In your twenties and thirties, planning for retirement is about laying a strong foundation. Consider the following tips as you plan for your future:
1. Put time on your side
The sooner you begin saving for retirement, the more time your money has the potential to grow. When you are younger, you can make time your best friend because of compounding – when you receive earnings on your earnings. Compounding can be a powerful wealth-building tool you’ll want to take advantage of.
Saving consistently over time can pay off later:
- Aim to save 10% to 15% of your pre-tax income in your retirement plan in the ABA Retirement Funds Program (“Program”).
- Even if you start small, think about increasing your contributions every year (even increasing by 1% can help).
- If your employer offers matching contributions, contribute enough of your plan-eligible pay each year to take advantage of the full match.
- Log in to your account to use myOrangeMoney®1, an interactive tool, that allows you to see how increasing your retirement savings by just a little can help fund your retirement income for the long term.
2. Build an emergency fund
Life is full of surprises. Work to shield yourself from unexpected expenses (like car or house repairs) and needing to dip into your retirement savings, by saving three to nine months of living expenses in an emergency fund.
You can do this gradually over time, so it feels less like a burden. Consider putting the money into a separate, readily accessible, insured, bank account that earns some interest. Use your emergency fund only for true emergencies, such as a prolonged illness, a car accident, or a critical home repair.
3. Check in on your investment strategy
The further you are from retirement, the more long-term your savings goals likely are, and that can affect which investment strategy is right for you. For example, you might consider a growth-oriented mix of high-risk investments to be a better fit than a low-risk investment mix designed to preserve your savings because you have more time and you can ride out volatility relating to short-term fluctuations in the value of your investments.
Since everyone’s situation is unique, it’s essential to identify your own personal comfort level with investment risk. Explore the following resources for help assessing how much risk is right for you:
After determining your risk preference, you can review the investment options available in your retirement plan in the Program here or by logging in to your online account. If you’d like to make a change to your investment strategy, you can do so within your online account or by calling the Customer Contact Center at 800.348.2272.
It’s a good idea to revisit your investment strategy as you get closer to retirement to ensure your investments continue to match your goals.
4. Ask for help
Even if you’re pretty confident about picking investments and making other retirement savings decisions, it can be helpful to have some professional guidance. A professional can help review your current situation, explore your options, and create a plan that fits your personal circumstances. Financial advice is available through your plan in the Program, including personalized one-on-one sessions for no additional cost. Visit our Financial Advice page to learn more.