Saving for retirement requires planning, knowledge and time. When you have the right information about how much cash you will need for retirement, you can start planning while you still have time to take advantage of compound interest. By their 30s, most people have become established in their careers, and are now thinking about retirement. Having a plan of how to save for retirement in your 30s is key to making the most of this decade in your life.
Know How Much Should You Save for Retirement in Your 30s
The best way to save for retirement is to know exactly how much to save for retirement in your 30s. Most financial experts suggest that you will need about 60% of your current income. Figure out what age you would like to retire, then do the math from there. If you currently earn $50,000, plan to retire at 65, and expect to live for 20 years in retirement, then you will need about $600,000 saved. Remember though, that you can still elect to work part-time and you may have passive income that can guide you through. The important thing is to have a general idea of how much money you will need.
Ideas on How to Save for Retirement in Your 30s
Below you will find a list of smart ideas you can start applying if you want to retire early.
Boost Your Career
If your career is not bringing in the volume of money you need to save for early retirement, it’s time to give it a boost. Consider investing in continuing education courses, making a career change or getting additional degrees. Some people even move to new cities where career opportunities are plentiful. This is the time to make those smart career moves that will give you the cash you need to save for retirement.
Rework Your Budget
One of the ways that you can find the cash you need to save for retirement is to take a look at your budget. If you have recently married, had another child or purchased a home, you have to take these expenses into account. Find out what you can cut and what you can’t and develop a budget that maximizes your savings while at the same time minimizes your expenses.
Pay Off Debt
If you have not paid off your student loans and other non-mortgage debt by now, this is the time to get smart about it. You will need to take aggressive steps toward becoming debt free. It is difficult to save for retirement if you are saddled with heavy debt, so now is the time to get rid of it. Some people get additional jobs, others find part-time home based businesses, and still others take advantage of consolidation programs. Getting your debt cleared should be top priority if you’re wondering how to save for retirement in your 30s.
Build Up an Emergency Fund
An emergency fund will help you to prevent the loss of assets if things go wrong. When there is an emergency car repair or unexpected medical expense, many people will forgo saving and use their disposable income to deal with the problem. If you have a healthy amount of money saved for emergencies, you can protect your finances and continue to save without interruption. Most financial experts recommend at least three to six months of living expenses saved for emergencies.
Avoid Major Money Mistakes
Avoid high interest debt, divorce and bad financial investments in your 30s if you want to save the most for retirement. These thins can derail your plans and add years on to the time that you have before you can retire. Be smart about your money in your 30s for the best possible results.
Start Saving 15% for Retirement
While many people only save the minimum amount of their pre-tax income for retirement, saving 15% or more will help you to reach your goals faster. Find out what your effective tax situation will be based on your retirement account. Some retirement accounts allow you to take advantage of tax free saving now, but will charge you the taxes on the other end when you retire. Talk to your financial professional to find out exactly what plan works for you. Many people aggressively save 20 percent or more of their income in their 30s in order to make the most of their savings.
Improve Your Credit
Your credit score will make all of the difference in what you pay for the things you need, including cars, homes and businesses. The better your credit score, the less you pay for loans. In addition, having a good credit score will make it easier for you to get business loans and other forms of credit that will allow you to increase your income potential. Understanding what is in your credit report and how to improve your score will give you the extra cash you need to save the maximum amount of funds for retirement.
Develop Streams of Passive Income
Passive income is money that will keep paying you, even though you are not actively working for it. Some people write books and generate income from royalties, others manage rental properties, others have automated businesses. Now is the time to start thinking of a stream of income that you can develop now that will cover your expenses in retirement. If you’re wondering how to save for retirement in your 30s, this is one of the best strategies to develop an ongoing source of income.
Now is the time to start a business, develop a series of side hustles and make as much money as possible. Most people who are wondering how to save for retirement in your 30s find that having as much money as possible is key to being able to save and invest while you still can.
Recommended read: How to Earn Passive Income in 2017?
Get Aggressive With Your Investments
Your 30s are a time that you can aggressively invest, since you have more than 30 years for your investments to weather any dips in the stock market. Consult a financial planner and start looking at investments that will focus on aggressive growth over the next 30 years. Since the stock market has historically been stable, despite a few ups and downs, experts recommend investing in a well-diversified stock portfolio.
Protect Your Income
If you do not already carry disability insurance, now is the time to buy some. Disability insurance will cover your expenses and protect your assets if you become disabled and can’t work. Life insurance will cover your spouse and dependents if anything happens to you. Many people lose their life savings when the unexpected happens, so be sure to make sure you’re covered by enough insurance.
If you’re thinking about how to save for retirement in your 30s, you should also know how you want to live when your working days come to an end. Do you want to live in your same home or retire to a Caribbean island? Do you plan to travel extensively, or simply enjoy your time at home gardening or engaging in your hobbies? Your lifestyle in retirement will factor heavily in how much you need to save.
Knowing how to save for retirement in your 30s is key to making the most of both your money and your time. From choosing the right investments to increasing your savings and decreasing your expenses, maximizing your career moves and protecting your assets, making the best possible money choices is crucial at this stage.