Retirement planning in your thirties? For some, that may sound routine. But the truth of the matter is, Americans are simply not saving enough for retirement. In fact, nearly half have saved nothing at all. But it’s not a lost cause. Your thirties are a perfect time to set yourself up to both enjoy and fund your golden years.
If you haven’t begun a retirement planning strategy, don’t panic. We’ve gathered the information you need now, to get on the right track tomorrow.
Top 6 Ways to Begin a Successful Action Plan for Your Retirement:
1. Start with a 401(k):
Chances are you’ve already begun contributing to your employer-sponsored 401(k) plan. In a perfect scenario, this long-term financial instrument will span decades and grow with your goals and needs. As with any investment, the value will be exposed to both peaks and valleys, but your focus should always remain on the long term. In plain English, time is money. If you made a $5,000 contribution on your 20th birthday and contributed nothing else over the course of your career, your balance would reach almost $160,000 on your 65th birthday. Alternatively, if you celebrated with the same $5,000 investment on your 40th birthday, it would value less than $35,000 at age 65. Now, of course, your retirement fund should not be contingent upon a single transaction.
So, how much should you be socking away?
Financial planners suggest that investors increase their contribution by one percentage point each and every year. That means millennials should earmark about 12% of their salary. Since incomes tend to increase over the course of our lifetime, planners generally make determinations based on paychecks that are on an upward trajectory. After all, annual incremental bumps will generate an even greater nest egg for your future.
2. Double down with a Roth IRA (RIRA):
So, your 401(k) is up and running, and the future is looking bright. You’ve watched your savings grow, and you’re feeling confident. But, will it be enough? Nearly 8 in 10 investors between the ages of 30 and 54 believe it won’t be. And they are correct. The answer is to diversify beyond what you have stashed in savings accounts and your employer-sponsored plan.
And a good place to start is a Roth IRA, which provides the added perks of tax benefits and flexibility.
With a RIRA, you save through after-tax dollars, and you won’t pay income taxes on withdrawals. And that works in your favor since you’ll likely be in a higher tax bracket once you hit retirement.
In a perfect world, savings accounts and retirements plans are used for what they are intended for, your future. However, life tends to deliver the unexpected. Between now and then, you could encounter a health crisis, a layoff at work, or even the businesses opportunity of a lifetime. Roth contributions can be withdrawn penalty-free at any time. So if you are faced with a curveball, a RIRA just might be the answer. However, there is one caveat, you must be at least 59 1/2 years old to access your earnings, but there are several exceptions that allow for earlier withdrawals. Education costs, some unreimbursed medical expenses, back taxes, and up to $10,000 for first-time homebuyers all qualify.
3. Diversify through Mutual Funds (MF):
4. Put your Windfall to Work:
5. Plan for Healthcare Expenses:
6. Leverage Investment Alternatives Like Real Estate:
And finally, look beyond traditional investments. Real estate can be a meaningful way to achieve greater diversification. In our parent’s generation, real estate investing was reserved for the wealthiest of the wealthy. Buy-in requirements were upwards of $100,000, and if you didn’t socialize with the elite, you were left out in the cold. Recently, it all changed when legislative and regulatory action disrupted the default and provided access to a new wave of investors. With as little as a few thousand dollars, you can take advantage of lending or real estate crowdfunding opportunities to achieve measurable returns for years to come.
Start Retirement Saving Now & Stress Less Later.
Financial planning for your retirement may seem like a daunting task, but if you put in the time now, you can better prepare for the years ahead. As with any investment, it is critical that your profile for risk matches your portfolio. And remember, you have time on your side, small investments today will make a world of difference for your future.