As I continue my series on retirement, we've reached a very personal decade for me: your 30's. As someone who's about to exit this decade next year, I look back at how much happened in my life: I've moved (twice), changed jobs X 3, met my wonderful wife, and had two amazing kids, just to name a few things. In all, I feel like I've finally grown into my true adult self. Looking at friends, co-workers, and others in my life, this seems to common during your 30's. But that's mostly personal milestones - what about retirement? Your fourth decade on this planet is so important to your retirement, because it's when most of us are figuring life out and solidifying our adult trajectory. Are you on the right career path? Do you have a family? Do you have a retirement plan and are you on track to meeting it? Let's talk through some of the key considerations for how these ten years shape your golden years.
They were so excited because they happened to run into each other on the street holding gold number balloons.
Career
By the time you're 30, you may or may not be well-established in your career. But, likely, you're well on your way. You've had some work experience under your belt, and have gained valuable skills you can apply to your job. You're hopefully being compensated well enough to have money above and beyond expenses. If so, you should be contributing to a retirement plan at this point - no excuses! Even those with doctorate degrees graduate in their late 20's or early 30's and should be established in their field of work soon thereafter. Finding at least some money to kick in is critical in your 30's.
Am I killing your vibe? If you recall from the last blog about retirement and your 20's, I was pretty lax about retirement goals. But things change in a short period of time. The difference is not really age; you are still in the first half of average life expectancy and retirement is still likely a ways off. The shift is really about where you are in life, and a major part of that financial picture is your career. This is not to say your career (and earnings) path is locked in before 40. But you should have a good sense of where your career is headed by the time you exit this decade. Will you stay in the same job? Get promoted? Change careers? Quit the corporate world and open a BBQ joint in a gas station parking lot? These things can all change, of course, but you probably have a good sense of likelihood for how your career will play out.
Family
Having a family can be incredibly fulfilling. It can also kill your retirement planning! If you choose to start a family (get married and/or have children) do so with one eye on your retirement goals. As I discussed at length about in my marriage series, finding the right partner is tricky. With about half of American marriages ending in divorce, and money being a primary reason, you need to have a solid financial foundation going in. Having similar retirement goals - along with the income, savings, and spending discipline to make it happen - is key. Make sure you vocalize money with your spouse, the good and the bad, and track your financial progress to your retirement goals.
Now let's talk about those kiddos. Man, are they expensive! Daycare, diapers, feeding a non-income-generating mouth... the temptation to cut back or stop contributing to a retirement plan is there for sure. Stay steadfast and realistic in your goals. Let's say you decided with your spouse to have three children, and those bundles of joy show up when you're 30, 32, and 34. If you're contributing to a 529 for each and managing to pay the larger essential expenses without impacting your retirement contributions, gold star for you! But, if you have to cut back, try to do so temporarily, and get back up to (or exceed) your contributions as soon as you can. Here's a pro tip: use a raise, bonus, or unplanned windfall to make it up. You won't miss the money and will right the ship quickly.
The Plan
Life doesn't always go as planned. We can set a course, but we have to adapt to the real world. This doesn't mean plans are a fool's errand; they are still incredibly valuable. If you haven't at least thought through a retirement plan yet, your 30's is a good time to have a rough idea. With that, knowing how much you need to contribute to retirement to reach those goals is obviously important as well. With the variability of life, it may be hard to set contributions and stick with them. Having your sights on the end goal, you can adapt as needed. If you can lock in and do more when finances are strong, you're more likely to meet your goals even if your contributions falter down the line.
Let's take a deeper dive into the family example above. Say you couldn't do the 529's and cover other expenses without impacting your retirement contributions. If you have to cut back from, say 10% to 401(k) to 7% for a few years, you may be fine. If you can make it up (either by having kicked in more ahead of schedule or making it up when you can), all your retirement goals may still be on the table. If that can't happen, it's all about calibrating your goals to reality. If you had hoped to retire at 60 before cutting, maybe it means 62 now. Or, perhaps, you still shoot for 60 and just downgrade the retirement gift from a Cadillac to a KIA. Or, you could find a second career that makes you happier and you work until 70. And that's just a few examples of how retirement goals can be tweaked to meet your changing plans. That's the beauty of it - you have several different avenues to achieve your retirement even with setbacks.
Early Bird
If you're not convinced of how important this is, here's another consideration: the longer you delay retirement, the more you lose the benefit of the time value of money. Here's an example of how critical starting contributions earlier would play out in your 30's. If you contributed $5,000 per year from age 30-59, you would have $472,303.93 saved by 60 (assuming 7% rate of return). Now, say you skipped your 30's and started contributing at 40 - but doubled your contribution to $10,000 per year. You'd have more money, right? 30 years of $5,000 = $150,000, but 20 years of $10,000 = $200,000. Just simple math.
Simple indeed! If you bought into that, please go back and read every blog I ever wrote. I taught you nothing? You'd actually have only $409,954.92 at 60! That's $60K+ less, even though you eventually contributed more. That Cadillac is now a KIA for sure.
Your 30's are typically a decade of achievement. As you establish yourself in your career and personal life, taking your retirement seriously in this decade is of the utmost importance. Making recurring, consistent contributions to meet your retirement goals is ideal; if you have to reduce or pause, make sure to catch back up. Next time, let's skip the mid-life crisis and get right into the 40's.
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