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Money Management (Distributed by the New Jersey Society of Certified Public Accountants)

Retirement Planning Checklist for 30-Somethings


Each decade of life brings unique financial challenges. Many young adults in their 30s get married, buy houses and have children. With these new responsibilities, it’s easy to see how saving for retirement can fall by the wayside. To help 30-somethings refocus on saving for a secure retirement, the New Jersey Society of Certified Public Accountants (NJSCPA) offers the following checklist:

* Start Thinking About Retirement. Begin to identify what would make you happy in your later years. Will you continue to work, find a new hobby or travel the globe? When you have a vision, it’s easier to make the short-term sacrifices that will fund your long-term retirement dreams.

* Estimate How Much Money You Need to Save. To do so, estimate three important factors: at what age you plan to retire; how long you’ll be retired (based on your life expectancy); and your annual living expenses in retirement. A CPA can assist you with these calculations.

* Join An Employer-Sponsored Retirement Account. Sign up and participate in your company 401(k) or other retirement plan it offers. It’s the best way to save for retirement. If you don’t have a retirement plan at work, open and contribute to a Roth or traditional Individual Retirement Account (IRA). Self-employed workers can save for retirement in a Keogh or SEP (Simplified Employee Pension) plan. Whichever you choose, the important thing is to start early and contribute regularly.

* Maximize Your Contribution to Company-Sponsored Retirement Plans. This is particularly important if your employer matches a percentage of the money you put in. Otherwise, you're walking away from free money. Make it a goal to increase your savings gradually until you're contributing the maximum amount. The funds you contribute to your tax-advantaged retirement plans grow faster, since the earnings are tax deferred. And because the money is taken directly from your paycheck, you won’t miss what you don’t see.

* Automate Your Saving. If you’re contributing to an IRA or a Roth IRA, talk to your bank about arranging for automatic deductions from your paycheck.

* Be Disciplined About Spending. Scale down your spending, and use the money you save to fund your retirement. When you get a bonus or raise, invest it for retirement. The habits you develop today are the habits you will carry into retirement.

* Pay Down Credit Card Debt. The expensive monthly interest you pay on credit card debt reduces the amount you have available to save for retirement. Pay off credit cards as quickly as you can, and don’t charge anything that you can’t afford to pay off before incurring interest charges and other fees.

* Monitor Your Investments. It’s your responsibility to keep a close watch on the performance of your 401(k) investments. Review your statements carefully and compare your fund’s performance to the performance averages for the types of funds you own. Rebalance your portfolio once a year to maintain proper asset allocation. Also, be sure to keep an eye on investment expenses. These costs are deducted from your plan and reduce your earnings. Let your plan sponsor know if you think they’re too high.

* Consult a CPA. Many investors do better when they have a professional guiding them. A CPA can help you plan and achieve your key objectives. If you don’t have a CPA, you can easily locate one online using the NJSCPA Find-A-CPA service. Visit www.findacpa.org to locate a highly qualified professional who is right for you.

If you would like to receive more information on various financial matters, subscribe to E-CPA, the NJSCPA's free, monthly email newsletter. To subscribe, visit www.njscpa.org/finances or email a subscription request to e-cpa@njscpa.org.

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Money Management is a weekly column on personal finance distributed by the NJSCPA.

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