Today, Americans are living longer than ever, and that means longer retirements than previous generations. According to research, the average person spends anywhere from 10 to 20 years in retirement.
Many financial advisors suggest you'll need 70-80% of your annual pre-retirement income to maintain your standard of living.
Ideas about on how to save for retirement
- Decide how you want your retirement to look. Whether you're planning to travel extensively or kick back by a lake, your income will need to support your lifestyle. Once you decide how you'd prefer to spend your retirement days, you can map out a strategy that could help get you there.
- Start now - no matter how old you are. If possible, it’s a good idea to start saving for retirement as soon as you get your first job. If not, start as soon as you can. Although you might need to devote more funds to retirement savings the later you begin. Regardless of your age, simply start saving and save what you can while you can.
- Assess your finances. Take a realistic look at your current financial status. Look at how much you've saved, your debt, the amount of life insurance you have and what you have available in emergency funds. Talk with a financial professional.
- Increase savings. It's never too early — or too late — to add to your retirement savings. Increasing what you save for retirement by one or two percent each year adds up over time. If retirement is near, look into catch-up contributions, which can help improve your financial picture. Set up automatic deductions from your paycheck for whatever frequency and amount works with your budget. Evaluate your savings progress with our retirement savings calculator.
- Knock out debt. Those in the financial industry recommend keeping debt level manageable: no more than 35% of your income. Getting rid of high-interest debt such as credit card balances is something to consider. And before you retire, think about eliminating as much debt as possible so that you aren't servicing it with your savings. Consider paying off your home before you stop working, too.
- Open your own retirement savings account. Starting a separate retirement savings account, like an IRA, is a good option for a couple reasons. If your employer offers their own program and you’ve opted in, then contributing to a separate retirement savings account can help you speed up your retirement savings. If you don’t have an employer-sponsored program, then opening your own tax-advantaged retirement savings account gives you the ability to prepare for the future, regardless of what your employer does or doesn’t offer.
- Save at least enough to get your employer match. Your first step should be to find out if your employer offers a retirement plan and/or 401k and whether or not they provide a match. If so, meet with your benefits coordinator to find out how to take advantage of it to the fullest potential. Many employers will match your contribution, dollar for dollar, up to a certain percentage. Your first goal should be to contribute what you need to get the full match, and then add more to your contribution as it fits in your budget. Be sure to also check any vesting policies your company may have.
- Put your money to work. Raises, gifts, bonuses, tax refunds and any other unexpected income are other ways to help build your savings for retirement. In addition, if you have allocated a certain amount toward debt repayment, use those same funds to increase your retirement savings once your debt is eliminated.
- Review and revise your plan every year. Review with a financial professional every year to see if you're still on track. It's also a good idea to review your insurance coverage periodically, and any time your life changes, such as when you marry or have a baby. As you near retirement, you might decide to shift some of your savings to income-producing investments, such as annuities. Or, to keep your nest egg intact, your plan may be to continue working a few years more into retirement.