In Your 20s: Get Started!
As a 20-something, your focus is probably on attempting to feel “settled” post-graduation, finding your first job, moving to a new city, exploring your passions…you know, #allofthethings. Retirement planning is on the back burner, trailing behind more pressing matters like paying rent, student loans, and all of the other fun bills you now have to consider as an adult (ugh, adulting). After all that, you probably don’t have a whole lot of moolah or mental energy left over.
But, now is precisely the time for you to get started saving, even if it’s just a small amount (yes, you heard right).
This article in the Wall Street Journal discusses the impact that starting early can have. If you start to save at 25, for example, you’ll end up with a much larger nest egg upon retirement than someone who contributes the same amount, but doesn’t start until 45 instead. The power of compounding interest and investment income cannot be overlooked.
Some key things to keep in mind as a 20-something...
- Work retirement plans are here to help you—especially if your employer offers a matching contribution. It’s easy to sign up, and the money will come out of your paycheck on a pre-tax basis (meaning it’ll lower your taxable income, too—win-win).
- Pay yourself first. Decide on an amount of money to put aside each month, and then set up an automatic transfer to a savings account so you don’t have the chance to spend it.
- Build an emergency fund. Try to save at least three months’ worth of expenses so that you can deal with unexpected events without having to dip into your retirement fund.
In Your 30s: Continue Building Your Foundation
As a 30-something, you’ve most likely established yourself in your chosen career path and increased your earning power. Now is a great time to up your retirement-saving game. If you get a raise or bonus, try to devote a majority of it to your retirement fund (think about it: you’ve been living merrily without the extra cash so far…will you really miss it?).
Start thinking seriously about the kind of lifestyle you’ll want to have in retirement so you can adjust your savings goals accordingly. CNNMoney offers a tool to help you understand where you currently stand with your plan, as well as what adjustments you may need to make.
Lastly, continue to build your emergency fund, and pay off debt that you may have accrued over the past few years (car loans, credit card balances, etc.).
In conclusion, keep on keepin’ on, and you're bound to have a happy and prosperous retirement.