How to Set Your Financial Priorities, from Your 20s to Your 60s

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If you were a smart kid and started saving your allowance in a piggy bank or sneakily kept the change from a $20 when you bought milk for your mom, you probably already realize that your financial priorities change over time. A handful of quarters or fistful of dollar bills served you well as a preteen, but as we age, so should our money management goals.

Feeling pulled in different directions when it comes to saving money for an emergency, a house, tuition, and retirement? For help on how to establish priorities based on age, we asked financial advisors to weigh in. Naturally, you'll have some very specific individual goals. But these guidelines will help you rank what's important to you right now.

20s: "With a trend toward marrying later in life, most of your 20s are spent with little to no obligation to other people," says Brandon Moss, managing director at United Capital in Dallas. "This is prime time to lay a sound financial foundation and develop key habits that will help you for the rest of your life. You can't win or lose your financial life in your 20s, but just getting started gives you a tremendous leg up."
  • Save. Too many people make the mistake of saving only in their 401(k), Moss says. "Once the money is in the 401(k), it can't come out until you're 59½ (with limited exceptions). Be sure you're also saving outside your retirement accounts for when you need new tires or it's time to buy a house."
  • Automate the budget. No one likes or wants a budget, so why even do it? says Moss. "Focus on automating as much of your financial life as possible -- automate your savings, bills and obligations, and giving," says Moss. "Anything after this is yours."
  • Skip the BMW, but be sure you set aside some fun money. "Enjoy your 20s, just be smart about it," Moss says, using the example that $200 per month in savings in your 20s (compounding and earning interest) will grow to between $40,000 and $50,000 after 10 years and around $250,000 after 40 years.
  • Address your debt. Stay on top of any money you've borrowed to pay for significant expenses -- such as school or a car. Know what you owe, and establish a system to pay it down as quickly as possible.
30s: For those who have kids, your 30s are the time to take steps to instill financial responsibility in your children, suggests Suzanna de Baca, vice president of wealth strategies at Ameriprise in Minneapolis. "Guiding them on a path to financial independence is positive for them, but also good for your own financial future. Teach your kids to spend and save responsibly, and lead by being a positive influence," she says. Also, especially now that you have kids, be sure to establish a will and guardianship plan.
  • Don't crack the foundation. Get serious about laying one down, says Moss. "The good news is it's not too late," he says. "All of the above from your 20s still applies. And it's OK if you start them in your 30s, it's just a bit more difficult."
  • Discuss finances with your partner. If you have a significant other, now is the time to get on the same page financially.
  • Weave a stronger safety net. Having an emergency fund is important at every age, but especially as your family grows, which increases the chances of a surprise financial need arising.
  • Consider life insurance. If you have obligations, such as kids and a house and a car, what would happen if you weren't around? Life insurance is the simplest and easiest way to address this question, says Moss. Shop around and be sure to focus on term policies, not whole life policies (which tend to have an expensive investment element tacked on).
40s: "It's gut-check time," says Moss. "Real decisions need to be considered, and it's more important than ever to be on the same page as your significant other."
  • Know where you stand. If you haven't done this yourself, or you want a second opinion, pay to sit down with a professional who can give you a baseline for where you stand in terms of saving for retirement and any specific goals you have. A fee-only certified financial planner is a great place to start.
  • Understand the trade-offs. "If we pay for the kids' college, do we have to delay retirement for four years?" These are the questions you need to start asking and getting an idea of what each means for your financial life, says Moss.
  • Get serious about contributing to your 401(k). If you're not getting the maximum match from your employer, then you're probably not going to get where you want to be in the future, Moss says. Take advantage of all the tax breaks you can get for savings, both in your 401(k) as well as a Roth IRA (if you qualify) in order to supplement your employer-sponsored retirement savings plan.
50s: "These are typically your peak earning years and your peak savings years," says Jeremy Kisner, author of "A Good Financial Advisor Will Tell You..." and a certified financial planner and president of Surevest Wealth Management in Phoenix. "Your kids are typically grown and on their own. Child care and related expenses disappear. Mortgage payments that were a stretch when you first bought your home have become more affordable because the payments remain level but your household income has increased."
  • Tackle big debts to eliminate them before retirement. Develop goals to pay off your home and other large loans so they are not looming later in life, says Kisner.
  • Take advantage of catch-up contributions. "If you're already saving for retirement but have the ability to increase the amount you're contributing to your 401(k) or IRA -- do it!" says de Baca. "If your savings are lacking, don't panic, but recognize that you might have some catching up to do. The good news is, after age 50 you can make catch-up contributions to most retirement plans."
  • Consider long-term care insurance. "The average age at which long-term care insurance is purchased is 57," says Kisner. "People who wait until their 60s frequently don't buy the insurance because it's too expensive at older ages."
60s: "These should also be peak saving years," says Kisner. "However, it should be pointed out that more than 40 percent of workers are forced to retire earlier than planned due to medical reasons, corporate downsizing or layoffs, or the necessity of taking care of elderly parents."
  • Determine if/when you can afford to retire. "Develop a lifetime income plan as you decide about when to take Social Security or pension options, whether to keep rental properties or vacation homes, etc.," says Kisner.
  • Consider downsizing. You should start to focus on where you want to live and what type of home you want for your retirement.
  • Do your estate planning. If you don't already have a will, put it at the top of your to-do list, says de Baca. If you have one in place, make sure it still reflects your current wishes and that all your beneficiary information is up to date.
  • Evaluate your insurance needs. You may no longer need a life insurance policy to protect your family, but some affluent families opt to buy one to leave money behind for their heirs, says Kisner. Some long-term care policies also include a death benefit.
"Regardless of age, one thing I always like to tell people is, "It's OK to not be OK,'" says Moss. "Money is tough, but it doesn't have to be all-consuming. No matter where you are, it's never too late or too difficult to right the ship."

