How To Build Wealth With Your Paycheck at Every Age

Are you trying to build wealth? No matter what stage of life you’re at, building wealth is still an option. However, there are certain things you should do with your paycheck as you near retirement. Here are the top things you should do with your paycheck in your 20s, 30s, 40s, 50s and 60s in order to build wealth and prepare for retirement.

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As you enter your 20s, you are just starting to build your life. This might include settling down, advancing your career and purchasing a home. However, life is unexpected, making your 20s a great time to build your emergency fund.

At a minimum, you should have between three and six months’ worth of operating expenses tucked away in a high-yield savings account for any emergency life throws your way.

“Building up an emergency fund is paramount for a solid financial foundation,” said Stephen Kates, certified financial planner (CFP), principal financial analyst for RetireGuide. “Without an emergency fund that can adequately insulate you from repairs, job loss or other unexpected expenses, financial shocks could derail your savings or put you into debt. Funneling some of your paycheck automatically into a high-yield savings account will allow you to build your cash cushion slowly.”

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If you haven’t already started saving for retirement, it’s time to get the ball rolling in your 30s. Consider increasing your 401(k) contribution, maxing out IRA accounts and opening a health savings account. While in your 30s, you still have plenty of time to take advantage of compound interest, so focus on upping your contributions and savings across the board.

“If your employer offers a retirement plan, such as a 401(k) or 403(b), this should be your first stop,” Kates said. “As a baseline, contribute enough to earn the full company match if one exists. You can contribute up to $23,500 in 2025. Other places to save for retirement are traditional or Roth IRAs. By starting your retirement savings now, you will give yourself decades of compounding growth to do the heavy lifting for building a nest egg in retirement.”

Your 40s are some of your highest earning years, meaning it’s the perfect time to increase momentum in building wealth. Take the time to project your retirement needs. Are you on track? If not, back into how much you need to start saving to reach your goals.

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At the same time, consider opening education accounts, like a 529 plan for your children. Not only do many states offer a tax credit or deduction, but you can also enjoy tax-free growth and less stress when it’s time to send your kids off to college.

“If kids are now in the picture, consider funding 529 college savings plans or separate brokerage accounts for their benefit,” said Bryan Kuderna, CFP and author of “What Should I Do with My Money?”

“Perhaps increase retirement contributions beyond the match if the monthly budget is in good shape. This is often the time to convert any term life insurance to whole life to provide more long-term benefits. Also, make sure wills are in place and up to date.”

As you start to wind down your working career, paying down debt should be a priority in your 50s. Ideally, you want to retire with no debt, which includes paying off your mortgage.

Put together a net worth statement that outlines all of your outstanding debt. Then, make a plan to start paying off the amounts. The debt snowball method prioritizes paying off the lowest balances first, while the avalanche method focuses on the debt with the highest interest rate. Choose whichever method keeps you motivated.

“You’re nearing the retirement red zone and possibly in the sandwich generation of helping kids with college and parents with long-term care,” Kuderna said. “Don’t sacrifice your own retirement planning as you juggle responsibilities. Be sure to stay liquid and not take on bad debt as life changes occur. If your budget allows, it’s time to max out retirement accounts and contribute to brokerage accounts when possible.”

Most people will retire in their 60s. In fact, between 2016 and 2022, 70% of adults aged 65 to 69 were retired, according to a recent study. Before you give your notice, understand what your retirement will look like and put your paycheck funds toward your retirement goals first and foremost.

Will you have enough income to live on? What is your income-related monthly adjustment amount for Medicare? If you’re having trouble figuring out these items, contact a financial advisor. Once everything is all sorted out, sit back, relax and enjoy your retirement.

“If you are in your 60s and getting ready for retirement, it’s also helpful to evaluate if you are in a high enough tax bracket to be subject to IRMAA, [or income-related monthly adjustment amount],” said Joseph Eck, CFP and owner of Stage Ready Financial Planning. “Because IRMAA is subject to a two-year look back, the income you earn at age 63 will determine your premium for Medicare at age 65. Making extra pretax contributions to your 401(k) or HSA can lower your modified adjusted gross income and help you potentially avoid unnecessary increases in the cost of Medicare at retirement.”

Building wealth can seem like a daunting task. By prioritizing these different paycheck savings tasks, you can build wealth and set yourself up for financial success.