Here is a information to wealth constructing, decade after decade

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There’s never a better time to start building your wealth than now.

But how you do it depends on your age.

“The better you manage your financial security, the more flexible you will be in making better decisions in the future,” said certified financial planner Carolyn McClanahan, MD and founder and director of financial planning at Life Planning Partners, based in Jacksonville, Florida.

Here’s a decade-long guide on how to grow your wealth.

In your 20s

The first thing to do is set up an emergency fund. If your job is very secure, you have a savings goal of three to six months in expenses. McClanahan advises that if it’s unsafe, such as a commission-based sales job, aim for six to twelve months.

If your employer has a 401 (k) plan and offers a match, you’re contributing enough to get that match.

After that, open an individual Roth retirement account if your income is eligible, McClanahan said. The maximum amount you can deposit in 2021 is $ 6,000.

If after you’ve exhausted your Roth, if you still have some cash to save, you’re adding more to your 401 (k). In 2021, you can deposit up to $ 19,500 into the account.

At this age, your portfolio can contain more stocks than fixed income, as you have more time to recover from downward markets.

Finally, make sure you have adequate insurance, especially auto and disability insurance, as an accident or health problem could wipe out your savings.

In your 30s

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As you grow in your career, you shouldn’t succumb to the “lifestyle creep” and start spending that new money, warned CFP Matt Aaron, founder of Washington, DC-based Lux ​​Wealth Planning, a subsidiary of Northwestern Mutual .

Instead, increase your 401 (k) plan contributions. The rule of thumb is to set aside around 10% of your income when you’re starting out young, but a finance professional can help you figure out the numbers, he said.

After you’ve exhausted these contributions, start investing outside of your retirement account. Your portfolio should be diversified, with a mix of stocks and bonds.

Historically, stocks return about 7% a year, adjusted for inflation, so it’s important to invest rather than leave them in a savings account or under the mattress, said CFP Elaine King, founder of Family and Money Matters in North Miami, Florida.

“The money can double every 10 years,” she said.

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You may also be considering buying a house, getting married, or having children. If you’re starting to save up for these events, don’t invest in stocks unless your time horizon is more than five years, advises McClanahan.

Instead, she recommends a money market account that doesn’t bring great returns but isn’t as risky as stocks.

When someone is counting on your income, like a spouse or child, it’s time to get life insurance too.

The action-packed 40s

You may now be in your top earning years and may have to grapple with the cost of raising children.

You may have aging parents too, so check your financial planning, suggests McClanahan. If they’re not prepared, this is another financial obligation that can suddenly be thrown into your lap.

Evaluate all of the college savings you have for your children. If you haven’t started already, don’t divert your savings from your retirement account if you can’t save for both.

“You can borrow for college but not for retirement,” McClanahan said.

For those who have not yet started saving for retirement, putting aside 15 to 20% of your income is the general rule of thumb at this age, Aaron said.

It’s also a good time to consider doing outside work to increase your source of income beyond your job, King said. Think of it as a plan B if you lose your job and something to go ahead with if you decide to leave, she said.

Get serious at 50

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Retirement may be a decade away, so it is time to think seriously about how much you are really spending and whether you are on track to save enough to last you all your life, McClanahan said.

As soon as you have reached 50, you can also put more back into your 401 (k) or IRA with so-called catch-up contributions. It’s up to $ 6,500 for 401 (k) plans in 2021 and $ 1,000 for IRAs this year.

Unless you are using a financial planner, getting a financial planner at least hourly to see if you are on track to support your retirement lifestyle, she recommends.

Evaluate your wealth and make sure your portfolio is tailored to your needs. As you near retirement age, experts usually recommend reducing risky assets like stocks and increasing fixed income securities like bonds.

However, it’s important to keep stock exposure as it will give you a higher return, said Aaron.

King actually recommends considering alternative investments like startups or real estate. They could add to your stocks and bonds portfolio and add diversification as the market rises or falls.

In your 60s and beyond

At this point, you need to have a pension distribution strategy in place, said Aaron. This means that you understand the different sources of income that you will have.

“We need to build an investment strategy that is based on an appropriate asset allocation and only taking as much risk as is necessary for the income you need and your existing goals,” he said.

If you’re worried about taxes, consider investing in municipal fixed income instruments like municipal bonds, King said. You are not taxed at the federal level.

It is also important to understand the best option for you to make social security claims. Too many people take it by the age of 62, which is the earliest possible, McClanahan said.

However, you are only entitled to full benefits once you have reached full retirement age, which is 67 for births from 1960 or later. If you delay the use of the services from 67 to 70, your amount will increase.

“Postponing that is the best investment you can make in your future,” said McClanahan.

She recommends that those who are healthy and have a high chance of living until the age of 80 should wait until the age of 70. The return on waiting is an 8% growth per year, she said.

It gets complicated for married couples, however, and it’s usually better to have one requested early and the other delayed, she noted.

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