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Hi Taylor
- My parents were never good with financial planning, and I'm just
now realizing how behind I am on saving for retirement. I just turned
30 and don't have any sort of plan. Help?
Hi Talia - You're just a little behind and I'm confident you can
get where you need to be! Starting at 30 means you have to work harder
than if you started at 20, but not as hard as the people who get going
at 40. The trick is to maximize the options available to you, so let's
discuss what those are. |
1. Employee-sponsored
401(k). If there's a retirement program at your work, it's
some version of this. I'm actually not a huge fan of 401(k)s because
of the investment limitations and sneaky fees, but these are usually
the simplest investment vehicles and a good way to get an account
going. If your employer offers a retirement plan and any sort
of employee match, sign up and start making pre-tax contributions.
The money will come out of your paycheck so you don't have to
think about it, and if your boss offers a decent match you'll
get a little extra retirement funding that way. Again, not my
favorite option from a money-growing standpoint, but much better
than nothing.
2. IRA. An IRA, Roth or traditional, is the best place for
your retirement savings. You have a lot more control over how
the retirement money is invested; you also have the choice to
pay taxes upfront or wait until you retire and start making withdrawals.
Yearly contributions are capped at $6,500 (going up to $7,000
in 2024), so it's important to get started now and max out those
contributions. If you're a non-traditional worker (self-employed,
freelance, etc.), you can look into a self-employed IRA with higher
limits. If you work with an advisor, I'm a big advocate of a self-directed
IRA, which can include all sorts of investments like rental properties
and other commodities. For now, just get started with a basic
IRA and get those contributions going.
3. Set goals. The first step is to start saving. Step two
is to have an idea of what you're saving for. In 30-40 years,
your IRA needs to replace your annual earnings. The standard formula
is that you need about 70% of your current annual income to cover
a year of retirement living. So, if you make $100,000 a year now,
you'll want around $70,000 a year when you stop working. If you
retire at 65 and plan to live until you're 100, that's 35 years
multiplied by 70K. That might feel daunting, but steady saving
will get you there. Keep that goal in mind and keep funding those
accounts.
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| Beyond the
IRA, alternative investments like real estate and small business funding
can offer huge gains. There are lots of ways you can put your money
to work—just make sure to start now and you'll be in good shape
down the road. Good luck, Talia! |
| Legal Disclaimer:
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.
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