• Robert Ryerson

Spotlight: 5 Things You Can Do to Save for Retirement in Your 30s


Saving for retirement can seem like a daunting task in your 30s, especially if you have children and are balancing car and mortgage payments. As a guideline, it's recommended that individuals save enough to have at least 70 percent of their pre-retirement income to spend each year once they leave the workforce. Someone making $70,000 per year, then, should save up at least $1.47 million if they plan on retiring at 60 and living comfortably until they're 90 ($49,000 per year over 30 years).



This might seem like a lofty figure, especially for those who have yet to seriously consider retirement planning, but it can be achieved with the right actions. The following are five things people in their 30s can do to boost their income and better prepare for retirement.



1. Count Retirement Contributions as a Monthly Expense



People in their 30s generally know more about budgeting and responsible spending than those in their 20s. Many 20 year olds are still in school and working part-time jobs, while 30 year olds are expected to work full-time and balance money with their own needs or the needs of their family. Their monthly budget might already include a list of bills including mortgage and car payments, cable and Internet, groceries, and utilities.



Rather than setting aside any extra money at the end of each month for retirement, consider adding retirement contributions as part of your monthly expenses. You can put this money into a separate tax-free savings account and let it grow with interest. Scheduling these payments ensures you won't overlook retirement planning in any given month due to the hectic nature of life in your 30s. Setting aside as little as $200 per month for 30 years can give you a nest egg of $72,000, not including interest.



It may seem odd to you as a parent, but you should prioritize saving for retirement over contributing to a child's education fund. It's much more difficult to apply for a loan if you aren't working, whereas your kids are likely to be able to secure a student loan to attend university. In addition, you may be a financial burden on your adult children if you haven't saved enough for retirement.



2. Contribute to an Employer-Sponsored 401(k)



The easiest way to save for retirement is by contributing to an employer-sponsored 401(k) account. These contributions can be matched by employers and are automatically deducted from your paycheck. Aim to contribute as much as possible per year with the goal of at least 15 percent of your salary. If you start small, consider increasing your contribution amount by 1 percent each year.



You are required to start making withdrawals from a 401(k) account by the time you're 70. If a 30 year old were to contribute just 6 percent of their $50,000 salary over 40 years, they would have accumulated more than $800,000 in savings, assuming an 8 percent annual growth rate. If your employer offers a ROTH 401k option, try to use that option, as you will accumulate and grow all of those funds on a tax free basis, and provide yourself with tax free income and withdrawals from the 410k (or IRA rollover account, as the case may be) when you do retire-a very big difference!



3. Refinance Your Mortgage



Refinancing your mortgage is a good idea to not only save money in the short term but to also create more financial freedom to adequately save for retirement. However, you should only consider it if you can lower the rate by at least 1 percent, you have already built up significant equity, and you plan to stay in the same house long enough to make up for the costs of refinancing. Refinancing allows you to either lower monthly payments or shorten the loan term without drastically altering the payments.



4. Avoid Credit Card Debt



Paying off or avoiding credit card debt altogether is an important part of a successful retirement savings plan. Credit cards can be useful in certain situations, but high interest rates can hinder your ability to set aside enough each month for retirement.



"The money that I save on interest by not having debt is better than any return I could possibly get by investing that money in the stock market," billionaire Mark Cuban told Business Insider in 2014.



The average interest rate for existing credit card accounts is 14.61 percent. Considering that rate and $30,000 in credit card debt, you would have to make monthly payments of $1,034 to pay off the debt in three years, as there would be more than $7,000 in interest accrued. You can avoid this scenario by making payments on time as well as avoiding unnecessary balance transfers and cash advances.



5. Adding Income Streams



Diversification is a fundamental investment strategy and a useful guideline to increase your revenue and savings potential. Look for revenue-generating side hustles to take up your time on the weekends. If working more hours isn't feasible, consider renting a room in your house or selling things you no longer use. Put all money obtained from these additional income streams aside for retirement. With job security generally lower than it was a generation or two ago, building or having more than one income stream is wise.