Bankrate’s 2024 Retirement Savings Survey showed a big problem. 57 percent of Americans feel they’re falling behind on saving for retirement. And 35 percent feel way behind. This tells us many people need a solid plan to save for retirement now.
Many Americans feel anxious about their retirement savings due to income inequality and complex saving rules, which further complicates their ability to plan effectively. Additionally, the overall saving rate in the U.S. has been declining while life expectancy has been increasing, making it even more critical to address these challenges.
Economists have found disparities in retirement contributions across different demographic groups, with Black and Hispanic workers contributing less than White workers, further highlighting the need for equitable solutions.
Research suggests that many Americans underestimate how much they need to save, making it even more urgent to start planning and saving for retirement as early as possible. Many people lack a clear understanding of what constitutes an adequate amount of retirement savings due to varying future costs and uncertainties.
Most retirees need between 55% and 80% of their pre-retirement income to maintain their lifestyle in retirement, which highlights the importance of accurate planning.
This guide will show you how to save for retirement with simple steps. You’ll learn why planning for retirement is crucial. Starting to save early is key to maximizing your investment growth and achieving long-term financial security.
You’ll also discover the 4 percent rule and how it helps you plan. Many financial experts recommend using a 4% withdrawal rate from retirement savings annually to ensure funds last throughout retirement. Experts also recommend a savings rate of at least 10% to 15% of pre-tax income for retirement planning, which can help you build a solid financial foundation.
We’ll talk about 2025 limits so you can start saving now. IRA contributions can be up to $7,000, or $8,000 if you’re 50+. 401(k) limits are $23,500, or $31,000 if you’re 50+, with a catch-up of $11,250 for ages 60–63. The contribution limit for 401(k)s in 2025 is $23,500, with an additional catch-up contribution of $7,500 for those aged 50 or older. The contribution limit for IRAs in 2025 is $7,000, with an additional catch-up contribution of $1,000 for those aged 50 or older.
Choosing between Roth and traditional accounts is important. So are RMDs. These choices affect how you save for retirement, and your current income should be considered when determining how much to contribute and which accounts are best for your situation.
To maintain a comfortable lifestyle in retirement, individuals should aim to save at least 15% of their pre-tax income annually, including employer match. Experts recommend saving 10% to 15% of your pre-tax income for retirement to ensure financial stability.
Health costs can stop your retirement plans. But, using tax-smart tools like an HSA can help. In 2025, you need a high-deductible health plan to use an HSA. Contribution limits are $4,300 for self-only and $8,550 for family, with a $1,000 catch-up at 55+. Retired couples can expect to need between $188,000 to $366,000 in savings for healthcare expenses depending on their Medicare coverage level.
Saving for retirement is more than just numbers. It starts with a dream of what retirement means to you. Knowing what you want helps you figure out how much to save and which accounts are best for you, based on your current income and future needs. A common rule is to budget for at least 70% of your pre-retirement income during retirement.
Getting started requires a plan, automatic savings, and regular checks. Having a clear plan can boost your financial confidence and help you feel more secure about your future. If you want a quick guide, check out essential steps to financial planning for retirement.
It offers a helpful overview and links to tools and calculators. Automatic enrollment in retirement plans significantly increases participation rates, often by 26 to 91 percentage points within a year. Studies have shown that automatic savings policies do create longer-lasting gains for lower-income individuals, making them an effective tool for improving retirement readiness.
Why Retirement Planning Matters For Your Future Savings
Planning for retirement changes how you view money today. Making smart financial decisions about saving can turn small steps into a secure future. Use simple tools and habits to make progress without stress. Saving for retirement is complicated by the need to balance immediate spending with long-term savings goals, as many value present consumption. Being forced to withdraw from retirement accounts often occurs during job loss or health emergencies, which can significantly impact long-term savings and retirement preparedness.
Remember, other factors beyond savings, such as health and family needs, also play a role in retirement planning. Approximately 13 percent of individuals aged 25 to 55 take a penalized withdrawal from their retirement accounts each year.
How Time And Compound Interest Work In Your Favor
Compound interest rewards early action. If you save $6,000 a year starting at 22 with a 6% return, you could have about $1.45 million by 67. But, if you wait ten years, you need almost double the savings to reach the same amount.
