Having a retirement nest egg is essential for your future financial well-being. Retirement accounts, like a 401(k) or Roth IRA, will help you set aside and grow your savings so you can afford everyday expenses, travel, medical expenses, and more once you retire.
While many people open their retirement accounts when they get their first job, usually in their early 20s, being in your 30s is the sweet spot for boosting your funds and drilling down into a savings plan.
Read below to learn about the four biggest ways you can amplify your savings and plan for the years ahead.
Create a Retirement Plan
The first step to ensuring a financially-sound retirement is to create a plan that aligns with your budget and target retirement age. Ask yourself some of the following questions to help guide your plan:
- When do I want to retire?
- What type of lifestyle do I want?
- How many years of savings do I want or need?
- Do I plan to travel?
- Will I need additional insurance coverage?
All of these questions factor into today’s retirement plan and strategy. If you think you’d like to travel a lot in retirement, you may need to put extra money aside now. Meet with a financial advisor to walk through some scenarios that can help you make better decisions for the future.
You can also use a retirement calculator to help guide you when things in your life change – such as income, welcoming a new child to the family, getting married, etc. Retirement calculators use current age, retirement age, annual household income, and other variables to provide a retirement projection, showing users approximately how much they will have saved in retirement. Use the Slavic401k calculator.
Increase 401(k) Contributions
Another strategy to tackle in your 30s is increasing your 401(k) contributions. While you may have contributed smaller percentages in your 20s, you likely have a higher salary than you did a decade ago, so utilizing additional funds can help you maximize your contributions and amplify your future nest egg.
You can learn about the contribution limits, rules, and regulations through the IRS.
Use a retirement calculator to review contribution increases and how they affect your account, and make sure your current budget allows for additional contributions before you make any changes.
You should also enroll in your company’s 401(k) match program if they offer one. Employer matches can double all or a portion of your 401(k) savings no effort from you. Companies that offer a match will contribute the same amount (up to a certain percentage) that the employee contributes to their account. There are usually vesting terms associated with this type of plan, so if you plan to be with an employer for a while, enrolling in the match can be a significant difference in your future nest egg. Learn more about employer match programs.
Add a Roth IRA to Your Strategy
Roth IRAs are a great way to save additional funds for the future, especially in your 30s when you likely have a higher salary or discretionary funds to spend. Even though the Roth IRA contribution limit is significantly lower than a 401(k), a few thousand dollars of extra savings each year can make a difference in your retirement lifestyle.
While a Roth IRA has an annual contribution limit determined by the IRS, the contributions are paid with after-tax dollars, meaning your gains will grow tax-free for retirement. That means that you will not owe any taxes on your savings when you withdraw the funds later in life.
For example, if you save $6,000 in your Roth IRA every year, you may reach upwards of $700,000 by the time you retire, according to Nerdwallet. That $700,000 is supplemental to your 401(k) savings, which, when combined, can be a solid cushion for retirement.
Review, Adjust, and Diversify Investments
A good investment strategy includes a diverse set of investments, such as stocks, bonds, mutual funds, real estate, etc. As the market conditions change, so does your risk tolerance, and having a diversity of investments can offset major losses and overall risk.
Having a diversified portfolio includes a mix of conservative and aggressive investments. As some assets increase, others will decrease, reducing your overall loss as the market changes. While it may be hard to consistently maintain a diverse portfolio, it’s important to stay informed on market conditions and speak with a financial advisor to make adjustments as needed. You can learn more about managing risk and diversifying investments on the Slavic401k blog.
There are endless ways to save for retirement, and strategies are not one-size-fits-all. Work with a financial advisor, utilize resources, and ask questions to ensure you’re on track for retirement. Trying different approaches can make a big difference in the funds you’ll have available later in life, and remember, a little bit can go a long way.
