Money Matters

6 Easy Money Moves to Make Now That Will Pay Off Huge Later On

If you’re in your thirties, odds are your financial situation is a mixed bag. On the one hand, maybe you’ve settled into your career and built a little nest egg. At the same time, you might be juggling student loans, a mortgage, and childcare.

Look at the bright side: You still have time on your side (albeit not as much as you had in your twenties). So even small moves can make a huge difference long-term. Here are six moves you can make now that will pay big dividends down the road:


1) Embrace stocks: The financial crisis took its toll on many thirtysomethings. Nearly 40% of Gen Y-ers say they’ll never feel okay investing in stocks, MFS Investment Management has reported. Take note: Since 1926, a portfolio mostly in stocks has never lost money in any 20-year period while averaging gains of more than 10.8% a year, versus 4% for bonds. At age 30, you should have most of your portfolio in stocks, with about half in U.S. equities and nearly 30% in foreign equity. Need more guidance? Get an age–appropriate mix with a target-date fund in your 401(k). Take a look at the MONEY 50 list of the world’s best mutual funds and ETFs for specific suggestions.

2) Save in a Roth 401(k): With a Roth you save with after-tax dollars, so, unlike with a regular 401(k), you won’t pay income taxes on withdrawals. That’s a good deal if you’ll be in a higher tax bracket at retirement, as is the case for many young investors. Four in 10 large employer plans now offer a Roth option, according to Aon Hewitt. To hedge your bet on future tax rates, split your contributions between a Roth and a traditional pretax 401(k).

3) Don’t cash out: More than half of workers in their twenties who leave a job do not roll their 401(k) into an IRA or their new employer’s plan, says Aon Hewitt. Bad move: On a $10,000 balance, you could be left with just $7,000 after taxes and penalties. If, instead, you keep that money growing at, say, 6% a year, you’ll have an extra $100,000 or so by the time you retire.


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