Retirement Savings Advice: How to Invest in Your 20s, 30s, 40s and 50s

If you’re worried about your retirement, you’re not alone: About 55% of Americans feel behind on their retirement savings, according to a survey from Bankrate.

The bottom line: To grow your money, you need to invest it — and the longer it’s invested, the more it should grow. The best way to invest is to do it consistently. Most of us won’t discover the next Apple or Bitcoin, but sustained, thoughtful retirement planning will go a long way.

The smartest money moves depend on your age, income, employer offerings and much more. In general:

  • If you’re worried you don’t have enough to invest in your 20s and 30s, think again. Nerdwallet’s Alana Benson says the biggest mistake younger people make is thinking they can’t invest a small amount of money.
  • In your 40s and 50s, shine a light on your portfolio. This might feel like the financial equivalent of trying on a bathing suit under fluorescent lighting, but you need a complete view of your financial wellness.

Here’s detailed advice to stay on track to financial freedom.

Investing in Your 20s: Open Accounts and Build Habits

The trick is to invest early on, so you accrue compound interest — that’s when you make money on an investment, and then the “profits” earn even more interest, in a moneymaking snowball effect.

Investing in Your 30s: You CAN Start Now

If you’re in your 30s but haven’t started investing yet, now is still a great time. First, make sure you’re fully taking advantage of employer matching programs. Evaluate how much you’re putting into existing 401(k) and IRA accounts, and consider how to maximize contributions.

  • Double down: Open both an IRA and a 401(k) to maximize investments, especially if you’re just starting to seriously save for retirement. If you’re in your peak earning years or want to lower your adjusted gross income on tax forms, consider a traditional IRA.
  • Build an emergency fund: Consider a medium-term goal of saving one year’s salary.
  • Plan for kids’ futures: Set up college funds, such as 529 plans. All 50 states and D.C. offer at least one option.

News4’s Consumer Reporter Susan Hogan talks to an expert from NerdWallet about why and how to begin investing in your 20s and 30s.

Investing in Your 40s: Maximizing Contributions

Ready to roll out a strategy to maximize your retirement account contributions? Here’s how to get ahead with employer contributions and tax advantages, Benson says:

  • Start with your 401(k): Take full advantage of your employer’s matching policy — if they’ll match a 4% contribution, ensure you’re making a 4% contribution.
  • Max out your Roth IRA: The limit for the tax year 2023 is $6,500. Try to invest the maximum, because these accounts grow tax-free, and you will be able to withdraw money tax-free.
  • Go back to your 401(k): Once your IRA is maxed out, you can shore up your 401(k) — but there are limits: $22,500 for individual contributions and $66,000 for combined employee and employers contributions in 2023.

In Your 50s: Catch Up on Contributions

Catch-up contributions help people who don’t think they’ve put enough money into retirement accounts early on. It’s a great way to add to your retirement. You can make these annual contributions if you’re 50 or older by the end of the calendar year, the IRS says.

  • Add more to your 401(k): The IRS allows up to $7,500 in catch-up contributions in 2023.
  • Beef up your Roth IRA: Catch-up contributions to these accounts can be up to $1,000.

News4 Consumer Reporter Susan Hogan is #Working4You with ways to achieve financial freedom on News4 Today at 4 a.m., 5 a.m. and 6 a.m.