Fidelity’s benchmarks help you check progress: aim for 1x salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Set a consistent monthly contribution with automatic contributions and auto-escalation so your plan grows without relying on willpower. As you receive annual raises, consider directing a portion of each raise to increase your retirement savings.
Changing Retirement Realities And What They Mean For You
Many households face new risks. The Boston College Center for Retirement Research shows about 39 percent of working households, across a broad age range, might not keep their pre-retirement standard of living. This makes saving money retirement more urgent for many people.
Healthcare and long-term care costs can erode savings quickly. U.S. Health and Human Services estimates nearly 70 percent of 65-year-olds will need some long-term care. Genworth reported that the median annual cost for a semiprivate nursing home room topped $111,000 in 2024. Factor these costs into your plan.
Expect Social Security and employer pensions to fill only part of your needs. Count government benefits and workplace plans when you set targets. Planning for your desired retirement lifestyle is essential to ensure you can maintain your preferred standard of living.
Social Security is often a significant source of income in retirement for many people, making it crucial to understand how it fits into your overall financial plan. Working with an advisor often boosts assets over time and improves peace of mind; read a helpful summary at retirement and financial planning.
Setting A Financial Freedom Number And Realistic Goals
Use the 4 percent rule as a starting point: multiply your expected annual retirement spending by 25 to estimate a nest egg. Many people base this calculation on a percentage of their annual income or monthly income to determine how much they need to replace in retirement. This gives a clear savings for retirement target to aim for.
Run scenarios with a retirement calculator to test changes in retirement age, spending, returns, inflation rate, and future performance. Try tools from Bankrate, Fidelity, or your employer to see how small changes affect outcomes.
When setting your savings targets, consider using your preretirement income or pre-retirement income as a benchmark for estimating the income replacement rate needed to sustain your lifestyle in retirement. Most people will need to generate about 45% of their retirement income from savings, making it essential to plan carefully and set realistic goals.
Define what retirement looks like to you—modest, comfortable, or luxury—and build goals around that vision. Revisit your plan regularly. Life, markets, and tax rules shift, so adjust savings and timelines to stay on track with your financial freedom number.
Remember, past performance does not guarantee future results when using calculators or making investment decisions.
Saving For Retirement
First, make a list of all your retirement accounts. Include 401(k)s, IRAs, HSAs, and brokerage accounts. Also, add pension statements and your Social Security estimate.
Review your account balances to understand your total assets held for retirement. Knowing the tax rules for each helps plan your retirement savings.
Assessing Your Current Savings And Retirement Accounts
Compare your savings to benchmarks like Fidelity’s age-based multiples. Start by calculating your current retirement savings—this means the total balances across all your retirement accounts, such as 401(k)s and IRAs. Also, look at Bank of America’s middle-income estimates.
Check if your accounts are pre-tax or after-tax. Pre-tax plans are taxed when you withdraw, while Roth accounts offer tax-free withdrawals.
Think of your HSA as a tool for health costs and retirement savings. It can be used for health expenses and as an extra retirement account with smart investments.
How To Increase Contributions And The Impact Of Small Changes
First, capture any employer 401(k) match. This is like getting free money. Then, aim to max out an IRA, then the 401(k), and add taxable investments as needed.
Even small increases in contributions matter. Use auto-escalation or direct a part of your raises to retirement funds. Over time, these small increases can make a big difference.
Balance saving with paying off debt. Pay high-interest debt first. You might keep a low-rate mortgage while saving for retirement if investment returns are higher than your loan rate. Avoid early withdrawals from retirement accounts, as they can reduce your long-term savings and impact your retirement preparedness.
Prioritizing the repayment of high-interest debt, such as credit card balances, can be more beneficial than saving for retirement in the short term, as it reduces financial strain and allows for more effective long-term planning.
Using A Retirement Calculator And Tracking Progress
Try different scenarios with tools like Bankrate’s calculators. Change assumptions for returns, inflation, and retirement age to see how it affects your plan. Many retirement calculators allow users to see projections of their savings growth based on different rates of return, helping them make informed decisions about their financial future.
Keep track of your progress against benchmarks and your financial goals. Monitor the growth of your principal amount over time to evaluate how your investments are performing. Rebalance your investments regularly. Also, review your plan after big life changes like marriage, children, or job changes.