8 Ways to Mess UpYour Retirement Plan
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How to Set Your Financial Priorities, from Your 20s to Your 60s

Investing mistakes may top the list of how people ruin their retirement plan, but there are plenty of other ways to goof up too.

Click through our photo gallery as Bankrate shares 8 common mistakes that you should avoid at all costs, when it comes to saving and investing for your golden years.

First Up: Mistake No. 1

Many people look at their 401(k) or 403(b) plan, IRAs or other retirement plans as separate entities instead of integrating them as one total portfolio. By not seeing the forest for the trees, they don't correctly position their assets in their plans.

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Next: Mistake No. 2
Generally, investments that produce high, fully taxable dividends should go into your retirement plans. Inside a tax-deferred plan, dividends from investments such as taxable bond funds and REITs won't cause any tax damage. Conversely, investments that are designed to produce long-term capital gains, such as growth stocks, are generally best held outside of your retirement plan. They're tax-advantaged to begin with and don't need additional tax sheltering.
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Next: Mistake No. 3

Most employers that offer a retirement plan will match your contribution up to a certain limit. For instance, your employer may match the first 3% of salary you contribute. If you contribute less than 3%, you're literally throwing away free money.

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Next: Mistake No. 4

In some 401(k) plans, participants pay as much as 2 percent to 2.5 percent in expenses. These fees may be well hidden, but they still impair your return. Over many years, that difference, compounded and increasing as your assets grow, can cost you many tens of thousands of dollars. Do the research to see if your plan is fee heavy. If so, move your money to a rollover IRA, if allowed, as soon as possible.

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Next: Mistake No. 5

If you make contributions to a traditional, nondeductible IRA, make sure you file this form with your tax return to establish the necessary verification trail that you'll need when you make withdrawals from that IRA. Otherwise, you may have to pay taxes on withdrawals that should rightly be tax-free since you didn't get a tax deduction when you made your contribution.
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Next: Mistake No. 6

Suppose you plan to withdraw 5% a year from your plan once you're retired. Many people think that the 5% withdrawal can only come from interest and dividends, and therefore load up their plan with bonds, forgoing growth investments. They don't achieve an appropriate allocation. As part of your annual withdrawals, you can also sell individual holdings and use the proceeds.
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Next: Mistake No. 7
This tax break lets you remove company stock from your 401(k) plan. You pay ordinary income tax only on the cost (basis) of the shares when they first went into your 401(k), which may be much lower than the current market value. When you sell the stock, any additional appreciation is taxed at the long-term capital-gains tax rate. It sounds appealing, but it's usually not a good idea. It's often better to simply roll the stock over into a traditional IRA and then sell it.
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Next: Mistake No. 8
You designate beneficiaries when you open your plan. If you don't review your beneficiaries periodically, you might be leaving your assets to someone who is already deceased or no longer a part of your life. For instance, if you're divorced, you probably don't want to leave your money to your ex-spouse. But the plan administrator must distribute the funds to the listed beneficiaries. The beneficiary designation holds no matter what your will calls.
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Next: Retirement Hot Spots
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Retirement Hot Spots

Thinking about changing your address during your golden years? A move is a big decision that should be based on many factors, including what the cost of living will be. Bankrate has rounded up key stats on 62 popular retirement spots, we highlight 30 of them here.

Click through our gallery to check out the prospective communities. Compare the price of goods and services there, everything from the cost of a dozen eggs to median home prices.
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Michele Lerner is a Motley Fool contributing writer.​
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