During your 30s, you may start to conceptualize your financial future differently than in your younger years. Throughout this phase in life, you are more likely to take on more significant expenses, as this is usually the time people start considering getting married, having children, and buying a house.
Your 30s is also the age where you might start thinking about how much you need to save for retirement. While you may have gotten away without having a savings plan in the past, you may be setting yourself up for a future of financial hardship if you don’t begin saving in your 30s.
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How Much Should I Have in Savings?
Don’t be alarmed by the following information: According to two major financial planning and advice companies, you should have at least half to a full year’s salary saved up by the time you are 30. This means that if you make $45,000 a year, you should have the same amount tucked away into savings. Fidelity Investments aims on the high side, claiming that you will need $45,000 saved up. T. Rowe Price argues you should have half of this, $22,500, in your savings account.
Even looking at the lower savings benchmark, the $22,500 figure may leave the typical 30-year-old who is worried about their savings feeling dumbfounded and overwhelmed. If this figure seems unattainable, keep in mind that these savings include your 401(k), Roth/traditional IRAs, and any pension you may be earning. Additionally, these figures — while they might be from financial experts — are just suggestions. They do not take into consideration the means in which you live, your life expectancy, or retirement age and spending.
Perhaps the most comforting notion to hear upon receiving this information is that you are in your 30s — meaning you are still young and have time to make changes to start saving for a healthy financial future.
How Much Should I Have Saved for Retirement by 30?
While it is advised you have one half to a year’s salary saved away for retirement, many contingencies might suggest that this number is a bit high. For instance, what if you make a low salary and can’t afford to put away as much money? Alternatively, what if you had gone to graduate school — spending years for higher education and income later in life?
It should be noted that these projections are built upon a set retirement age, and many people may not retire at that time. While these numbers may be alarming, these retirement plans are only recommendations. If you are worried that you are not in line with a sound retirement plan, you are not alone.
Saving for Retirement in Your 30s
It is advised that you put away 10 to 15% of your income into savings for retirement each paycheck (or 15% of your annual salary). This can be achieved by setting a budget for yourself and sticking to it. By creating a budget, you may be able to start saving the money necessary for retirement and even start taking healthy financial risks such as investing in stocks and stock mutual funds.
Your 30s is the time to aggressively invest and take risks, if you can afford it, because if your investments don’t pay out, you have time to recover. Additionally, someone saving for retirement in their 30s should invest their money into accounts that accrue compound interest over time. Overall, saving for retirement in your 30s is just a matter of sticking to a budget and setting aside money.
In addition to setting a budget, it is wise to start paying into one or more retirement accounts. If your employer offers a 401(k) plan where they match your contribution, this is a perfect way to start paying towards your retirement in your 30s.
If your employer does not offer to match your contribution, you may want to consider investing in a traditional or Roth IRA. Depending on the type of IRA, there may be different rules on how the account is taxed, contribution limits, and early withdrawal rules, so make sure you are paying into the type of IRA that is best suited for you.
Where Should I Start?
As mentioned above, understanding that you need to be saving for your retirement in your 30s is a great start. Start contributing to your retirement fund by creating a budget, investing in accounts that will accrue compound interest, and paying into retirement accounts.
At this age, while it is great to pay as much as you can, it is essential to remember that you still have the rest of your life to continue paying into these accounts. A lifetime of sound financial decisions — budgeting, saving, and paying into the right accounts — can set you up for a comfortable retirement.
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