By Alessandra Malito
The path to becoming financially secure is not linear. Nor is there a one-size-fits-all approach.
But to put your head in the sand over saving and investing, whether for retirement or some other goal, is perhaps the worst strategy of all.
Individual circumstances make everyone’s journey slightly different, but no matter your age, there’s always a vision. You can change it over the decades, but at least you have something to aim for, and an idea of where you stand in relation to that goal. Include a margin of error because no one knows what life—or the stock market — will bring.
This path — and the choices you need to make — will look different depending on your age, what life-altering moment you’ve experienced and the lifestyle you want. Someone a few years from retirement shouldn’t have the same mix of stocks and bonds in his portfolio as someone just starting out her career. A baby or an empty nest, a new business or a business failure, divorce or illness can all alter your ability to save.
Retirement, of course, is one of the biggest financial goals. There is no one answer about how much money you’ll need or how to go about it. And saving can be hard and involve sacrifices. But there is an often-underappreciated quality to doing it: that money gives you more control over your life and how you spend your time — which feeds into how happy and comfortable you’ll be.
These suggestions can help you get there, no matter what stage of life you’re in:
Retirement seems so far away. But this may be the most crucial time to start saving for it, as those in their 20s can benefit most from the power of compounding. That’s when an account’s returns and interest grows atop itself every month, year after year, decade after decade.
Paul Merriman has an eye-opening explanation of how you can turn yourself into a multi-millionaire by saving for retirement for just five years if you start at 25 and do nothing after that.
Of course, this is also the time when you’re probably earning the least amount of money in your career and the budget may be tight. You may be balancing a number of money goals and obligations.
Still, here are some tips to get your savings on track:
Financial advisers typically suggest putting away between 10% and 15% of salary for retirement. If that’s not possible, start with the bare minimum, no matter what that is, even if it’s just $5 or $10 a month. When you get a raise or a bonus, increase the amount.
Consider automatic contributions into a retirement account straight out of your paycheck.
If you have access to a 401(k) with an employer match, try to qualify for the match. There may be some conditions, including how long you need to be working there, but think of it as free money. Why not take advantage of that?
This may also be the time to invest in a Roth account, which is funded with after-tax dollars, because workers at the very beginning of their careers typically have the lowest salaries and may anticipate being in higher tax brackets when they retire.
Don’t forget to set aside some money for emergencies!
This is the decade when you may be buying your first home, getting married, building a business, starting a family or some combination of all these. That’s a lot of financial obligations. But that doesn’t mean retirement accounts should be forgotten.
Ideally, a 30-year-old should have twice their salary at this point, according to one guideline from Fidelity Investments. Many say that’s not feasible , not with rent and mortgages, their student loans or kids’ college funds, assistance for their parents and other bills to pay.
Fair enough, but the point remains: retirement shouldn’t be forgotten. If you are living paycheck to paycheck or close, you should still try to allocate something—anything—to a retirement account, and then make a promise to increase that contribution when the budget allows.
Try these tips in your 30s:
Reassess your budget and if there’s spending that doesn’t align with your values, cut out those low-priority expenses
Look for ways to boost your income. Can you ask for a raise? Find a higher-paying job or take on a side gig? Even some one-time cash by selling unwanted belongings, however small, can boost retirement savings.
Diversify your retirement accounts; if you have access to a 401(k) at work, take advantage of it, especially if there’s a match. If you can save a little extra, consider opening a Roth IRA.
This is the decade when you may be seeing more money in your paychecks, thanks to raises or job changes. And retirement suddenly doesn’t look impossibly far away. At some point in this decade, you’ll likely have been working longer than the time you have left until retirement.