The 21st century is time different than that of a decade ago. Not only has life became faster but the world has become plugged in. It is possible to create, learn, or predict just about any aspects of our future, expect our retirement. Even though we have technology that can send man into space, the future of retirement has become more uncertain than ever. Many are questioning the reliability of the market and of social security There are several key actions we must take in order to ensure we will have an healthy retirement. This article will point you in the right direction as in regards to retirement planning in your 30s.
Key Action 1: Focus on Tax-Free Accounts
There are many retirement plans to choose from but my favorite is the predictable and tax free option a Roth IRA can provide. Freedom from taxes is my favorite aspect of a Roth IRA. A quick history lesson will show you that during WWII, taxes rose as high as 94%. Today, at an all-time-historical-low the highest tax bracket is 39.5%. Considering these numbers, why would anyone assume that taxes in the future would remain the same if not lower? Due to the unstable economical events, I suggest that you play it safe. Take advantage of the historical low taxes offered today and don’t overpay on taxes.
The key here is that you ensure that you fund these plans with the maximum allowed contributions on a annual basis. Take advantage of the benefits of retirement plans early on so that during retirement, if taxes rise or social security becomes obsolete, you’ll be secure. In 2016, the maximum amount you can contribute on a yearly during your 30’s is $5,500. Ensure your money is invested in conservative accounts that bring you an average of 9% annually. Compounding can help you accumulate millions of dollars that you can access at retirement.
Key Action 2: Take advantage of Free Money
Work for employer that offer profit sharing plans, 403(b), SEP, or 401(k) plans. These type of companies are not hard to find as now more and more employers are seeing the value of employee benefits. Working for such a company give you free money towards your retirement. Take advantage of every opportunity that comes your way. A matching 401k, SIMPLE IRA, or SEP allows your employer to take advantages of various tax breaks while helping you fund your retirement account. The maximum IRS allowed contribution of you and your employer toward a retirement plan by your employer for the year 2016 is $53,000.
Key Action 3: Take advantage of Insurance Retirement Plans
The last step you need to take is to accumulate cash through an outside source. You have several options you can take advantage of which include mutual finds, bonds, or even stocks. But for retirement, I’d guess your looking for something safe with high potential return rates. My suggest would be to consider a Life Insurance Retirement Fund. Consider this example: A 30-year-old who saves 6 percent of a $50,000 salary, or $3,000 a year, will have nearly $4,200 monthly income by the time she has to start taking funds from her LIRP (Life Insurance Retirement Plan) at age 65 until she reaches age 90. (This example assumes an 7 percent annual growth rate.) Although this might not seem like a lot for many, please remember that this amount combined with the ROTH IRA can produce monthly earnings around 10,000 with the assurance that you won’t outlive your money.
My ultimate for an individual in their 30’s is to begin. Retirement Planning in your 30’s requires you to take action. Which ever key action step you take, as long as you begin NOW, you’ll be able to reap high rewards later on. For further reading on this topic, please check out The Everything Personal Finance in Your 20s and 30s: Erase your debt, personalize your budget, and plan now to secure your future by Debby Fowles.