I’m 39 and have already saved enough to retire. Here are my top tips

Kickstarting saving for your retirement is not always easy. As a millennial money coach, I’ve juggled paying off $300,000 in debt while investing. And even though I now have enough to retire early, the landscape has changed significantly since I made my first 401(k) contribution nearly 17 years ago — and the shortage of pension savings is even wider.

According to a survey, about 41% of American adults stopped contributing to a retirement fund in 2022 due to the increase in the cost of living. 2023 US News Survey. Even more worrying, almost a third have withdrawn their retirement savings by 2022 to stay afloat.

If you’re feeling overwhelmed or burdened by other financial debts or goals, you’re not alone. Save for retirement is difficult, but with a proactive money plan, continuing education, and the right emotional support, you can take small steps today to help you build a respectable future in your golden years.

Take steps now to prepare, even if you’re not ready to save yet

Saving enough to enjoy retirement is certainly a challenge, especially as housing and other essential costs continue to rise while wages are not keeping pace. Many of my own students age 50 and older have postponed their retirement plans because they simply cannot afford to live on their current savings. Others may have postponed contributing to a retirement fund until debts are paid off or their income increases.

In coaching thousands of people to achieve their financial goals, the biggest regret I hear is that they all wish they had started sooner. There will probably never be a ‘perfect’ time. But there are ways to save more for retirement without putting any money down. Here’s how I recommend you get started:

• Open accounts now so they’re available when you’re ready.
• Use features like ‘watchlists’ to track investments you’re interested in and learn their trends and nuances over time.
• Pay it off High-interest debt, such as credit cards to increase your cash flow. Once a debt is paid off, you can put some of that money toward retirement savings while you work on the next debt.
• Follow money experts like those at the CNET Financial Expert Review Board for practical education and inspiration.
• Talk to people you know who have successfully retired to remind yourself that it is possible.

The more you arm yourself with financial knowledge, the easier it will be to get started.

Social security can help, but is rarely enough

If you’re counting on Social Security benefits to get you through retirement, I recommend doing some research. I learned that firsthand Social Security Benefits often do not extend far enough. When my parents retired, they relied solely on these benefits to make ends meet. But when my father passed away, we learned that only a portion of his benefits would go toward my mother’s care. And even with full benefits, Social Security alone is rarely enough to cover medical costs. My mother struggled with diabetes and a failing kidney, both of which were necessary healthcare costs than what social security would cover.

To plan better, figure out how much you’ll need to collect from Social Security when you retire. The maximum monthly social security benefit depends on the age at which you retire. For example, if you retire in 2024 at:

• If you are 62 years old, your maximum benefit would be $2,710
• full retirement age, your maximum benefit would be $3,822
• If you are 70 years old, your maximum benefit would be $4,873

The longer you wait to retire, the greater your benefit. However, if you need to retire early

Take Advantage of Roth IRAs

Regardless of age, the first place I recommend putting your retirement funds is in a Roth IRA, or, if your employer offers it, the Roth option in your 401(k). About 88% of 401(k) plans offered a Roth account in 2021, nearly twice as many as a decade ago, according to the Plan sponsor Council of America.

Since you contribute to a Roth IRA with after-tax dollars, when you withdraw money from a… Roth IRA when you retire, you won’t owe taxes on the money. But more importantly (and what most people miss), you also don’t pay taxes on the growth you’ve earned since your original contributions.

If you contribute $5,000 to a traditional IRA or 401(k) and it grows to $25,000, you’ll pay taxes on the full $25,000 when you withdraw. But if you contribute to a Roth 401(k), you won’t pay taxes on the extra $20,000. That is a huge advantage.

Before 2024, you can contribute $7,000 total for all your IRAs, traditional (pre-tax) or Roth (after-tax), and the limit increases to $8,000 if you’re 50 or older. A contribution of $7,000 per year may seem like a lot at first, but if you divide that by 365 days in a year, you would need to save $19.18 per day, or about $575 per month, to meet the IRS limit. reaches. The sooner you start, the more time your money will have to work for you, thanks to the power of compound interest.

Let’s say you start with $0 today and invest $575 monthly to reach the IRA maximum of $7,000. If you maintain this pace for ten years and earn a 10% interest rate, you will have an extra $111,562 to live on in the future.

However, Roth IRAs do have income limits. Before 2024, you no longer have to contribute the full amount if you earn more than $146,000 if you file taxes alone, or $230,000 if you are married and file taxes jointly. I recommend going to a traditional IRA if you exceed the income limit to contribute to a Roth IRA. My biggest regret in my own financial journey was not understanding the power of the Roth IRA sooner.

Use user-friendly investment tools

Just ten years ago, investing was much less transparent and much more complicated. We no longer have to settle for the expensive and confusing mutual funds that our parents and grandparents had to choose from. Instead, we can start saving for retirement in just a few minutes, thanks to rapidly evolving digital tools and their accessibility online banking and investing platforms.

I have a 401(k) through my company, and I recently transferred my traditional and Roth IRAs from an outdated financial services company to Fidelity, which is easier to use, more customizable, and comes with information about each investment. But even if you’re not self-employed, you can check your company’s investment platform to see what options are available to you. You may be able to decide where you invest your money.

It was even more encouraging to see more environmental, social and governance metrics, also known as ESGoptions available to investors. For example, you can now choose retirement investments based on social or environmental factors, such as a company’s carbon emissions, waste management practices or commitment to employee diversity.

Take advantage of high savings and CD rates

Us current high climate can help you earn a little extra as you approach retirement. While a savings account with high returns may not be your primary retirement account, but can serve as a useful supplement. Having at least a month’s worth of buffer savings in a HYSA can reduce the risk of taking money out of your retirement fund when times get tough.

This one-month buffer should include what it would cost to cover your housing, utilities, transportation, food, and healthcare costs so you can start moving and stop waiting for the next paycheck to pay your bills.

If your risk tolerance isn’t quite robust enough to invest in the stock market, real estate or other alternative investments, I’m happy to use certificates of deposit to help me save a little more money now, while reducing the temptation to spend it right away.

For example, I decided to put the amount insured by the Federal Deposit Insurance Corporation in a one-year CD to earn more than 4% for a down payment on a house this year, which will allow me to afford a mortgage on a bigger house.

CDs are a great starting point for investing for anyone worried about losing money. They can help you diversify your overall assets, but you won’t earn as much over time as you would if you invested in the stock market.

After you’ve maximized your contributions to tax-advantaged retirement accounts and you’re ready to invest with a little more risk, consider investing through an online platform or robo-advisor to grow your money with index funds, in the stock market traded funds. and other forms of investment.

Don’t wait. Your future self will thank you

The sooner you start your retirement savings journey, the faster your money will grow. Even if you’re not ready to take the plunge and start saving just yet, research different retirement accounts and brush up on different savings strategies to make prioritizing your future a little easier.

When you’re ready, plan to make regular contributions to stay on track and grow your retirement savings. That way, you’ll be used to making contributions and can adjust your budget to fit your retirement savings, necessities, and other financial goals.

Related money advice: