In the Trees: Retirement Planning in your 20s, 30s and 40s
We’ve been told that the first three decades of our careers are critical for building our retirement nest eggs—i.e., maxing out our 401(k) plans, opening IRAs, etc. For most of us, there’s not going to be a pension waiting for us at the end of the line. And we know that, more than likely, Social Security won’t cover all our needs. Basically, we will have to take responsibility for our retirement planning and saving—so, better get ready now!
But these are also the years that many major expenses roll in, one after the other, clouding the view of retirement in the distance. It might start with student debt in our early 20s, perhaps followed by more education expenses, getting married, buying a first home, or having kids.
For many, the path will wander through various career transitions, some of them financially disruptive. And for some, the needs of aging parents, changes in marital status, or unforeseen medical issues may trip up good intentions to save.
There’s no denying that the 20s, 30s and 40s are “squeeze years” for many, when life is at its busiest and money is stretched. When it comes to retirement planning, the temptation may be to stick your fingers in your ears and nervously sing “la-la-la.”
Believe me, we get it. But we also offer a message of encouragement.
Even though the distractions are many and the stresses high, there are small steps you can take now that will keep you on the path to retirement:
- Keep a Positive Attitude. Keep retirement on the radar screen, even if it seems far off. And stay positive about the future, even if retirement seems unattainable from where you’re standing today.
- Slow and Steady Wins the Race. Contribute regularly and consistently to 401(k)s or other vehicles, even if initial amounts are small. Then increase contributions as income rises and other expenses allow.
- Time is Your Friend. Stay diversified with an asset allocation that reflects your longer time horizon. And avoid temptation to pull out of the market during downturns—you’ll sell at the bottom and risk missing the upturns.
- Good Habits Start Now. Keep a budget and track your monthly expenses. Maintain good financial records. Consolidate accounts for optimal clarity and control. All of these habits will serve you well over a lifetime.
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