For tips on saving early, automatic deposits, and registered plans, check out the Financial Consumer Agency of Canada at start saving for retirement.
Building A Retirement Savings Strategy And Portfolio Allocation
You need a clear plan for saving for retirement. It should fit your timeline, risk level, and life goals. When building your retirement savings strategy, always consider your risk tolerance to ensure your plan matches your comfort with market ups and downs.
Start with a simple plan that balances growth and safety. Keep an eye on your retirement savings portfolio to adjust as needed.
Match your asset allocation with your retirement years. If you’re young, focus on stocks for growth. Use broad index funds or target-date funds for simplicity. As you near retirement, move to bonds and conservative holdings to reduce risk. Choosing the right asset mix is essential to meet your retirement goals and manage risk effectively.
Use an asset allocation calculator to find the right mix for you. For example, aim for 80% stocks and 20% bonds by age 40. This balances risk and growth. Make sure your portfolio aligns with your investment objectives, such as your target retirement age and desired income. Don’t forget to manage old 401(k) accounts by rolling them into an IRA or your current plan.
Understanding sequence-of-returns risk
Sequence-of-returns risk can hurt your nest egg if the market drops before or during retirement. This risk makes planning withdrawals and diversifying crucial. Keep a cash reserve of one to six months, increasing to six months as responsibilities grow. This helps avoid selling investments in downturns.
Use both taxable and tax-deferred accounts for flexibility. Tax-diversified accounts let you choose where to pull funds based on market conditions and tax impact. Retirement savings plans, such as 401(k)s and IRAs, play a key role in building your portfolio and taking advantage of employer contributions and tax benefits. Conservative withdrawals during tough times help your retirement investments last longer.
Alternatives and diversification beyond the classic 60/40
Spread risk by diversifying beyond the 60/40 mix. Consider real estate, inflation-protected securities, international equities, and commodities. Remember, investments carry risks and can lose value, and diversification does not guarantee profit. When building your portfolio, select each particular investment to fit your overall plan and risk profile.
Explore annuities or guaranteed-income products after understanding fees and contract terms. These can manage longevity risk if you want predictable income. Mix alternatives with core ETFs or mutual funds to keep your investments practical and manageable.
Think about savings vs retirement choices holistically. Small allocation shifts, consistent contributions, and periodic rebalancing keep your strategy on track. Regular reviews help adapt your retirement savings portfolio as life and markets change.
Maximizing Retirement Savings Options And Tax-Efficient Withdrawals
Choosing the right accounts and timing withdrawals can save taxes and stretch your money. This article does not provide tax advice; for personalized guidance on your specific situation, consult a qualified tax advisor. First, review your employer’s pension details and your Social Security statement.
Make sure to capture any employer match in a retirement plan before adding more contributions.
When considering complex withdrawal strategies, it is important to consult qualified professionals who can help with retirement and tax planning. For those seeking holistic advice, comprehensive wealth management services can provide coordinated planning across investments, estate, and tax considerations.
Employer Pensions And Government Benefits
Check your plan documents and talk with HR about vesting, survivor benefits, and payout options. Use your Social Security statement to estimate your social security benefits and test different claiming ages. Be sure to understand your full retirement age, which is typically age 67 for those born in 1960 or later, as this is when you become eligible for full Social Security benefits. This will show how monthly checks change and help you plan your retirement income more effectively.
When your employer offers matching 401(k) contributions, prioritize the match. This free money increases your retirement savings over time and closes the gap between your goals and actual balance.
Personal Retirement Savings Accounts And Conversion Strategies
Compare traditional IRA, Roth IRA, and 401(k) for contribution limits and tax rules. Roth accounts grow tax-free and avoid RMDs, while traditional accounts offer upfront tax relief but add RMDs at 73. A Roth conversion moves tax-deferred funds into tax-free space, but creates taxable income in the year of conversion.
Think about HSA contributions for health costs in retirement. HSAs offer tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. The 2025 limits are higher, and catch-up amounts apply for those 55 and older.
Tax-Efficient Withdrawal Sequencing And Preserving Tax-Advantaged Space
Plan your withdrawal order to manage tax brackets and RMDs. For many, tapping taxable brokerage accounts first, then tax-deferred accounts, and leaving Roth funds for later can lower lifetime taxes. This approach keeps tax-advantaged space for RMDs and unexpected expenses.
