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In Your 30s and 40s
By the time you’re in your 30s, chances are you’ve settled in a career, although you may change jobs a number of times before you retire. You’re likely to have a family of your own, with all the accompanying expenses—music lessons, sports teams, family vacations, saving for college, buying a new home, and so on. Financial management experts recommend that you have an emergency fund equal to six to eight months’ worth of expenses as a financial safety net to protect your assets in case of an illness, disability, job loss, or other unforeseen event.
Now’s the time to make adjustments to your spending, budgeting, and saving as needed to ensure you stay the course. Naturally there will be many demands on your income from many directions, but it’s vital that you build your long-term investments despite these immediate demands.
Hopefully, by the time you’re in your 30s you’re well-grounded in your employer’s 401(k) or other retirement plan. Many experts advise putting 10% of your income towards your retirement, but this is an average. What you invest will depend on your income and fixed expenses. If you’re lucky, it may make sense for you to contribute more than 10%.
Just remember to take advantage of your employer’s 401(k) plan or other tax-deferred retirement plan. Your contributions will be made with pre-tax dollars and taxes on earnings will be deferred until you withdraw them during retirement. Even better, many employers will match all or part of your contribution, which means significant gains for you.
When you reach your 40s, it’s a good time to review your estimate of how much income you’ll need to live on after retirement. You’ll have a better sense, based on the cost of living, of how much you will need to support yourself when you retire.
Financial Planning for Retirement