I’m a 32-year-old man who just started my true career. Until now, I have been waiting tables, making just enough money to pay the bills. Recently, I started a new job at a factory making more money than I have ever seen (yay!).
Currently, I have extra funds. I’ve already started an emergency account and have begun putting money into a 401(k) offered by my employer which will eventually begin to match after a year of servitude.
My question is simply this: What are the next steps for me to still have the ability to retire around 55 and get the most out of my extra income? I think I’m on the right path, but I’m quickly becoming lost as I’m in an entirely new era of saving.
A Late Bloomer
Dear Late Bloomer,
Congratulations on the new job. It’s so important to have a job that you appreciate and, hopefully, work with people who you enjoy. Given that millions of people spend eight hours a day (or more) at work, it makes life so much easier, as you will discover, and can help avoid burnout and stress throughout your working life. It will also help you stay happy and healthy, and in a better state of mind to save and make financial decisions that serve you well. I take my hat off to your positivity.
You are at a good age to start taking your career and your retirement seriously. Just don’t put too much pressure on yourself. Retiring at 55 is a big ask for most people, but not impossible if you live frugally, start saving now, and know that the best investments in the stock market are long-term investments. Another factor to be aware of: In most cases, you cannot access your 401(k), at least without incurring stiff penalties, until you are 59 ½.
Read: Forget retirement — focus on financial independence
There is the Rule of 55 where you can access your 401(k) without penalties at 55, but you would have to meet certain narrow criteria, such as separating from the job that offers the 401(k). Something else to consider — and this is a big one — you should be solvent enough to see you through many decades of retirement.
Another consideration: You must still pay tax on your 401(k) distributions because you have contributed to this fund with pretax dollars. That — as my dear grandmother used to say — may take the currant out of your bun.
“You are at a good age to start taking your career and your retirement seriously. Just don’t put too much pressure on yourself.”