7 Retirement Tips for People in Their 30s
As you move from your 20s to your 30s, your financial life can get more complicated and keep you from saving for retirement. Instead, use these 7 tips to make sure you don't forget your priorities and are fully prepared for a comfortable retirement.
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As people move into their 30s, life often becomes more complicated. Getting married, starting a family, buying a house--these are just a few of the life events that often occur and make it even tougher to prioritize saving for retirement.
Use these 7 tips after you hit 30 to make sure you'll be prepared for a comfortable retirement:
Retirement Tip #1: Make it a priority
While the 30s is often a time of rapidly rising income, it’s also a time of even more rapidly rising expenses for most people. New houses need to be furnished, babies need to be clothed and fed, mortgage payments come around monthly.
With so many competing priorities, it is easy to say that retirement is still very far away and can wait. This is a mistake.
One assumption that’s built into this viewpoint is that savings will become easier later. For most people, there will always be other priorities competing with our retirement savings aspirations. Helping elderly parents, a bigger house, a new car.
In our consumption driven economy, there is always something we want or feel we need to have now. In addition, the penalty for waiting to save is large. By starting to save at 40 for retirement instead of 30, you will need to double your monthly savings to get to the same dollar figure by the time you hit 65.
Retirement Tip #2: Track your expenses
To help you find opportunities for savings, it’s a great idea to track your expenses more closely and see where your money really goes. Programs like Quicken and sites like mint.com make this very easy to do.
By the time you’re 30, you likely have a better handle on what is really a necessity versus a luxury that could turn in to savings. Will you really wear that $200 sweater frequently or will it sit in the closet gather dust after a few uses?
Just how much money are you spending on your Starbucks habit? Do you really still watch all the premium channels you pay for on your cable bill? Looking at a few months of expenses in detail can often uncover significant sources of potential savings that won’t really impact your current lifestyle.
To help you find opportunities for savings, it’s a great idea to track your expenses more closely and see where your money really goes.
Retirement Tip #3: Make sure you protect yourself from the unexpected
One of the quickest ways to derail a retirement plan is to have an unexpected financial event. Ranging from a short-term disability to the death of a breadwinner, without adequate protection, even the best laid plans can be devastated.
Here are a few of the most common events and how to best prepare for them:
- Unexpected job loss: By the time you are in your 30′s, you should create an emergency fund that covers 3-6 months of expenses. Having this cushion allows you time to find a new job without raiding your retirement savings or taking on high interest debt.
- Short-term disability: Similar to a job loss, a short-term disability has the potential to interrupt your income and create havoc with your budget. The good news is that many employers provide short-term disability insurance. If you don’t have access to this, investigate buying a private policy or rely on your emergency fund to carry you through.
- Long-term disability: This has the potential to permanently impact your income stream. Many employers offer insurance, but if yours doesn’t, investigate private insurance options.
- Death of a breadwinner: Obviously this is the most devastating of possible outcomes. If you are married or have kids, make sure you have adequate life insurance to cover your family’s expenses. Due to its low cost, I recommend a term policy with level premiums until your kids are out of the house. I do not recommend high-cost whole or universal life.