

“Make sure your spending level is reasonable after retirement,” says Dyer. “A withdrawal rate of 3 1⁄2 percent to 4 percent of assets per year would be appropriate.”

It’s important to be conservative, but some people overdo it. They’ve been in the saving mode all their lives, and it’s difficult for them to start spending their savings.

“After 50 years of saving money, there can be a lot of resistance to spending it,” says Miller. “I had a client who kept trying to reduce expenses to break even, even though she had a lot of
money sitting there. At some point, it’s OK to reverse that mindset.”

Depending on your asset accumulation level, it’s time to review your wealth preservation and transfer plans. Under current law, a married couple could pass up to $4 million to their heirs without federal estate tax taking a bite, if they’ve set up their estate plan properly.

No matter what your life stage, the key to achieving financial independence is to shun debt, embrace savings and investment, and ensure that your other needs — the various types of insurance, your estate plan, and your housing needs — are all appropriate to your age and personal requirements. By keeping an eye on your financial future throughout your lifetime, that future should be bright.