Knowing how to start saving for retirement, and when is the right time, has so many dependencies it can be difficult to know for sure. With these tips, people will have a greater understanding of how they can maximize their savings depending on their age.
20s: Starting Early
The reason that so many retirement experts suggest starting retirement savings when people are in their 20s is the benefit of time and compound interest. If people put some money into a retirement account in their early 20s, that money will grow interest and keep expanding until they retire. Even though incomes at this age can be smaller, even small contributions could make a notable sum 30 or 40 years into the future. Although workplace 401k and other retirement programs are a pretty safe bet to choose, people can also put money into an independent retirement account (IRA) or Roth IRA.
30s: Diversifying Investments
Although many people’s forays into retirement savings are limited in their 20s, their 30s is an excellent time to double-down on the focus and really get the accounts growing. People who reach age 30 having not saved a dime can still create a totally respectable retirement fund with some creativity and dedication. At this age, it is often a good idea to consider investing in different types of retirement accounts, as well as the purchasing of stocks or bonds with a fair annual yield. Some investments may not pan out. On the whole, diversifying will help to spread out and minimize the risk of losing a lot of money on one investment.
40s: Improving the Field
By the time people reach their late 30s and 40s, they are probably at the peak income of their lifetimes. If they have stayed in the same field, they may have decades of experience and be considered a trusted expert or manager. This is an ideal opportunity to revisit the retirement plans and correct the course, if any investment or savings approach is not yielding a practical return year after year. In their 40s, most people are still at least 15-20 years from retirement. People should focus on keeping their skills relevant, so that they can continue to maintain or even increase their income as the years go on.
50s: Maximizing Contributions
Workers who start saving in their 50s have a lot of work to do. Fortunately, there are options that make it easier for people in their 50s to build larger retirement accounts more quickly. When people turn 50, they can dramatically increase their annual contributions to a 401k or IRA. Although money saved only a few years in advance of retirement has less of a chance to grow through compound interest, it is still money saved that can be used during retirement. At this age, people can start to plan the details of their retirement, and set initial budgets to determine how much money they will realistically need to accomplish their goals.
Saving for retirement is a goal that adults in their 20s or their 50s should have in common. Using these tips, people have the ability to get their retirement savings going, maximize returns and provide for a more comfortable life after they retire.