What to know about saving for your retirement

09th November, 2021

With the continuous advancement in technology and medicine, people now live longer. However, the mere prospect of living as a retired individual for about four decades, the same time frame the individual spends working, can make planning and saving all the more imperative. However, saving is just one piece of the whole retirement puzzle. The essential factor is how much should you save? Typically, financial advisors recommend saving about 10-15 percent of your income. However, certain savers might be well outside the recommended range. If you have any apprehensions about your trajectory, it is okay for you to consult a retirement calculator to analyze your approach. Nonetheless, here is our beginner’s guide for saving for retirement.

1. You are never too young to start

So, let us address the big question — when should you start saving for retirement? If we have to give an honest one-word answer to this question, we would say “now!” Now is when you start. Your 20s, the time when you start earning, is when you should also start saving for your retirement. The benefit of compounding is unprecedented. So, the earlier you begin planning, the more time your money will have to grow.

Having said that, if you are in your 30s and have not started yet, know, it is never too late. Every penny you save now will prove worthwhile in the future. However, invest strategically so you do not end up playing catch-up for too long.

2. Do not be intimidated by the acronyms and numbers

Of course, if you are starting, the numbers and acronyms might seem a little confusing, but it is not as scary as it might seem on the face of it. We will address a few numbers you will encounter:

  • 401(k)s and 403(b)s
    Former is the account that you get via your employer. It is funded via your pre-tax payroll deductions. On the other hand, the latter is an account you get if you work with a non-profit organization or an educational institute.
  • IRAs
    Individual Retirement Fund Account or IRA is an account independent of your place of employment, and anyone can open this account. These are suitable for someone with no employer or whose employer does not provide a 401(k). However, people usually save in both IRA and 401(k) or 403(b) because IRA has additional benefits, absent in employer-sponsored retirement accounts.

There are three different varieties available.

  • SEP IRA, which is for the self-employed.
  • ROTH IRA that uses your after-tax money
  • Traditional IRA, which is tax-deductible


All of these have different rules and features.

  • Social security is going to be there, but it will not be enough
    Social security benefit requirements will demand contributions up until 2037. This is long before many of the present 20 somethings will reach their retirement age. There is a probability that we may see some government-provided income as we retire, but it might not suffice. Thus, it is vital to take matters into your own hands.
  • Figure out the amount you want to invest
    The amount needed to retire depends on your current expenses and income and how the same will change after retirement.

The idea is to replace about 70-90 percent of the annual-pre-retirement income via social security and savings. For instance, if you make 60000 USD annually pre-retirement, you may require 42000-56000 USD annually after retirement.

3. Be careful with where you invest
To start your retirement savings, you do not have to know a lot about investing. You can ignore what’s happening in the stock market. However, it is vital to make contributions. You get the target-date mutual funds in 401(k) plans, depending on the year you retire. The funds will auto-adjust the investments over time. Initially, they commence as aggressive, but they become more conservative as the target date comes closer.

4. Do not ignore your financial goals

Saving for retirement is not going to be your only financial goal. You may also have other goals on the side, such as paying your student loan, clearing your debts, or building an emergency fund. Thus, it would be best if you ran all of this parallelly, and one should not come at the compromise of the other.