Planning for retirement is crucial to securing your future and ensuring that you’re comfortable when you stop working.
However, many people are unsure how much they need to save to retire comfortably.
A good starting point is saving 10–15% of your annual income, but the exact amount depends on your age, lifestyle, and retirement goals. Taking a proactive approach and staying informed will help you make the right decisions as you age.
Understanding your retirement goals
Your retirement goals set the foundation for your financial plan. Everyone’s plans are different. Yours might include traveling the world, spending more time with family, or focusing on hobbies. What you want in retirement will shape how much you’ll need to save.
Start by reflecting on your priorities. Will you downsize your home or stay where you are? How much will you spend on activities, healthcare, and daily living? Answering these questions will help you create a savings plan tailored to your future.
A clear picture of your goals will make it easier to determine how much you’ll need, set realistic retirement savings goals, and make smart investment choices.
Estimating your retirement expenses
Planning your retirement needs to start with an understanding of what your future expenses may look like.
To start, look at your current costs and consider how they might change. Basics like housing, utilities, and groceries may stay the same, but healthcare or travel costs could increase.
A standard guideline is to aim to replace 70–80% of your pre-retirement income. This accounts for fewer work-related costs but higher expenses in other areas. Create a detailed budget to identify potential gaps, and factor in inflation and long-term care needs.
Budget tracking tools like Albert make it easier to monitor your current spending so you can project your future costs. Regularly update your expense estimates, so you can stay prepared for unexpected changes and adjust your retirement strategy accordingly.
Determining your retirement timeline
Your retirement timeline directly impacts how much you’ll need to save. Retiring early means you’ll have fewer years to save and more years of expenses to cover. On the other hand, delaying retirement can give you extra savings time and increase your Social Security benefits.
Think about when you want to stop working and how long you expect to spend in retirement. With lifespans increasing, planning for 25–30 years of expenses is wise. Consider how this timeline affects your savings rate and investment choices.
Retirement calculators can help you see how your timeline will impact your goals. These tools let you explore different scenarios and make informed decisions that will align with your future plans.
Retirement savings by age
Saving for retirement is a long-term goal that needs to evolve as you move through life. Each life stage brings unique opportunities and challenges, so it’s important to adjust your strategies along the way.
In your 30s, focus on building strong savings habits and taking full advantage of employer contributions to your retirement accounts. Compound growth works best when you start early, so even small contributions can make a big impact over time.
Your 40s often come with greater financial responsibilities, but your retirement savings must remain a priority. Maximize contributions to tax-advantaged accounts like 401(k)s or IRAs to stay on track.
By your 50s, retirement is on the horizon. This is the time to evaluate your progress, ramp up your savings rate if needed, and take advantage of catch-up contributions available for those 50 and older.
In your 60s, you're nearing retirement age and should start finalizing your income plan. Assess whether your savings align with your retirement goals and prepare for any adjustments. Planning withdrawals and Social Security benefits carefully can also make a significant difference here.
Strategies to boost your retirement savings
Your retirement plan doesn’t have to feel stressful. Working with a few key strategies, like maximizing employer contributions, making smart investments, and taking full advantage of tax benefits, can help you make progress toward your retirement goals.
Maximize employer contributions
Employer matches in retirement plans like 401(k)s are extremely helpful when trying to save money. To take full advantage, contribute at least enough to get the full match.
As your income grows, consider increasing your contribution percentage — it’s a simple way to boost the number in your retirement savings accounts without significantly impacting your budget. Automating your contributions can help ensure consistency, keeping your retirement savings on track with minimal effort.
Explore investment options
Investments are another powerful way to achieve your retirement goals. Building a diversified portfolio with a mix of stocks, bonds, and other assets can help you balance risk and reward.
Regularly review your portfolio and adjust your strategy based on your goals and market trends to keep your plan as effective as possible. Whether you manage your investments or lean on professional advice, staying informed is key to achieving long-term growth.
Take advantage of tax benefits
Tax-advantaged retirement accounts like traditional IRAs, Roth IRAs, and 401(k)s are essential tools for retirement planning.
Traditional accounts offer immediate tax deductions, while Roth accounts provide tax-free withdrawals in retirement.
Knowing how to use these benefits strategically and maximizing your annual contribution limits can significantly grow your savings. Staying current on tax laws will also help ensure you’re getting the most out of these accounts at all times.
Common mistakes to avoid
Avoiding pitfalls in retirement planning can make a big difference in securing your financial future. Misjudging future costs and overlooking inflation are two of the most frequent — and avoidable — mistakes people tend to make. Here’s how to steer clear of them.
Underestimating future costs
Failing to account for unexpected expenses, medical bills, or the possibility of a longer life can leave you with a savings gap you’ll have to navigate.
To avoid this, do your best to create a budget that’s as detailed and realistic as possible, factoring in healthcare, long-term care, and any other potential expenses. Revisit your budget regularly to ensure it stays accurate as your life changes.
Planning for these costs early and revising your budgetalong the way will help you be prepared. Tools like Albert can simplify this process by tracking your expenses and providing you with insights to help keep you on track.
Ignoring inflation
Even modest inflation rates can impact the purchasing power of your savings over time. Without accounting for inflation, your money might not go as far as you expect in retirement.
To combat this, adjust your savings targets to include inflation and consider investment options like stocks, which typically outpace inflation. Being proactive can help ensure that your financial plan aligns with rising costs.
How to track your retirement savings progress
Staying on top of your retirement funds is essential for hitting your financial goals. Regular check-ins on your savings, investments, and overall progress can help you adjust when needed and keep you on the right path.
Set milestones: Breaking your retirement goals into smaller, achievable milestones can help keep you motivated. These benchmarks help you measure your progress and identify gaps early on.
Use financial tools: Comprehensive financial apps like Albert can simplify financial tracking. Albert offers a clear, real-time view of your finances, combining budgeting, investing and financial protection. Features like automated alerts and personalized advice also help ensure you're always informed about your progress.
Adjust your investments: Doing periodic reviews of your investment strategy will help you stay aligned with your goals. Adjustments based on market conditions or life changes ensure your portfolio is working for you.
Building a secure future for your retirement
Saving for retirement is a personal journey that requires thoughtful planning and consistent effort. You can create a more financially secure future by setting clear goals, adjusting your strategies as you go, and using the right tools and resources. Start early, budget to save regularly, and stay informed.
These small steps now can lead to a less stressful retirement where you can enjoy your hard-earned years of rest.
⚡️ Albert makes it easy to budget for today and plan for the future — all in one place. Sign up today.