How to Prep for Retirement in Your Twenties and Thirties

Are you in your twenties or thirties and looking to save for retirement, but don’t know where to start or how to avoid common mistakes when saving? If so, you’re in luck! Retirement expert, Jerry Golden joined me for an interview this week to dish on how those age 25-34 can best prepare for retirement, how much the average person needs to save and how to avoid common pitfalls when saving!

Retirement expert Jerry Golden shares retirement tips for those age 25 - 34.

Retirement expert Jerry Golden shares retirement tips for those age 25 – 34.

 

Candace Rose: How can those aged 25-34 prepare for retirement?

Jerry Golden: “In terms of thinking about retirement, usually there are other expenses that people have to deal with at that age whether it’s paying off a student loan or thinking about saving for a down payment on a house, if they’re married…start having a family and have to think about college education, so there’s a lot of planning and thinking one has to do and sometimes retirement takes a backseat. What I would say in terms of the two most important things are educate yourself about investing for retirement so when you do have the money to set aside you’ll make a smart decision.

And then secondly, if your employed take full advantage if you can of your employer plan by making sure you contribute enough to at least get any employer match and see if you can put as much as you can into your own contributions.

If you’re self-employed start submitting your social security (it’s mandatory) so you’re building up credit for your social security and again, if you have additional funds that you can set aside think about some form of retirement plan that you can start for yourself, whether it’s an IRA or a mini 401(k) called a Uni-K. Begin setting up those programs, saving as much as you can and taking advantage of employer matches, taking advantage of the tax laws. And whether it’s a small amount or a little amount, with the magic of compound interest it may add up as you get older and older, and ultimately approach retirement.”

Candace Rose: How much money does the average person need to save for retirement?

Jerry Golden: “Social security, particularly if you’re self employed, you’re setting aside a particular amount of money and depending on your income level social security can do a better than expected job of replacing a portion of your income.

As a rule of thumb, and again it’s a very personal situation if you can save besides the social security (give or take 10% of your pay) early in retirement most of the real savings just because of the way life works out, will actually make in between 45 and 50 in retirement, and at that point if you can get that 10% up to 15% after expenses, that depending on your circumstances and your investing should produce a reasonable amount of income replacement in retirement.”

Candace Rose: Are there any common mistakes you see when people are preparing for retirement?

Jerry Golden: “A lot of people get upset or nervous about what they see on the 6:30 news whether the Dow is up or down, or whatever so I think you have to think for the long term. You need to be diversified- that is between the Stock Market and the Bond Market. People were riding pretty high in 2008 and the portion they put in the Stock Market was well above 50/50, approaching 70-80%. So be diversified between equities and fixed income, pick low cost investments that are broadly diversified across the market so you can stay the course and not have to worry about the ups and downs, and continue to invest.

If you have a low cost investment approach and the market’s going up and down, I’m a believer in the so-called dollar cost averaging, which is by putting a consistent amount in the market you’re going to be buying those in the highs and lows of the market. And over time it’s better than trying to time the market.

The other thing is to think that small amounts of savings don’t mean a lot. I think consistency, regular contributions trump the amount. If you can put more in that’s great, but that doesn’t mean you shouldn’t put a little in or whatever you can afford.

As you get closer and closer to retirement I think the big mistakes are that people continue what they were doing pre-retirement into retirement. And I think that’s our whole philosophy- savings to income, we think there’s a very different process and not simply just drawing down your investments in retirement. That might work for the one percenters, but it doesn’t work for you or me and most people, so you have to think about a different approach to creating income as you approach retirement. But for your audience, you have a long time to think about that. So the main things are diversification, small amounts count, and sometimes people do not take full advantage of their employer plans which they should do first.”

Candace Rose: Where can we go for more information?

Jerry Golden: “We have two places you can go: SavingsToIncome.com is our educational website, it talks about our philosophy and has a couple of tools that you could use and there’s a blog associated with some of my views on not only retirement planning but I’ve proposed reform to social security. And there we have an affiliated adviser GoldenRetirement.com which really talks about the adviser and what it can do for individual clients. So those are the two main sources of information- SavingsToIncome.com which is educational natured and GoldenRetirement.com which is our registered investment adviser.”

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