3 Retirement Strategies to Adopt Before Age 30

As a young person, you exhibit the single most desirable component of the investing universe: time.

Time is the magic ingredient when it comes to making your money grow. If you haven't yet hit the big 3-0, the financial world is your oyster. A little sacrifice now can reap you big rewards down the road.

Make the most of your time and money during this phase of your life with these three strategies. Your future self will be happy you did.

1. Live within your means
Young people face a lot of competing demands for their dollars. Buying a car, getting married, and securing a house are just a few. But don't let the keeping-up-with-the-Joneses mentality tempt you. Sure, the Audi coupe, $30,000 wedding, and 4-bed/3-bath townhouse look amazing, but they're the biggest obstacles on the road from here to destination financial-peace-of-mind. Getting your spending under control now will let you be in control of your financial future.

2. Pay down debt
Every dollar that's tied up in paying down debt is one less that you can use to save for retirement. By devising a plan for reducing your debts, you can pay them off faster, allowing you to allocate more money toward retirement savings. Simply put, by paying down loans earlier you maximize future savings.

This could not be truer than for credit card liabilities. As soon as humanly possible, transfer balances from high-interest cards to those with lower rates. Ideally, find a card with a 0% introductory APR, and pay the balance off in full before the zero-percent interest clock stops.

3. Fund retirement accounts
Laying down a solid foundation for retirement right now is critically important. With compound interest accumulating over many decades until you retire, you don't have to save nearly as much money by starting now versus if you don't start saving for another five, 10, or 15 years. Not only do you have time on your side, but also the advantage of tax-deferred (heck, even tax-free) growth that comes with retirement accounts.

Sock away as much as you can into your retirement plan at work and at least enough to get the maximum match your employer offers. If you can squeeze out even more money from your budget, contribute to a Roth IRA as long as you qualify for doing so.

Make sure the money you're saving for retirement won't be touched until then. Yes, you can get money out of a 401(k) or IRA before you retire if you absolutely must, but there's generally a penalty -- and taxes, too -- for doing so.

To the victor go the spoils
Retirement might seem very far down the road. And, lucky for you, it is. By adopting sensible money habits, conquering your debts, and saving for retirement early in life, you'll reap the reward of a secure retirement later.

To retire on your terms, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


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  • Report this Comment On July 01, 2013, at 10:15 PM, szcz wrote:

    Live within your means, pay down debt and save - noble thoughts. Unfortunately, your ever-expanding government is not doing this. Consequently, my guess is that 30 years from now your government will claim most of your nest egg "for the greater good."

  • Report this Comment On July 02, 2013, at 12:32 AM, kankemike wrote:

    Pay yourself first, pay your bills second, that will help you do all things mentioned above.

  • Report this Comment On July 02, 2013, at 9:06 AM, robyrob wrote:


    That actually isnt happening, but if you'd like to keep believing you have no control and anything that goes wrong isn't your fault and "it's the government," you go right ahead. The size of the US Government has radically decreased over the past 5 years! The rest of us will try and follow this pretty sensible advice and build a nest egg.

  • Report this Comment On July 02, 2013, at 10:26 AM, mikecart1 wrote:

    1) Invest in your health

    99.99999% of all people in this country at least (USA for you home gamer's), will wind up spending more money, far more than the purchase of any other purchase in their lifetimes on their health and declining health in particular. The best way to really grow serious money, and I'm not talking about the so-called dream of saving a few hundred thousand or a million, is to stay in shape, lift, and keep your body as close to pristine condition as possible inside and out.

    When you are in your 40s and 50s and you see all your unhealthy friends paying doctors thousands yearly for things they could have easily prevented themselves, you will realize what the words COMPOUNDING INTEREST mean!


    I'm still in my 20s btw lol.

  • Report this Comment On July 02, 2013, at 1:05 PM, klk5439 wrote:

    Sadly, not just preventable, but any medical condition can ruin any chance of a comfortable retirement, I would say starting in your 30's even if healthy start looking at long-term care health insurance, that is where the financial health care crisis is really going to happen to you, someone in your family is going to have a condition that requires 5k a month care, and older retirees today simply take it for granted. (My father was in ICU towards the end of his life at probably 5k a day, and I was told it was taken care of with Medicare.) Start reading about health care and get politically involved now.

  • Report this Comment On July 05, 2013, at 6:04 PM, kthor wrote:

    in a decade or two congress will tax roth ira's and everything "retirement" savings 35% ... just to screw people up! then they'll give themselves another type of freebies not available to the common people

  • Report this Comment On July 05, 2013, at 6:37 PM, daveandrae wrote:

    Living within your means, paying down debt, and funding retirement accounts are strategies one should adopt and MAINTAIN all through one's life.

    Not just before the age of "30."

    As for investing in one's health, I would stress the mental twice as much as the physical. For one must never forget that your strongest resource is your MIND, not your "body."

    As for the U.S. Government, the last time I checked, its a free country. If you don't like it here, why not just move somewhere else.

