How To Save For Your Retirement When You Are In Your 30’s 

In your 30s, responsibilities pick up. You’re likely to buy your first home and grow your family. Marriage, a mortgage and little mouths to feed can drain your earnings. Even the family dog eats a portion of your paycheck.

It’s easy to think that saving for retirement is impossible in your 30s, but it should remain a top priority, especially as your pay increases. You’ll need to work hard to balance spending with saving.

1. Ramp up 401(k) savings

Ideally, you’ll make the maximum allowable contribution each year to an employer-sponsored fund, such as a 401(k). For 2024, that’s $23,000. As you move up the career ladder, put raises into your retirement savings instead of spending them.

If you can’t afford to stash all of your pay increases into retirement funds, gradually increase contributions over time, advises Dee Lee, CFP and author of “The Complete Idiot’s Guide to 401(k) Plans.”

“Let’s say you’ve got 3 percent in your 401(k) to qualify for the company match. Add a bit more. Then maybe add another percent of your salary a few months later, so eventually you’re saving 10 to 15 percent of your income,” Lee says. “You won’t miss the money if you increase saving slowly.”

Even incremental 1 percent increases can make a big difference in the long run. For example, a 30-year-old who saves 6 percent of a $50,000 salary each year, or $3,000, will have banked $1,159,517 by the time they are required to start withdrawing money from their 401(k) at age 75. (This assumes an 8 percent annual growth rate.)

If that same person boosted their yearly contribution by just 1 percent, or $500, they’d have $1,352,770. That’s a difference of $193,253. Use Bankrate’s calculator to see how your retirement contribution affects your paycheck.

Keep padding your emergency fund, too. Shoot for enough to cover six months of essential expenses.

1. Open an IRA

If you’re already putting as much as you can into a 401(k) or other employer-sponsored fund, pat yourself on the back, then open a separate IRA.

In 2023, individuals under age 50 can save up to $6,500 in a Roth IRA or traditional IRA. That number jumps to $7,000 in 2024.

Ed Slott, a nationally recognized retirement expert and author of “Your Complete Retirement Planning Road Map,” says that everybody should open a Roth. You save with after-tax dollars, but the earnings on your investments grow tax-free.

“The greatest money-making asset anyone can possess is time,” Slott says. “So younger people should take advantage of the decades of tax-free compounding available to them through a Roth IRA.”

Unlike many other retirement plans, you never have to cash out of a Roth. Earnings can grow for as long as you want.

However, there are income limits for contributing to a Roth IRA.

If you don’t yet qualify for the 401(k), look at the traditional IRA. It has no income requirements as long as you’re not enrolled in an employer-sponsored retirement plan. You get a tax deduction for your contribution and earnings grow tax-deferred, which means you pay income taxes when you withdraw your money.

1. Maintain an aggressive asset allocation

It’s not enough to just save. You also need to keep an eye on existing retirement assets to ensure you’re not squandering opportunities for growth.

In your 30s, you need to invest aggressively, allocating 80 to 90 percent of assets to a diverse array of stocks, says Ellen Rinaldi, former head of the retirement agenda for Vanguard.

The important thing is to stay focused on your goals during market volatility. Equity markets rise and fall. Declines are tough, but they are normal.

“Young people have the ability to weather a setback and they can wait for a rebound,” Slott says. “They can set it and forget it, within reason. Then the market will be good to them long-term.”