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Columns | Go Far With Kovar

How Do I Start Saving for Retirement

by Taylor Kovar

November 7, 2023

Hi Taylor - My parents were never good with financial planning, and I'm just now realizing how behind I am on saving for retirement. I just turned 30 and don't have any sort of plan. Help?

Hi Talia
- You're just a little behind and I'm confident you can get where you need to be! Starting at 30 means you have to work harder than if you started at 20, but not as hard as the people who get going at 40. The trick is to maximize the options available to you, so let's discuss what those are.

1. Employee-sponsored 401(k). If there's a retirement program at your work, it's some version of this. I'm actually not a huge fan of 401(k)s because of the investment limitations and sneaky fees, but these are usually the simplest investment vehicles and a good way to get an account going. If your employer offers a retirement plan and any sort of employee match, sign up and start making pre-tax contributions. The money will come out of your paycheck so you don't have to think about it, and if your boss offers a decent match you'll get a little extra retirement funding that way. Again, not my favorite option from a money-growing standpoint, but much better than nothing.

2. IRA.
An IRA, Roth or traditional, is the best place for your retirement savings. You have a lot more control over how the retirement money is invested; you also have the choice to pay taxes upfront or wait until you retire and start making withdrawals. Yearly contributions are capped at $6,500 (going up to $7,000 in 2024), so it's important to get started now and max out those contributions. If you're a non-traditional worker (self-employed, freelance, etc.), you can look into a self-employed IRA with higher limits. If you work with an advisor, I'm a big advocate of a self-directed IRA, which can include all sorts of investments like rental properties and other commodities. For now, just get started with a basic IRA and get those contributions going.

3. Set goals.
The first step is to start saving. Step two is to have an idea of what you're saving for. In 30-40 years, your IRA needs to replace your annual earnings. The standard formula is that you need about 70% of your current annual income to cover a year of retirement living. So, if you make $100,000 a year now, you'll want around $70,000 a year when you stop working. If you retire at 65 and plan to live until you're 100, that's 35 years multiplied by 70K. That might feel daunting, but steady saving will get you there. Keep that goal in mind and keep funding those accounts.

Beyond the IRA, alternative investments like real estate and small business funding can offer huge gains. There are lots of ways you can put your money to work—just make sure to start now and you'll be in good shape down the road. Good luck, Talia!
Taylor Kovar

"Go Far With Kovar" November 7, 2023 Column
Legal Disclaimer: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. To submit a question to be answered in this column, please send it via email to Question@GoFarWithKovar.com, or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.


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