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Planning for retirement in your 30s

Smart retirement planning moves in your 30s 01:40

If you didn't start saving in your 20s, you better get started when you are in your 30s. This is a critical decade for you to start building your nest egg.

It is important to avoid getting caught in the debt trap in these years. Despite median income that's 76 percent higher than those in their 20s, people in their 30s are more likely to be 60 days late on a bill and nearly twice as likely to have five-digit debt (more than $10,000) on their credit cards.

This can be partially explained by the fact that your 30s are the decade when you begin to make big financial decisions -- whether it is getting married, starting a family, or buying a new car or house. However, you also have to keep your retirement savings on track. Here are a few things you need to focus on in your 30s:

First, you have to make hard financial choices. There is a lot of temptation out there, but you really have to be thoughtful when deciding how you spend your money. Make sure you know how much you make and do not adopt a lifestyle that exceeds your means.

If you have a spouse, make sure you both understand what your finances look like and what that means for your lifestyle. If you are having kids, you might need to cut back on eating out, or live somewhere that is farther away from work. The most important thing is to know what is coming in and what is going out.

Second, pay off those credit cards every month. If you already have debts, make sure you are working to pay them off.

Next, you need to squirrel away some money. If you have not already started building a rainy day fund with about six months of living expenses, make sure you do. That way a temporary setback won't turn into a financial crisis.

Keep your eye on retirement. Your contributions to retirement need to continue if you want to have a comfortable old age. I recommend you put away 10-to-15 percent of your gross income (or your combined gross income if you are married), every year. If you don't have a 401k plan at work, set up automatic transfers into a retirement account to make sure that it happens.

Finally, keep your portfolio balanced in line with your age. The old rule of thumb was to subtract your age from 100 to know how much of your assets should be invested in stock mutual funds. I say, subtract your age from 110. That keeps a higher percentage of your savings in stocks as you age.

People are living longer. To be confident you'll be financially secure throughout your retirement, you need your investments to keep growing until you're well into your senior years.
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