Alright folks, it’s time to get serious about investing in your 30s. Sure you’re still further from retirement age than you are close to it, but you’re also likely in a position to start paying attention to how you’re investing your money. People in their 30s are also usually looking to start a family, or take care of one for the first time, while also getting settled in their career. These new life stages present a whole new world of savings and investments that you have to pay attention to before expenses, like your kid’s college tuition, is upon you.
Get Familiar With Retirement Accounts
If you haven’t already been contributing to your 401(k) account at work, now it the time so start doing so. Don’t let free money from your company go to waste, especially when it comes to planning your retirement. Understand the benefits of a 401(k) plan as well as common 401(k) mistakes. If you have extra money in your budget though, don’t stop there.
Your traditional 401(k) is funded using pre-tax dollars, which means you don’t pay taxes on the money now, but you will in the future when you make withdrawals. So, to help shelter yourself from future taxes — since you don’t know what taxes will look like by the time your retirement rolls around — start a Roth IRA as well. You fund this account with after-tax money, so once you hit retirement age, your withdrawals are yours to keep as a part of your income. In your 30s, you can contribute up to $5,500 a year in your account.
Some companies offer Roth 401(k) options as well, which work like a Roth IRA, in that it’s funded with after-tax dollars, so when you make future withdrawals, those are yours to keep.
No matter what you choose to do with your retirement accounts, the important thing is to make sure you have at least one set up so you can passively earn income with little to no attention from you.
Start a 529 Account
If you have kids, or plan to have kids in the future, then it might be a good idea to start a 529 account for your little ones. These accounts help you pay for college tuition and other college-related expenses like books, housing and even computers. If you already have kids and don’t have a 529 account started for them, you’re missing out on some fiscal and emotional benefits.
Even if you only have a few dollars saved for your child’s college tuition, your child is three times more likely to actually attend college than if you’d saved nothing and chose to pay as you go along, according to the Corporation for Enterprise Development. This is because kids feel like you believe in them since you’ve literally invested in their future already. The other benefit is that this account is funded with pre-tax money, so it will lower your annual taxable income, and you won’t have to pay taxes on withdrawals, as long as they’re for qualified expenses.
Buy a House
The great quest of any 30-year-old is to finally own a home, but this is easier said than done. Buying a home takes money and time to save that money, but it is doable with a bit of effort and budgeting. First thing’s first, and that’s if you don’t have a budget already in place for yourself, then you need to do so. This will help you allocate how much you can afford to save and invest. There are some simple investments you can use to grow your money short-term, like a CD, or you can put it in some semi-aggressive ETFs if you don’t think saving alone will help you hit your down payment target. You’ll also want to check your credit and make sure your score is in good standing. If it isn’t then figure out what you can do to increase it.
However, some people may advise you that buying a home isn’t a great investment since less people are buying houses now than they were during the housing boom. In fact, some baby boomers who bought property as an investment are worried they may not see a return in time for their retirement. While that situation sounds grim, there are still benefits to owning your own home, especially if you are in your 30s.
Every month that you don’t pay toward your mortgage, you are paying someone else for your lodgings, which does you no favors, especially because on-time rental payments rarely help boost your credit, Additionally, if you get a 30-year mortgage in your 30s, then by the time you hit 65 years old, that’s one more monthly payment you won’t have to worry about funding in retirement. Since you’ll be on a fixed income, the less you have to pay monthly, the better.
Talk to a Financial Professional
You’ve likely heard about talking to a financial advisor to get your investments in order, but have you actually done it? Now is the time to head to the bank, sit down and talk about your options. If you’re worried about fees, stop. Usually if you’re talking to someone at an institution where you’ve been banking, a consultation is free, and you will walk out of there feeling more confident about your options than when you walked in. They can help you come up with an investment strategy based on your income and what you want you retirement to look like.
Keep in mind that there are different kinds of financial professionals like advisors and counselors. This is why many people feel comfortable starting with the place that’s been their trusty bank for years. However, if you don’t love your bank and want to explore your options, ask your friends and family who they invest with. You might find that one of them is thrilled with how they’ve been receiving help, and that will be a better experience for you than being unsure with your money.
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