How to Start Saving for Retirement in Your 30s?

Thang Truong
Thang Truong
Updated on:

Many people start to think more seriously about their financial future when they enter their 30s, and this is the time to start saving money for retirement. In fact, Fidelity Investments has a rule of thumb stating that people should have saved up about 1X their annual salary by the age of 30 years old.  

Even if you haven’t started saving yet, you still have lots of time available to invest. In the United States, typical retirement age for most people born after 1960 is 67 years old. This is the age when you become eligible for full Social Security Benefits. With 37 years to go until then, you’ll have plenty of time to invest money at a slow pace and build up a large nest egg. Let’s take a look at some of the ways you can start saving for retirement in your 30s.

Open an Investment Account

If you haven’t already, open up a retirement account and start setting money aside directly from your paycheck. There are multiple kinds of investment accounts available which allow people to set money aside with tax benefits too. These accounts allow you to place money into various investments and grow it over time. Some potential investments you may pick include, stocks, bonds, and real estate holdings.

>>MORE: Should I Invest in S&P 500 Index Through an Indexed Universal Life Insurance (IUL) Policy?

401(k), 403(b) 457 Plans

These are the original retirement accounts offered through your employers. The interest earned in these accounts grows on a tax-free basis, so you don’t pay any taxes on income taken in retirement. A 401K is most widely available to the public, while a 403b is available to public school employees, and the 457 plan is available to government employees. 

If your employer offers a 401K, they may also match some of the money that you place into your account to help it grow faster. It’s basically free money for your retirement. The maximum you can contribute to a 401K is $19,500 yearly as of 2020.

>>MORE: Retirement Savings Strategies for High-Income Earners

Individual Retirement Accounts (IRAs)

There are multiple kinds of IRAs you can open up, and they can be paired with a 401K account to allow you to set aside more money for the future. In 2020, the maximum contributions to an IRA are $6,000. Here are the two most common types of IRAs:

  • Traditional IRA: The money placed into a traditional IRA grows on a tax-deferred basis allowing it to grow a little faster, but you will be taxed on income payments taken in retirement.
  • Roth IRA: Money placed into a Roth IRA is taxed, but this allows the interest earnings and capital gains to grow tax-free, so you don’t pay any taxes on income taken in retirement. 

Even if you just make a low $1,000 initial investment with $100 a month in contributions to your IRA, you can expect a big return on investment. At a modest growth of 5%, you’ll have $128,035 set aside by the time you hit 67 years old.

Since you are still young, you’ll also be able to make more aggressive investments with potentially larger returns. Of course, it does pay to have a healthy mix of stocks and mutual funds in your portfolio.


>>MORE: The Tax Benefits of Life Insurance: Compare with Other Investment and Retirement Savings Options

>>MORE: 5 Strategies to Save for Retirement in Your 20s

Use Life Insurance for Retirement Income

If you are still worried about getting enough set aside for retirement, or just want to have another source of income available, consider purchasing a permanent life insurance policy. There are a few types of policies that have two components, a death benefit and a cash-value. The death benefit is usually the same from the first day of the policy, but the cash-value grows over time. It’s also possible to tap into the cash-value through withdrawals or loans when needed.

If you are concerned about providing for loved ones, such as children, if you die young, there are also ways to do so. Consider getting two different life insurance policies, a term life policy and a permanent life policy. At the age of 30 years old, term life insurance is still very affordable and will help protect your spouse and children in the event of death. While the permanent life insurance policy allows you to start saving for the future. The best policy for retirement savings is indexed universal life insurance (or IUL). Learn more why it is a great option for retirement savings.

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Types of Permanent Life Insurance to Consider:

You have a lot of flexibility that comes with being able to start saving for retirement in your 30s instead of say, 50 years old! There are multiple life insurance policies with cash-value components you can invest in to help grow a nest egg.

  • Whole Life Insurance: This permanent insurance has a cash-value component that grows at a modest set rate each year, usually about 2%. You always see growth from year-to-year, but it is much slower.
  • Indexed Universal Life Insurance: With this policy the growth of your cash-value is tied to the growth of selected market indexes, but the money isn’t directly invested in the market. Your insurer pays interest to your cash-value component based on the rate of the market’s growth. An IUL can bring potentially decent returns with no losses.
  • Variable Universal Life Insurance: VULs allow you to invest a portion of your monthly premium directly into the market using multiple sub-accounts. Most insurance companies allow you to invest in 50 to 100 sub-accounts for various mutual funds, and small-, mid-, and large-caps. The VUL offers the largest potential returns but your cash-value is also exposed to potential losses. You can learn more how variable universal life insurance works here.

>>MORE: How to Use Life Insurance in Retirement Planning – A Case Study

Final Thoughts:

  • In your 30s, you still have a lot of options and time available to save up for retirement.
  • Consider opening multiple investment accounts, such as a 401K and an IRA or a Roth IRA.
  • Term life insurance and permanent life insurance allow you to protect loved ones financially, while growing wealth.
  • Whole life insurance, indexed universal life insurance, and variable universal life insurance allow you to build up decent cash-value for retirement.

>>MORE: How to Start Preparing for Retirement at Age 40?

Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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