8 Steps to Starting a Retirement Plan in Your 30s

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It's simple: The sooner you start a retirement plan, the more you'll have during your golden years. What's not so simple is figuring out what you need to get started once you're ready. Fortunately, we have some simple tips to help you start a retirement plan in your 30s.

1. Get Real About Your Expectations

According to the United States Department of Labor, the average American spends 20 years in retirement, so you need to make saving for retirement a priority. However, if you haven't started saving yet, it's never too late to start planning for your golden years. In fact, Forbes found that 60% of millennials in their 20s haven't even thought about retirement at all, so you aren't alone.

Before you can start thinking about what you will contribute to your retirement plan, you need to figure out what your retirement goals are. Then, you can better determine the right upfront investment, how much you should save every year, and what the correct asset allocation is for your risk tolerance and expectations.

2. How Much Will You Need in Retirement?

Most experts estimate that a person needs 70%–90% of their pre-retirement income after retirement. Take advantage of a simple retirement calculator to find out how much you can save by retirement or a more detailed calculator that will help you determine the right retirement plan and asset allocation.

3. Take Advantage of Compounding Interest

With compounding interest, you can benefit from earning interest on your interest. The longer you are invested in a retirement plan, the more money you will make because the interest will just keep growing exponentially. Compound interest can significantly boost your contributions over the long-run because it will make your account grow at a faster rate than it could with simple interest alone.

For example, if you start saving at age 25 (with an annual return of 7% after fees), you only have to save about $4,830 annually to reach $1 million by age 65. If you wait until age 40, you'll need to save $15,240 per year, which is more than triple the amount, all thanks to compounding interest.

4. Find Out About Employer Contributions

The first thing you need to do is enroll in your workplace retirement plan, such as a 401K, 403(b), 457, or pension. If you aren't already enrolled, you may be missing out on free money.

Often, a company will match your contribution, up to a certain amount. For instance, they may offer to match up to 20% of what you contribute. This is like free money and should be considered an additional source of income that will pay off after retirement.

Once you are participating in the retirement plan, you should try to contribute the max amount, or at least as much as you can afford. For 2015, you can contribute up to $18,000 per year to your 401K (and $6,000 more at age 50 and older), so try reaching the max limit, if you can.

Make sure you learn what your plan includes, such as how much you need to contribute and how long you need to stay in the plan to receive your employer's contribution. You may also be able to receive some benefits from your spouse's employee retirement plan.

5. Set Up Automatic Contributions

You can even sign up for automatic contributions to make things easier. The more you contribute, the lower your taxes will be at the end of the year, so there will be a slight payoff now, and a big payoff later. Look for low-fee mutual or index funds so that you are spending less on fees and enjoying more in your account.

6. Open an IRA

You can contribute up to $5,500 per year (or more if you are age 50 or over) to a traditional Individual Retirement Account (IRA) or a Roth IRA. You may need to speak to a financial planner about which type of retirement account is right for you. Keep in mind that a Roth IRA is more flexible and you can even use up to $10,000 from your Roth IRA to purchase your first home. IRAs also have tax advantages and automatic contribution options.

7. Save More

Wells Fargo recommends saving at least 10% of your income at this stage of your life. Contributing at least 10% of your income into a retirement plan will add up quickly every year. If you can't commit to this amount, then save as much as you can and gradually increase your contribution as soon as you are able. More recent estimates agree that as you age, you may want to save more — closer to 15%–20% of your income.

Find additional sources of income that you can save, such as tax refunds and year-end bonuses. If you are expecting a raise, increase your savings by the same percentage as your raise amount. Try minimizing your spending and debt so that you have more available for your savings and retirement accounts.

8. Start With an Emergency Fund

Before you begin saving for retirement, make sure you are set up for the here and now. Most financial experts recommend keeping at least three to six months' worth of expenses in an accessible savings account, in case you ever need emergency funding. The last thing you want to do is pull money from your retirement account before retirement, so make sure your savings account is set up before you start worrying about retirement.

If you still aren't sure if you're saving enough money, or don't know where to get started, you may want to speak with a certified financial planner. They can help you organize your personal finances and create the right plan for your retirement goals.

Do you have a retirement plan in place? What are your tips for getting started? Please share your thoughts in the comments!