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Key takeaways

  • The exact amount you should save for retirement will vary based on your goals, timeline and financial situation, but try to save at least 10% of your pre-tax salary each year.

  • Saving through a variety of investment accounts with different tax treatments may help reduce the taxes you pay over your lifetime and into retirement.

  • An employer sponsored retirement plan, a Roth account and an HSA are good options to start investing in. 

Investing for retirement is one of the most important financial tasks we’ll tackle in our lifetime, but with inflation, lifespan and other factors to consider, it can be hard to know just how much to save.

Here are some general guidelines and tactics for building a retirement income that will help you maintain your lifestyle.

One thing that everyone should do is diversify the types of accounts you’re saving your money into so you can maximize your tax situation into retirement.

How much should I save for retirement?

While an exact percentage will vary based on your individual goals and timeline, a general rule of thumb is to save 10–15% of your pre-tax salary each year for retirement. This target is a helpful baseline for most people to start with, because while you might not necessarily notice the difference each paycheck, it’s enough to make a difference come retirement.

TIP: To calculate the 10–15%, remember to use your pre-tax salary figure, as this number will look a lot different than your salary after taxes.

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Of course, you may choose to set aside more or less than that 10-15%—and you might change the percentage at different times in your life. Let’s take a look at other factors that can affect how much you save for retirement and which vehicles you use to save.

Determine your specific retirement goals.

A crucial first step in retirement planning is being honest with yourself about the kind of life you expect to lead in your retirement years, whether that date is far away or just around the corner.

Since your goals and aspirations for retirement are unique to you, it’s important to take the time to try and envision what your ideal retirement looks like.

For example, if you want to travel abroad regularly, spend the winter in warmer climes or establish philanthropic endeavors, your plan should account for those larger expenditures. But if you plan to stick close to home and occupy yourself with family and local activities, your retirement planning might look a little different.

So, spend some time thinking about your financial present as well as the financial future you want when you’re fully retired. Once you do this, you can create a plan that ladders up to that lifestyle.

Factor in your retirement age and time horizon.

The length of time you have until retirement will also affect how you save and which retirement strategies are best suited to you. Here are some age-specific tactics that may help maximize your retirement savings.

  • Starting out in your career. As a young investor, you have two things on your side: time and compound returns. That means the earlier you can start saving for retirement, the better. And, if you’re just starting out and not yet in a high tax bracket, it would be wise to invest in a Roth IRA, where you invest money after tax (more on Roth IRAs in the next section).
  • Planning for kids or another life change. Expanding your family or preparing for another significant life event can quickly change your budget. Consider contributing as much as you can to your 401(k) before these life events take place. Why? You’ll not only increase your retirement fund but also learn to live on less. That way, when kids come along or another life event happens, you’re better prepared for those expenses.
  • When retirement is on the horizon. An option that can help ease the transition from working full-time to retirement – both financially and psychologically – is phasing into your retirement. If it works for you, consider working three-quarters of the time and then part-time before you retire completely. Stretching out retirement can help you not lean so heavily on your savings right away. This will give you more wiggle room with your budget and allow you the potential to do more of what you want to do in retirement.


How to save for retirement

Everyone’s financial situation is unique. Some may start saving for retirement early on, while others have had to play catch up after a late start. One thing that everyone should do is diversify the types of accounts you save and invest in, so you can maximize your tax situation in the future.

Here are three buckets to consider when saving for retirement.

Contribute to a 401(k).

The tried and true standby, investing through an employer sponsored retirement plan like a 401(k) is a great foundation for your retirement savings. Especially if your employer offers a match, contribute at least the percentage of what your company is willing to put into your 401(k) to avoid leaving money on the table.

Additionally, find ways to boost your contributions. Any time you have more income coming in than you normally do – let’s say when you get a bonus or a raise – use that to increase your contributions when possible. And if you’re 50 and older, try to take advantage of increased “catch-up contributions” to your 401(k) or IRA. If you can set the money aside before it hits your bank account, it’s less likely you’ll miss it.

Contribute to a Roth account.

Aside from a traditional 401(k), depending on your income level, also look into either a Roth 401(k) or Roth IRA. A Roth 401(k) is likely another option offered by your employer, and technically you can invest in both types of 401(k)s at the same time. A Roth IRA, on the other hand, is an individual retirement account that you can set up on your own or with the guidance of a financial professional.

Both a Roth 401(k) and a Roth IRAs offer potential tax benefits, because your contributions are taxed now instead of when you ultimately withdraw funds. This means that when you need to access your funds during retirement, everything in your Roth account is yours, tax-free.

A Roth account can maximize your tax situation in retirement, especially if you expect to be in a higher tax bracket in the future. While much of what you save for retirement each year can be funneled into your traditional 401(k), you may want to consider putting at least 1–5% of that into a Roth account.

Take advantage of an HSA.

An avenue that many people overlook when it comes to retirement savings is an HSA (Health Savings Account). Healthcare is typically one of the biggest expenses in retirement, and while Medicare provides basic coverage for most retirees, it isn’t free and it doesn’t cover everything.

An HSA is the only account with both tax-free contributions and withdrawals. If you have a high-deductible health plan, an HSA can help you accumulate savings while you’re still working and provide a source of healthcare funds in retirement. While you can no longer make contributions to an HSA once you enroll in Medicare, you can use the funds to cover insurance premiums and other out-of-pocket expenses. Plus, you can use it to help offset the costs of long-term care, which nearly 70% of Americans will need at some point in their lives.


Retirement planning can feel overwhelming, but it’s never too late to formulate a plan that considers the lifestyle you hope to achieve, your specific financial situation and what works best for your budget. With a little forethought and a realistic retirement strategy, you can achieve a retirement that fulfills your expectations and delivers financial peace of mind.

Learn how we can help you  work toward your retirement goals.

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