There are several ways to save for retirement in your 30s and it’s never too early to start. Now is a perfect time to begin saving because you’re at an age when you’re probably making a decent income, not like in your 20s when you may have still been in college or just getting on your feet. Plus, you still have many years before you actually retire (unless you hit the lottery or get rich some other way), which gives you plenty of time to create a good retirement nest egg.
You’re more likely to have a generous amount of retirement income if you save for retirement in your 30s by following these simple tips:
- Save early and regularly. If you’re saving for retirement in your 30s you may think you have plenty of time to do so since you still have a few decades before you reach retirement age. However, putting back a little bit of money in a retirement account on a regular basis throughout your working years will provide a larger amount of money than if you set aside a large amount later on. For instance, according to the Employee Benefit Research Institute, a worker who saves for retirement in their early 30s and contributes $1,200 a year in a 401(k) account ($100 a month), would have approximately $209,000 by age 67. On the other hand, if a worker chooses not to save for retirement in their 30s and waits until age 45 to start saving, even if he tried to make up for lost time by doubling his contribution to $200 a month, he would still only have a balance of $104,000 by age 67.
- Take advantage of an employer’s matching contributions. When saving for retirement in your 30s, you should definitely contribute to a 401(k) account at a company that offers a match. Saving 5 percent of your salary in an employer’s 401(k) program in which a dollar-for-dollar match is offered, is like accepting a 5 percent raise. Choosing not to participate in your company’s 401(k) program is like turning that raise down, which is almost unheard of, and will cost you a considerable amount of money at retirement. If you’d like to start saving for retirement in your 30s and your company doesn’t offer a 401(k) match, or you want to find out more about contributing to an IRA, Roth IRA or another retirement account, seek out a financial advisor for advice on the best account for your personal situation, the appropriate amount to contribute, how often, etc.
- Diversify your investments. It’s important to contribute money to a variety of investment types (stocks, bonds, money market funds), when you begin saving for retirement in your 30s. Putting all of your eggs in one basket and relying on one investment type is not a good idea. It’s also important to make sure you’re diversifying within each type of investment type as well –multiple stocks, bonds, etc., instead of investing in only one stock or bond.
Stay out of debt. Entering retirement debt free is essential to being able to maintain a comfortable standard of living. Saving for retirement in your 30s often involves reducing or eliminating credit card and other debt, which isn’t hard to do if you start now. Also, making sure you live within your means will help curtail the excessive credit card usage as well.
Keep in mind that there is no such thing as an ultra-safe way of saving for retirement in your 30s, but if you follow these tried and true retirement saving tips, you should be able to live fairly comfortable in your retirement years.