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"I'm 35 with No Retirement Savings. Where Do I Start?"

    

SUMMARY: Are you in your 30s and falling behind on retirement savings? It’s not too late for you to take advantage of all that the markets have to offer. Follow these tips to get started.

Maybe it’s one of those worries that keeps you up at night. Or perhaps it just hit you early one morning as the sun peeked through your window, before your alarm clock got you out of bed—you’re 35 and have no retirement savings.

It’s OK. But it’s no time to panic—it’s time to get motivated. Here are just a few things you can do to hit the ground running.

no retirement savings

Use your 401(k)

Your goal should be to put 10 to 15 percent of your annual salary toward retirement. A great place to start is your 401(k), which is one of your most powerful tools for achieving this goal.

If your company offers one, be sure to contribute the maximum amount that’s allowed, up to $19,000 in 2019. If you can’t afford that, do what you can and increase it over time. You can most likely automate these tax-free contributions so that there’s no hesitation come the first of the month.

Put bonuses and raises right in there as well. And if your company matches contributions, you’re in even better shape.

Think carefully before you change jobs

If you’re getting that itch to spread your wings and move on from your current employer, be sure to think through what that could mean for your retirement plans. Yes, a higher salary and superior benefits are both good things, but timing is key.

You’ve put a lot of time and money into your current employer’s 401(k), so be sure to check on when those contributions will fully vest, or mature. If you jump ship too early, you may miss out on your full share of 401(k) funds.

Likewise, it may be tempting to cash out your 401(k) as soon as you leave that job. Be careful here, too. If you’re younger than 59½, you’ll have to hand over a 10 percent penalty to the IRS, and as much as 37 percent in taxes. Instead, put the money in an IRA, which lets you keep all of the money and continues its vesting.

Add an IRA

Even if you don’t need to roll over your 401(k), an IRA is still a great investment tool. If you keep your job but have contributed the maximum amount, your IRA can absorb up to $6,000 more.

There are three main flavors of IRA:

  • Deductible. No restrictions on income, but you can’t contribute here and also give to your employer’s plan. You only pay taxes on withdrawals.
  • Nondeductible. Very similar, but anyone can use it, even if they contribute elsewhere.
  • Roth. Income restrictions of $122,000 for singles, $193,000 for married couples filing jointly, but with no limits on contributions, you can add as much as you want.

Start an HSA

On the surface, a health savings account (HSA) seems like it’s merely a nice place to keep money that you’ll need for healthcare expenses. But dig a little deeper, and you’ll discover that if you have a high-deductible healthcare plan (HDHP), it’s also a powerful retirement savings tool. And 21.8 million people can’t be wrong—that’s how many workers had HSAs at the beginning of 2017, a 9.2 percent jump from the year before.

So what’s the big deal? You get a tax break in three different ways: tax-deductible contributions, tax-deferred growth on the funds as they sit in the account, and tax-free withdrawals for qualified medical expenses.

Flirt with risk

The good news in all this is that you’re only 35. You still have time to take advantage of all the markets have to offer. This means you can bump up your level of investment risk.

So jump in the deep end and start swimming—put up to 80-90 percent of your assets in stocks. Yes, the waves will get rough at times—large company stocks lose money an average of one out of every three years—but that still puts you in a good position. Your long-term horizon can handle these ups and downs, much more so than an investor nearing retirement.

Don’t forget your other goals

Retirement needs to be your top priority, but not your only priority. An emergency fund of at least three to six months’ worth of income is a must-have. If marriage and family are in the cards, some investments should go toward buying a home, saving for college, paying off debt and, just maybe, a vacation here or there.

It’s not too late

Don’t let the retirement boogeyman keep you up at night. Take those sleepless hours and jot down some numbers. Work out how much goes into each bucket: 401(k), IRA, emergency fund, mortgage, etc. Over time, all those buckets will grow and a secure financial future will be that much closer.

If you need a little push, consider our e-book, Your Guide to Popular Retirement Plans.

retirement plans

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