As time goes by, you will find that your paycheck has more demands. In your 30s, you may face expenses like buying a house and supporting a family. These added expenses can make it difficult to properly save for the future. Though you still have a long time until you retire, it is important to put small amounts of savings aside for the future. By starting now, you will have time for your savings to grow, making it much easier for you to retire on time and comfortably.
Here are a few tips for retirement planning in your 30s:
Know Your CalSTRS or CalPERS Retirement Benefits – A CalSTRS retirement benefit is a defined benefit pension plan. Once you have five years of service credit, you are eligible for a guaranteed lifetime retirement benefit. Retirement benefits are calculated based on years of service, age factor percent and compensation. It is important to understand that pension payout benefits will differ for each individual. Most CalSTRS members will choose a payout option that will leave a benefit to a living beneficiary in the event the CalSTRS member passes away. Choosing a payout option that leaves a benefit to a beneficiary may significantly reduce the CalSTRS member’s benefit. Like CalSTRS, CalPERS plans offers a defined benefit plan based on a formula as opposed to contributions and earnings contributed to a defined contribution plan like a 401(k). The retirement benefit payout is determined by a similar formula used by CalSTRS. CalPERS members also have a choice to choose a payout option that will leave a benefit to a living beneficiary.
Sign Up for a Supplemental 403b or 457 Retirement Savings Plan – If you have not already signed up for a supplemental 403b plan or 457 retirement savings plan, now is the time to do it. Contribute as much as you can to your plan each paycheck. Now is the ideal time to invest in your future, even if it is only a small amount per paycheck. By starting now, you will have many years to contribute and build a solid nest egg for yourself and your family.
Determine How Much You Should Save for Retirement – It is important to know that your CalSTRS or CalPERS retirement plan may not cover all retirement expenses. The average CalSTRS or CalSTRS payout to a member is 60-70 percent of pre-retirement income. First you should know your Income Gap. **Click here for a projection**. Next, open and contribute to a supplemental retirement plan like a 403(b) or 457. Work with a financial advisor to determine how much you will need to contribute in order to offset your Income Gap. Understanding your Retirement Income Gap and making contributions to a supplemental plan now will possibly allow you to retire with 100 percent of your pre-retirement income.
Consider Life and Disability Insurance – Now is the time to determine if life and disability insurance is offered through your district. You will also want to determine an appropriate level of coverage. Being young and in good health now, you may be able to lock in lower rates for the future.
Revisit Your Investments Regularly - Reviewing your investments will help ensure you stay on track for retirement. One thing is guaranteed; investing environments change and are rarely constant. In order to meet your retirement goal you must revisit your supplemental plans. It is important to know that your district’s 403(b) plan has many investing options. A 403(b) plan will typically offer over 30 approved venders to choose from. A 457 plan will usually have fewer options available.