Most millennials are officially in their 30s, and it is high time they make a plan for retirement. Given how bleak the future looks right now and none of us have any idea what’s going to come next, it is necessary to be prepared for everything. Planning early for retirement is an essential part of that.
With the recession upon us, saving for retirement is only going to get more challenging as you grow older. Hence, this is the time to seize the moment and start saving today.
You might argue that the 30s are the busiest times. For instance, some prioritize relationships, some focus on their careers, and some plan to have kids. However, this makes all the more reason to invest in your retirement because life is fast, and soon you will not have the same strength you have right now to work hard and efficiently. Furthermore, responsibilities will keep increasing. So, in order to live your life without worrying about the future, you must prioritize retirement.
Now, let’s discuss how you can plan for retirement in your 30s.
1. Increase Contribution to 401k
Your 401k is sponsored by your employer, but you can choose to make the maximum contribution allowed to ensure you are securing a good part of your earnings. Your salary must have increased considerably from the time you first entered the professional field. It will continue to grow as you progress in your career. Start increasing your contribution gradually, so it does not put a burden on you. A good thing about 401k is that even starting with tiny boosts of 1% will have a significant effect in the long run.
2. Start Investing to Earn Extra
Of course, as a grown-up, you need to make sure you are fulfilling all your responsibilities, such as paying all your bills, building an emergency fund, contributing to your retirement plan, saving for your kids’ college, paying your mortgage, etc. However, it has become difficult to do all this with a single income. It would be wise to start a side hustle or invest your money to earn some extra cash.
If you have little knowledge of investing, it is better to start small. There are plenty of ways you can invest to start saving for retirement at 30. For instance, you could put your savings in a savings account and earn interest, or you could invest in a start-up that you think will do well. Additionally, you can also buy shares of a company that is making a significant profit. However, before entering the stock market, a thorough understanding is required, so you don’t end up losing money instead of making more.
3. Make Some Changes to How You are Using Your Income
Usually, when a person’s pay scale increases, they tend to spend more instead of saving more. If you wish to do something about your future, you must prioritize saving for retirement over upgrading your lifestyle. Yes, that is what being an adult is all about.
A better approach would be to start budgeting and giving yourself a spending limit after you have allocated your savings. This way, you get to enjoy your raised salary while also ensuring a contribution to your retirement plan.
4. Don’t Cash Out Your 401k
Leaving your job for another can be a tricky business. You see, employees have the option to cash out their 401k, and often they take it. However, the drawback of cashing out before you turn 59 ½ is that you will be charged a 10% penalty fee. In case your salary is high, the penalty could be more. Hence, it is better to turn your 401k into an IRA.
In addition to this, some employers try to trick you out of taking advantage of your 401k by putting duration restrictions on it. For instance, you get access to a certain percentage of your 401k after a year. The longer you stay with the company, the more access you gain gradually. Hence, when deciding to leave the company, always have a look at your permitted access to 401k before quitting. At times you will be quite near to being fully “vested” (full access to 401k), and hanging in there for a couple more months would be the right move.
5. Get Disability Insurance to Safeguard Your Future
Life is unpredictable, and accidents with lifelong injuries can happen at any time. Despite many companies gradually becoming inclusive, this can still affect your earning capabilities. In order to secure your future, it would be wise to buy disability insurance. Hence, if you ever get into a situation where you get physically impaired, you will have a backup plan for financial security.
Depending on your need, insurers provide different plans to help you safeguard your future. Remember, some employers also offer disability insurance, so go through your contract to see what kind of coverage you have.
6. Open an IRA
An IRA is an Individual Retirement Account that lets you save for the long term and also provides a tax advantage.
The money you put in this account is tax-deferred, which means you need not pay tax until you withdraw it. If you are saving for retirement and you do not have a 401k, a traditional IRA will work very well for you. It has no income limit, and you can save up for as long as you want.
The Final Word
Safeguarding your future by planning for retirement is the best thing you can do for yourself. You see, the 30s is a strange time, you are still young, but you also have multiple responsibilities. At the same time, you are looking toward an unknown future and have doubts about your financial security. Hence, the 30s is the perfect time to plan for retirement, so you aren’t burdened in the future with more responsibility.
Furthermore, there is no specific time to start saving for retirement. The sooner you start, the more funds you will accumulate by the time you need them. So, make the decision to secure your financial future today!
