January 15, 2025
Many of us know that it’s important to save for retirement and that the earlier we start, the better. But sometimes life can get in the way, and our savings goals can take a back seat to other more immediate priorities.
There may be times when you feel like you’re behind or aren’t doing enough. First, don't be too hard on yourself - saving for retirement takes time and discipline. The key thing to remember is to do what you can given your circumstances.
Ahead, we'll go over a few retirement savings tips that are relatively simple and, more importantly, achievable no matter what stage of life you're in.
This is probably the most challenging step because there are so many unknowns. You don’t know how long you’ll live. You don’t necessarily know when you’ll retire – even if you have a target age, it may come sooner or later than you think.
You also don’t know what sort of healthcare costs you or your loved ones might incur. Your location and lifestyle will impact this number. Point is: You just don’t know, and not knowing can make retirement planning a daunting task.
So what can you do? There are several retirement planning calculators out there that will try and factor in some of the variables (retirement location, lifestyle, wage inflation, etc.). There’s also a basic rule of thumb that you’ll need 80% – 100% of your pre-retirement income each year once you retire.
Going with this rule, let’s say you retire at 65 with a $150,000 annual income. For this example, let’s use 90% as the percentage of your income you’ll need in retirement. Take that $150,000, multiply it by 0.90, and $135,000 is the annual income you’ll need in retirement. That’s well over $3 million if you live to 90.
Keep in mind that this is just a basic example. It's important to do some research, crunch your own numbers, and figure out a ballpark goal that's realistic for you. Even a range is fine because planning your retirement with some actual numbers is a critical first step. Whatever you do, don’t just wing it and hope that you’re saving enough.
Good to know: Everyone's financial situation is different, so you may also want to think about bringing in a financial advisor to work with you on your retirement planning.
Start by establishing good habits and making retirement a priority. How you manage your finances now will shape much of how you handle finances in your future, and you want to build a solid foundation. Time is on your side, and the more you save early on, the more compound interest will work in your favor.
Maybe this section is for your kids (or grandkids), and if so, help them by reinforcing good habits.
At this stage, you’re likely earning more than you were in your 20s. It’s also the point in your life where your obligations – financial and others – can start to expand. This is where putting together a financial plan can help you stay on track for your goals, avoid lifestyle inflation, and make sure saving for retirement remains a priority.
If you’re behind (or just getting started): First, don’t panic. Even if you start now, compound interest can still work in your favor and help you reach your retirement goals. Make sure you understand the fundamentals covered in the previous section and then set aside a greater percentage of your salary for retirement if you can.
Your responsibilities in your 20s and 30s probably seem like a cakewalk once you hit 40. For some in this age group, you might find yourself in the stressful position of having to take care of both your own children and your aging parents. And when you’re taking care of everyone else, it can be easy to forget about yourself and your priorities.
If you’ve built good habits in your earlier years, keep going!
If you’re behind (or just getting started): Know that you’re not alone. If cutting your budget only does so much, think about ways you could increase your earnings – ask for a raise, look for a higher paying job or consider another income stream (rental properties, side gigs for passive income, etc.).
Retirement probably doesn’t feel so distant now that you’re in the homestretch. And while you might still have a number of competing priorities you’re juggling, keep focusing on your future. Your focus will gradually start shifting from building your savings to accessing your savings. Your money should continue to work for you, but as your retirement age inches closer, you’ll need to figure out how to manage your retirement income.
If you’re behind (or just getting started): Take a deep breath. Be realistic about your retirement goals and when you plan on retiring. It’s possible that you may need to work longer to meet those goals. The most important thing you need to do is start saving more if you can.
Remember: No matter your age, start by getting a general estimate of your retirement needs. Then save accordingly, evolving your strategy as you age.
Retirement can be nearly a third of your life, and you'll want to enjoy it without having to worry about money. Early planning can go a long way to help you build a healthy nest egg, so that you can head into your golden years with confidence.
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