If you're in your 30s, serious planning for retirement begins now. Odds are you have never taken a close look at your earning potential and long-term needs, or thought much about all the savings and credit options before you. Now is the time to get real about such things because your life is changing in ways that you may only be beginning to appreciate.
For one thing, you're getting older. You're not old by a long shot but the door is starting to close on the certainty of long-term investment gains. "The most powerful force in the universe is compound interest," Albert Einstein famously declared. But the magic only happens through consistent saving over many, many years. Delay is costly. Consider: Had you started saving $5,000 a year in a Roth IRA at age 20 you would today be on track to accumulate $1.9 million by age 65 (assuming 8% annual returns). But now, at age 30, you need to save more than twice that amount each year ($11,200) to get the same result and if you are 40 you need to sock away $26,400 a year. The earlier you begin the less you need to save. In the example above, lifetime contributions that began at the age of 20 totaled just $225,000; at the age of 30, $392,000; and at 40, a staggering $660,000. (In your 30s? See five ways to put your retirement planning into high gear.)
You still have time to do it the inexpensive way, and you might even do better than the examples cited above because if you start now you'll be accumulating stocks that have been beaten down in recent years and will surely recover in a timely way for you. This is also true of real estate, by the way, where prices have been hammered but where long-term appreciation is all but certain — though not at the heady pace of the past decade. And with real estate you have the added incentive of tax breaks: Mortgage interest is tax deductible and, for now, there is an $8,000 tax credit for first-time homebuyers. That break is set to expire December 1st but likely will be extended and possibly even expanded.
In many ways, your 30s are your most important years. Typically, this is when you settle down and start a family. At this age, "you begin to transition from the selfish years (teens and 20s) to a phase where you have to start thinking about other people," says Daniel Forbes, a financial planner in Providence R.I. This is especially true if you are a breadwinner; your family depends on you not just to protect your income but have a long-range plan to fund the kids' education and to retire without becoming a financial burden to them or anyone else. You can't afford to put off the future any longer.