  • Report this Comment On July 06, 2013, at 9:00 PM, jasenj1 wrote:

    The most important time to save is when you're young. Compound interest will make the dollars you save in your 20s & 30s far more valuable than those you save in your 40s & 50s.

    As for health: The longer you live, the more chance something crazy will happen to you. You may catch a strange virus and have your health destroyed, or have some cells go crazy & get cancer. There are things you can prevent - like type 2 diabetes - but there are a lot of random things you have no control over. Last year I had "idiopathic pericardial effusion". Three days in the cardiac ward. No explanation other than "probably a virus".

    Control the things you can, but recognize there's a lot more you can't control. Be prepared.

  • Report this Comment On July 07, 2013, at 12:26 AM, Prisoner2012 wrote:

    This stuff really works if you make $35,000 straight out of school with 10% annual pay raises. Other than that you are just as well off playing $100 in lottery tickets a week.

    Old Town Alexandria knowledge for the masses is just as good as Scrooge telling the destitute lady to get a job, just for fun.

  • Report this Comment On July 07, 2013, at 10:02 AM, mm4AUTigers wrote:

    What are your thoughts on either paying off a fixed rate low interest mortgage through making additional interest payments each month versus investing the additional funds in dividend growth stocks?

  • Report this Comment On July 07, 2013, at 1:15 PM, jordanwi wrote:

    @mmm4AUTigers - for me, this one's kind of a no brainer. You can find a nice, growing 3-4% yield in the market, also with a good chance of capital appreciation. Your mortgage is 2.5-3.5%. Choose the one that's bigger (hint: it's not the mortgage) This will also keep you more liquid.

  • Report this Comment On July 07, 2013, at 2:44 PM, StockGamingCom wrote:

    Get your government to pay back its debt from the generation that took out the debt, not from your generation in 30 years.

  • Report this Comment On July 07, 2013, at 4:32 PM, mm4AUTigers wrote:

    Thanks for the comments. This is my opinion also. But I believe Dave Ramsey advocates paying of the mortgage before investing. Maybe this is when mortgage rates were higher. I wonder what his opinion is today with the low interest rates.

  • Report this Comment On July 08, 2013, at 6:56 AM, daveandrae wrote:


    Try not to think in terms of "paying off the mortgage before investing." Instead, if wealth is truly your goal, think more in terms of driving your long term debt, to tangible equity ratio, down to zero, as fast and as tax efficiently as possible.

    Put simply,

    When it comes to your finances, always think in terms of...More Equity- Less debt, but be warned. This is not standard thinking. Most people, left unaided, will do the exact opposite.

    Put even more simply-

    Consciously, consistently, and relentlessly find ways to DE-Lever your balance sheet at favorable interest rates, not the other way around.


    Last year at this time I had 123k in long term debt before income tax, at an aggregate interest rate of 5.7%.

    I had 245.6k in tangible equity capital yielding 3.4% in dividend income.

    I refinanced my long term debt down to an aggregate interest rate of 3.29%, continued to pay taxes, and did absolutely nothing with my tangible equity capital except reinvest the dividends.

    at that time my long term debt to tangible equity ratio was 0.50%

    123/245.6 = .500

    One year later I now have 119.6k in long debt and 287k in tangible equity capital as my portfolio returned 16.86% over the last twelve months.

    Now my long term debt to tangible equity ratio is 0.42%

    119.6/287 = 0.416%

    I keep saying "tangible" because I am referring to the capital I could access in say, 3 days if need be, thus I am excluding real estate equity.

    Over the next twelve months, my goal is to drive the ratio down into the 30's.

    Say, 100/300

    And so on.....

    And so on....

    Thus, at some point, God Willing, I will be in the financial position to sell some stock to pay down some debt, but only when the ratios are in my favor.

    Example, selling, say, 7k of stock at 300k, to pay down 7k of debt at 119k, is using 2.33% of equity to pay off 5.88% of debt, the effect of which would bring the debt to equity ratio down even further, to 0.38%

    112/293 = .382

    This kind of capital allocation makes financial sense to me. Especially when the net effect expands the margin line without suffering tax consequences.

    You may read this and think, "that's something you do in a business" and you'd be right. The thing you must never forget is that you are in the business of living.

    Behave accordingly.

    Good luck and God bless. :-)

  • Report this Comment On July 08, 2013, at 11:22 AM, r2d23333 wrote:

    "Pay down your debt" presumably means high interest consumer debt. A young person investing wisely using a margin account could have found having debt rather profitable over the past 5 years. A young person with a good job could have found this an excellent time to take on mortgage debt at very low rates.

  • Report this Comment On July 08, 2013, at 12:50 PM, DavidBressler wrote:

    These aren't strategies, these are behaviors.

    What do you do once you have managed to incorporate these behaviors, and have saved some money?

    And, how do you stay ahead of the things that drag on your ability to retire like taxes, increasing cost of living, and employment uncertainty?

    There's a free 10-part email course I've written that answers these (and other) questions. It's especially useful for those in their 20's and 30's, as they change jobs and rollover their 401K's.

    Please have a look:


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