1. In Your 20s

Master your credit score.
It determines the interest rates you'll get on loans and credit cards, and a good one—above 720—will save you money throughout your life. Visit myfico.com to get your score, understand how it's calculated, and learn how to improve it.

Enroll in your company 401(k) plan.
Most companies match your contribution; by not enrolling, you're virtually throwing away free money. The secret to investing is giving your money time to grow. If you delay saving for 10 years, you'll be hard-pressed to make up for lost time. If you're self-employed, park a Roth IRA or a SEP-IRA at a discount brokerage such as Muriel Siebert or a low-cost fund company like Vanguard or Fidelity.

Pay off credit card debt.
To calculate the shortest and most effective route to becoming debt-free, visit Bankrate.com.

2. In Your 30s

Build an eight-month emergency cash fund.
Set up a savings account into which money is automatically transferred from your checking account each month. Once you have saved the minimum required—often $500—move your savings into a higher-interest money market account.

Save for a down payment on a home.
Don't go for a mortgage that doesn't require a down payment—if you don't have the necessary 5 percent or so, you're not ready to own. Set up a housing savings account with an automatic transfer from your checking account.

3. In Your 40s

Draw up a revocable living trust with an incapacity clause.
Though it's best to have both a will and a trust, a trust eliminates the lengthy probate court process required to validate a will. A lawyer can draw up the document for you, but you can also create one yourself with several software programs. You'll then need to hire an estate lawyer to review your work.

Save for your retirement before the kids' college tuition.
Don't shortchange yourself—the kids can get loans for school but you can't get loans for retirement. Max out your 401(k) and, if you're eligible, a Roth IRA. To find out how much you need for a secure future, visit smartmoney.com/retirement.

Once you're on the track to a comfortable retirement, visit savingforcollege.com for tips on funding your children's education.

4. In Your 50s

Start your bonding.
Though stocks should still make up the bulk of your portfolio, shift about 20 percent of your retirement assets into bonds.

Speed up your mortgage payments.
If you intend to stay in your home, pay more now so that you can head into retirement without large, looming monthly bills. In the Mortgages section at bankrate.com, you can calculate how much less time it will take you to own your house fully if you up your payments; you'll also be able to see how much you'll eventually save on interest fees.

5. In Your 60s and 70s

Consider opting for early Social Security benefits...
...But only if your payout won't be taxed (if you're making less than $12,000 in 2005). If you earn more, those early benefits will be reduced by $1 for every $2 you make above that $12,000 threshold. Taking a reduced amount before you're 65—you're eligible at 62—makes more sense than waiting three years for the full benefits.

Begin your traditional IRA and 401(k) withdrawals when you turn 70.
You'll face a stiff penalty if you don't start taking out money at this time. Contact the brokerage, fund company, or bank where you've invested for assistance on how to calculate and collect your withdrawal amount.
Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.


Next Story