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Steps to Take in Your 30s and 40s to Prepare for Retirement

Steps to Take in Your 30s and 40s to Prepare for Retirement

May 15, 2024

Retirement may seem like a distant milestone when you're in your 30s or 40s, but the truth is that the decisions you make during these decades can significantly impact your financial security in later years. As a financial advisor, one of the biggest mistakes I see people make is putting off planning for retirement for too long. While it may feel like there's plenty of time to prepare, the truth is that the earlier you start planning, the better off you'll be in the long run. 

Here are some essential financial strategies you should be focused on in your 30s and 40s: 

Set clear goals: Think about the lifestyle you want to have in retirement. Many people incorrectly assume that their expenses will decrease when they retire, but usually the opposite is true. Do you want to travel? Pursue your hobbies? Or move closer to your family? Understanding your goals is the first step to take, and a financial advisor can help you develop a comprehensive plan to work toward them.

Maintain an emergency fund: Life is impossible to predict, and we never know when we may face job loss, health issues or a major home or auto repair. It’s imperative to have a safety net when the unexpected arises. Make sure to save at least three to six months’ worth of living expenses in an account that’s easily accessible and won’t penalize transfers.

Maximize retirement contributions: When you reach your 30s and 40s, you’ve likely reached your peak earning potential. Make the most of this momentum to increase what you invest in retirement. Contribute as much as you can afford and take advantage of all available matching contributions from your employer. Whether you have a 401(k), IRA or Roth IRA, these tax-deferred accounts offer compound growth, which will help your savings grow over time.

Pay off high-interest debt: Prioritize paying off high-interest debt, such as credit cards or loans. Once your debt is repaid, you can enjoy the benefits of peace of mind, and then focus that cash flow into investments. 

Diversify your investments: Diversifying your financial portfolio is critical to mitigating risks and maximizing returns. It’s good to spread your investments across various asset classes such as stocks, bonds and real estate. Each asset class reacts differently to market conditions and economic cycles. Stocks offer growth potential but come with higher volatility, while bonds provide income and stability. Real estate can offer appreciation and rental income. By spreading your investments across various asset classes, you reduce the impact of a downturn in any single market sector.

Seek professional guidance: When you’re sick, you see a doctor. When your car breaks down, you turn to a mechanic. Likewise, when you need a plan to maintain an income stream throughout your lifetime, you should lean on a financial advisor. At Willis & Machnik, we develop, implement, and monitor a strategy designed to address your specific financial situation. Our goal is to be your complete wealth management partner, helping you prepare confidently for retirement.

Starting to plan for retirement in your 30s and 40s is crucial for securing your financial future. By taking advantage of the power of compound interest, investing for the long term, and balancing competing financial priorities, you can build a nest egg that will allow you to enjoy a comfortable retirement and pursue your passions later in life.