Keep some savings in taxable accounts for flexibility in early retirement. These accounts avoid RMD rules and can be structured to limit penalties on early access. Always consider capital gains tax and qualified distribution rules when planning withdrawals.
Before executing conversions or complex withdrawal strategies, consult a tax or financial advisor. Investment products carry risks and may not suit everyone.
Budgeting, Lifestyle Choices, And Working In Retirement
Planning for retirement starts with a budget that matches your lifestyle. It’s important to consider how you can maintain your current lifestyle after you stop working. Think about downsizing, traveling, or taking on caregiving roles. Estimate your yearly spending on housing, health care, hobbies, and travel.
When budgeting and planning, keep in mind the challenges and strategies of retirement saving, as these will impact your ability to sustain your desired lifestyle. Use the 4 percent rule as a quick guide. Multiply your desired annual spending by 25 to find a starting nest-egg target for savings for retirement.
Building A Retirement Budget Based On Your Desired Lifestyle
Start with a list of fixed and flexible expenses. Fixed costs are mortgage, utilities, and insurance. Flexible items are travel, dining out, and hobbies.
Remember to include rising health and long-term care costs. Keep an emergency fund of one to three months at first. Then, build toward three to six months, and maintain six months as responsibilities grow. This helps avoid liquidating assets during market dips. Inflation rates are typically assumed around 3% for retirement planning, affecting the long-term value of savings and emphasizing the need for careful budgeting. Many calculators use this default assumption to estimate the impact of inflation on retirement savings.
Use a retirement calculator to see how spending levels affect your savings needs. Small cuts in discretionary spending can help you save money retirement without feeling deprived.
Options For Phased Retirement And Continuing To Work
You can reduce hours, shift to part-time work, consult, or start a side gig to supplement income. Working longer allows for more compound growth and higher contribution limits, including catch-up contributions at age 50 and older. Delaying Social Security claiming can also raise monthly benefits.
Compare the income from working an extra one to five years with the impact on withdrawals from your savings for retirement. Use a calculator to see how continued earnings change required withdrawal rates and the chance to save to retire on your terms.
Planning With Your Spouse Or Partner
Talk openly about goals, timelines, and who will handle day-to-day finances. Coordinate savings rates, pension choices, and Social Security claiming to match your shared lifestyle. Keep beneficiary designations, wills, and powers of attorney current so survivor benefits work as intended.
Balance competing priorities, such as college costs for children versus retirement needs. Many advisers recommend prioritizing retirement because you cannot borrow against future retirement income. Good communication helps you avoid hidden financial surprises and makes your joint plan more resilient.
For practical tools and a planning framework you can use today, consider a trusted guide like financial planning for retirement to align your budget, working options, and partner planning with realistic steps to save to retire.
Protecting And Growing Your Retirement Funds While Enjoying Retirement
When you retire, having a solid plan for your money is key. Use a multi-bucket approach to manage your funds. Keep cash for emergencies, use taxable accounts for spending, and tax-deferred and tax-free accounts for managing taxes.
Periodically rebalance your investments to keep them in line with your goals. This helps avoid taking on too much risk. Think about guaranteed income options like annuities or pensions, but check the rates and fees first.
Make sure you have enough insurance and understand your Medicare options. Also, consider long-term care insurance early, as it gets harder to get later in life. These steps help protect your retirement savings from big losses.
To grow your savings efficiently, focus on tax-efficient strategies. Hold tax-inefficient assets in tax-deferred accounts. Use tax-efficient funds in taxable accounts. Harvest losses and use Roth conversions wisely to manage taxes.
Max out 401(k) and IRA contributions and use catch-up contributions if you can. This helps keep your tax benefits. For tips on managing your retirement savings, see this guide: retirement savings tips.
Build a withdrawal plan that fits your budget and risk level. Use calculators to check if your withdrawals are sustainable. Remember, traditional IRAs and 401(k)s have RMD rules after age 73.
Regularly review your spending, investment performance, and health needs. Get advice from financial, tax, or legal experts before making big decisions. This helps balance protection and growth in your retirement.