3 Retirement Strategies to Employ Before You Hit 40

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It's never too early to start preparing for retirement. To make sure you're on the right path, here are three retirement strategies to put in place before hitting the big four-oh. (See also these strategies for planning in your thirties, forties, fifties and beyond). If you adopt the right moves at each stage, you'll be more able to retire when and how you want.

1. Identify, prioritize, and plan

Let's face it. Your forties are a stage of life where you are pulled in many directions -- physically, emotionally, and financially. Whittling down credit card debt, paying off your own student loans, saving for your child's college education, and contributing to your retirement all compete for your dollars. But you don't have to let it overwhelm and discourage you.

Instead, identify your financial goals, prioritize your needs, and make a plan to address them.

First and foremost, devise a plan for reducing your debts. Paying them off faster lets you maximize retirement savings. Transfer any balances from high-interest-rate credit cards to one with a lower rate. Ideally, find a card with a zero-percent introductory APR. Then, take your balance, divide that by the number of months you have until the zero-percent-interest clock stops, and voila, you have a plan for eliminating credit card debt with the smallest monthly outflow possible.

2. Benchmark your retirement savings

Chances are good that by now you've asked yourself the burning question: "Am I on track?" To answer that, Fidelity recommends having the equivalent of twice your annual salary accumulated in retirement savings by age 40 (if you're curious, it's four times by age 50 and six times by age 60).

Keep in mind that these milestones are general rules with assumptions that might not fit your particular situation. Since every individual's circumstance differs, proceed with caution when using retirement savings calculators. Seek advice from a financial planner for more customized guidance.

3. Pump up your contributions

If you fall short of your benchmark, amp up your retirement plan contributions. Luckily for you, the contribution limits are quite generous: $17,500 for 401(k), 403(b), and 457 plans for 2013. And thanks to the phenomenon of compound interest, by upping your retirement contribution now, you won't need to save nearly as much money later.

Here your strategy is to contribute at least enough money to your 401(k) to get the maximum match your employer offers. But if you're flush with cash, why stop there? Invest as much as you can into your retirement plan at work. If you already max out your plan contribution (and a huge high five if you do!) or if you'd like to add some tax diversification to your overall plan, contribute to a Roth IRA. Just make sure you meet the eligibility requirements before doing so.

Get started today

Retirement is getting closer with every passing day. But before age 40, you've still got plenty of time to save. By identifying your financial goals, prioritizing your needs, and contributing enough toward your retirement savings, you'll reap the glorious reward of a retirement on your terms.

Nicole Seghetti is a contributing writer to The Motley Fool.

12 PHOTOS
Best States for Retirement Aren't the Ones You Might Think
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3 Retirement Strategies to Employ Before You Hit 40
Not only does it have a Florida-like climate, but Tennessee also boasts the second lowest cost of living in the country. Combined with a low tax burden and great access to medical care, Tennessee is ideal for retirees living on fixed incomes, Kahn said. The only downside: the state has one of the country's highest crime rates.

One of the state's oldest towns, Sevierville, Tenn. (pictured above), provides close access to a national park where retirees can picnic, hike and fish, and it's an easy drive to Knoxville.
Another balmy locale, the state has an average temperature of 66.7 degrees -- behind only Hawaii and Florida for warmest average climate. Louisiana residents also enjoy low taxes, above-average access to medical care and a relatively cheap cost of living. Like Tennessee, though, it suffers from a crime rate that is among the nation's highest.

It may not be a retirement hot spot, but Bankrate says it should be. The state has the country's lowest crime rate, and an estimated state and local tax burden of just 7.6% -- lower than every state but Alaska. The downside: with an average temperature of 46 degrees over the past 30 years, it's pretty darn cold there.

For small town lovers, Aberdeen, S.D., holds a renowned film festival and has a historic downtown that plays host to farmers markets, haunted walking tours and holiday parades.

Photo: Conspiracy of Happiness, Flickr.com

The Bluegrass State is one of many Appalachian states to dominate Bankrate's top 10. While it may not have Florida's sunny beaches, it does boast an extremely low cost of living, warmer-than-average temperatures and a below-average crime rate.

In Louisville, retirees can stay active by walking or biking on the Louisville Loop, a pedestrian path set to eventually cover more than 100 miles. The smaller town of Danville, Ky., meanwhile, is ideal for horse lovers.

Beyond its warm weather, Mississippi also provides cheap living costs and a lower tax burden. But retirees may want to choose where they live carefully: the state has a high crime rate and subpar access to medical care. It has only 178 doctors per every 100,000 residents -- almost 100 less than the national average.

Photo: Natalie Maynor, Flickr.com

This coastal state came in above average for most factors that Bankrate analyzed, including climate, access to healthcare and cost of living. Its crime rate is one of the lowest in the country, with only 2,446 property and violent crimes per 100,000 people.

An affordable college town, Lynchburg, Va. offers the beauty of the foothills of the Blue Ridge Mountains, as well as historic Civil War sites.

Another Appalachian state, West Virginia is boosted onto the list by low crime, a cheaper cost of living and above-average access to medical care. Still, it has a colder climate than some of the other states.
Warm temperatures, low state and local taxes and a relatively low cost of living all pushed Alabama into the top 10. Yet it suffers from below-average access to medical care and a relatively high crime rate, with 4,026 crimes per 100,000 people -- almost double that of Virginia.

Home to a campus of the University of Alabama, Huntsville, Ala. offers botanical gardens and nature preserves and 19th century architecture. Near the Georgia border, Fort Payne, Ala. is a quintessential small town with activities that include an annual fiddling convention and a stop at the "world's largest yard sale."

Beyond its cornfields, Nebraska offers excellent access to hospital care, a below-average crime rate and living costs among the country's cheapest. But with a lower than average temperature, it's another state for retirees who don't mind the cold.
Like neighboring South Dakota, this state is not for retirees looking for warm weather. But it does have the second lowest crime rate in the nation, a mild estimated tax burden of 8.9% and 5 hospital beds available for every 1,000 residents.
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