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How to Plan for Retirement — While You're Young

Retirement Planning
mother counsels her young daughter at home about how to plan for retirement while you’re young

Retirement can feel a lifetime away when you're in your 30s and 40s, but the decisions you make now could contribute to where you'll end up financially. If you consider taking steps now, you may be better prepared for retirement down the road.

Here, we'll examine those steps and help you understand how to plan for retirement, including the potential options available for early, traditional age or nontraditional retirement. This article will also touch on the need to consider a comprehensive plan for retirement, including mention of timeline, standard of living and the need to start saving for retirement as early as possible.

Smart Savings

You've likely heard it many times before: Save for retirement as soon as you can! There's a reason this financial advice is so popular. The money you save while you're young has more time to grow through your investments. A dollar saved in your 30s could end up being worth more for your retirement plan than a dollar saved in your 50s.

One popular rule of thumb is to save 10-15% of your annual income, especially if you start saving in your early 20s, according to Forbes magazine. However, depending on your financial goals, you may want to aim for a savings rate of 30% or more. Regardless of whatever goal or target you choose, consider looking for ways to save more money in the future. Usually, no one regrets saving too much for retirement — but there are probably many that regret saving too little.

Consider Growth

Many investment portfolios focused on growth could benefit from being in stocks and mutual funds. According to U.S. News & World Report, many financial planners believe you can subtract your age from 110 to find the percentage of your portfolio that might go into stocks. This would mean that someone who's 30 years old could have about 80 percent of their retirement assets in stocks.

Stocks historically have a higher return and could potentially grow more quickly than conservative assets like bonds and bank certificates of deposit (CDs). The trade-off is that stocks carry more financial risk in the short run and could potentially suffer market losses in any given year.

Rules of thumb are certainly helpful, but let's consider a hypothetical situation to help make this more concrete. Susan, for example, is 35 years old and has started saving for retirement. She contributes $500 a month — or $6,000 a year — to her retirement account. Let's say her return is 8 percent a year. What could happen over 20 years? Well, we could find out using an investment calculator like the one offered by When she turns 55, Susan will have $286,330 — a nice sum for her retirement needs.

Make Retirement Your Financial Priority

You might have a variety of financial goals in addition to retirement — like buying a house, building a college fund for your kids or launching your own business. These are all important, but you might consider making your priority hitting your retirement savings target.

If you don't save enough for your other financial goals, there are generally alternate options available. For example, your children could take out student loans for college. But if you don't save enough for retirement, there may not be alternate ways to get more money — so you might not be able to maintain your lifestyle.

In your 30s and 40s, you've likely already built some net worth or are getting more serious about saving. That could be an appropriate time to meet with a registered representative to learn how to plan for retirement, manage your portfolio and help ensure you're on track to meet your future financial goals.

Your registered representative could help confirm whether you're saving enough and using the right products for your situation. In addition, consider consulting a tax professional to maximize all of the available tax benefits for your retirement strategy. Your 30s and 40s are a good time to get focused on your long-term retirement preparations and help protect your future today.

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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.