Why 30 and 40-Year-Olds Need to Care About Investing & Retirement Income

Why 30 and 40 Year Olds

By Ed McClure, CFP®, PPC®

When you think about where you want to be in 20 years, many 30 and 40-year-olds will discuss their goals for financial independence or reaching their ideal retirement. Yet there is often a gap between experiencing financial security and taking the right steps early on to make it a reality. 

Investing and planning for retirement income are two critical aspects of financial planning that every individual, irrespective of their age, should consider. But 30 and 40-year-olds are in a unique position to benefit significantly from making wise investing decisions early in their careers. Here are 4 reasons why those in their 30s and 40s should care about investing and the steps they can take to succeed financially. 

Time Is On Your Side

One of the most significant advantages that 30 and 40-year-olds have when it comes to investing is time. That’s because of two concepts: the time value of money and the power of compounding. 

The time value of money concept states that the money you have now is worth more than the same amount of money in the future. This is because money has the power to earn interest, so the earlier you receive and start investing that money, the more time it has to grow. 

The compounding effect occurs when you earn interest on top of the original amount invested as well as interest that has already accrued. This allows money invested to grow exponentially over time. Simply put, the earlier (and more consistently) you invest, the more time you have to let your money grow. Even when market downturns are considered, early and consistent investing still provides greater growth than keeping your savings in cash.

Social Security May Not Be Enough

Many younger individuals mistakenly believe that Social Security will be enough to support them in retirement. But the reality is that Social Security alone often does not cover all the expenses in retirement. Additionally, the Social Security system is facing several challenges, including an aging population and declining birth rates, which may make it harder for future generations to rely on Social Security. By investing in a retirement account, such as a 401(k) or an IRA, individuals in their 30s and 40s can build a retirement nest egg that can supplement their Social Security benefits and provide a reliable income source after they leave the workforce.

Inflation Is a Real Threat

Inflation is the general rise in the price of goods and services over time. It is a normal part of a growing economy, but it is a major threat to your long-term retirement stability. As the cost of goods rise, the same amount of money will buy less in the future than it can buy today. This means 30 and 40-year-olds need to invest in assets that can generate returns greater than the inflation rate in order to maintain their purchasing power in their later years. 

Life Is Unpredictable

Another important reason why individuals in their 30s and 40s should care about investing and retirement income is the need for financial stability in the face of adversity. Life is unpredictable, and unexpected events such as a disability or a serious illness can significantly impact your ability to earn an income. 

By investing in a retirement account or other investment vehicles, individuals in their 30s and 40s can build up a reserve of funds that can be used to cover living expenses and take care of family in the event of a financial crisis. This financial cushion can help reduce the stress associated with a sudden loss of income. Additionally, having a reserve built up can also help individuals avoid going into debt or having to liquidate other assets to meet their financial obligations. Therefore, investing at an early age can help individuals prepare for the unexpected and build financial stability for themselves and their families.

How to Succeed Financially

There are several ways for individuals in their 30s and 40s to succeed financially and build a secure retirement.

  1. Start early: As mentioned, the earlier you start investing, the more time you have to let your money grow. Time is your biggest asset, but it can easily slip away from you if you don’t take steps to control your finances now. You can also streamline your investment contributions either through salary deferrals or automated deposits. 
  2. Take advantage of employer-matching contributions: If your employer offers a matching retirement contribution, be sure to contribute enough to qualify for the full employer match. It’s essentially free money that can be used to grow your nest egg even more.
  3. Stay invested: It can be tempting to sell your investments when you see the market drop, but staying invested even in market downturns is key to long-term success. Remember, your investments may lose market value, but you won’t lose any money unless you sell while the value is low, and staying invested allows you to participate in the inevitable market rebound.
  4. Gradually increase your contributions: As your finances improve, put away a little more into your investment accounts. With each raise or increase in income, you can increase your contributions to your retirement accounts or other investments, accelerating your savings and improving your chances of experiencing financial stability.

Do You Have Questions About Your Investment Strategy?

Investing for the future is an essential ingredient for reaching financial independence, but it can be overwhelming to navigate on your own. At McClure Wealth Management, we help business owners and individuals confidently pursue financial success through comprehensive financial planning and investment advice. If you have questions about your investment strategy, or would like a second opinion on your overall financial plan, don’t hesitate to reach out! Give me a call at (760) 607-0611 or email [email protected] to set up a consultation.

About Ed

Ed McClure is a CERTIFIED FINANCIAL PLANNER™ practitioner, Professional Plan Consultant® (PPC®), and founder of McClure Wealth Management. With over 25 years of experience, Ed works with business owners who want to maximize their retirement plan benefits, businesses that need help setting up and managing a 401(k) for their employees, and families who want guidance while planning their futures. He is known for simplifying complicated and intimidating topics and making wealth management concepts easy for others to remember and understand.  

Ed has established himself as a trusted resource for business owners and individuals, and his mission is to help his clients achieve the financial independence and well-being they deserve so they can give their time and energy to the people and things they love. He has a bachelor’s degree in finance from the University of Illinois. In his spare time, Ed conducts financial workshops for the Just In Time for Foster Youth organization, which helps equip young men and women as they come out of the foster care system. He also loves to travel and spend time with his favorite people. To learn more about Ed, connect with him on LinkedIn.