Saving for retirement in your 30s
If you’re one of the many people who have not started saving for a pension when you turn 30, fear not – your 30s is a common time to start thinking about putting money away so that you can enjoy a comfortable retirement.
The younger you start a pension the better. You can put less in each month than if you start later to achieve the same size pot, and your savings will have a longer time to grow.
While starting a pension in your 20s is ideal, fortunately at 30 you’re still young enough to make significant retirement savings, but only if you start making sensible pension choices now.
Life in your 30s
Your thirties are typically the decade in which you’ll get married, have children and buy a home, if you haven’t already done so. This shows that life in your 30s is a busy time, with a lot of your money being spent on weddings, house deposits and your offspring.
Yet it’s also a time when you tend to be more established in your career and will (hopefully) be earning more than in your 20s, and you’re also less likely to be planning a gap year or having to pay expensive university fees (although you will still likely be paying back your student loan).
While your 30s can be a financially difficult time with many life events vying for whatever little money you have spare each month, and State Pension age may still feel a long way off, it is important to remember that the earlier you start saving for retirement the less you will need to put into a pension each month to build a suitable pot, so you should really start thinking about saving for your retirement now.
This means it’s a good idea to evaluate your finances. You should aim to find out exactly what debts you have, the interest rates you’re being charged on those debts, and how much you are paying off each month.
You also need to compare your monthly income to monthly outgoings, along with what you need to put into your savings if you are saving for a house deposit or wedding. Once you know exactly what you have financially coming in and going out each month you can then see what money you have left to put into your retirement savings.
How much should I be saving for my retirement in my 30s?
The general advice is as much as possible and as much as you can afford. If you don’t have much money to spare each month, it is better to save even a little and it will still add up in the future.
When you do have extra money to spare, for example from a pay rise or as a result of clearing debt, then it is a good idea to increase your regular pension contributions or even make a one-off addition to your pension pot.
It’s also advisable to think about how much retirement income per year or month you would like to have when you retire.
How do I save for retirement at 30?
The easiest way to start saving for retirement is to join your workplace pension scheme. You’ll benefit from your employer’s contribution, not to mention Government tax relief, plus you will be able to manage the investments your pension money is invested in – although you won’t get to decide which pension provider the plan is with (this is decided by your employer). At 30 it is likely that you will change jobs a few times before you retire, so remember that your workplace pension stays with you and always keep track of the different pensions you might accumulate over the course of your working life.
If you have the ability to save extra each month (on top of your workplace pension) it is advisable to look at setting up your own form of retirement saving. This can be done through opening a personal pension plan or an ISA, or even the Lifetime ISA if you want to benefit from a 25% Government bonus and are certain you won’t need to spend the money on anything other than a first home before retirement.
How should I invest my money in my 30s?
When planning for your retirement in your 30s it is important to factor in additional assets, and it may be a good time to consider investing your money in other things such as investment ISA’s, Buy to Lets or shares.
Given that you’re still some way from retiring, you may be willing to take more risks with your money for the potential of generating greater returns, and for this reason may want to steer away from cash.
It could be worth familiarising yourself with investment platforms, but given the riskier nature of investments, make sure to seek advice before you take the plunge.
In your 30s you may also be saving for a deposit for your first house or maybe have just managed to get onto the housing ladder.
At retirement your house can be used towards funding your future retirement, such as by downsizing which can release a sum of money that you can use to increase your retirement income.
Of course, these decisions are still decades away, but it’s worth having an idea of the kind of options available so you know what to prioritise in the present.
Pros and cons of starting a pension at 30
- You are still young enough to make significant savings for your retirement.
- The younger you are when you start saving the less you will need to save each month.
- With 38 years left until you reach State Pension age (as it currently stands) you still have a lot of time to gain a good savings pot from your workplace pensions, where you benefit from your employer contributing a minimum of 3%.
- You have time to build up additional assets such as a house which can be used to help increase your retirement income.
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