When to start saving for retirement

As we get caught up in day-to-day living, it can be easy to forget about the future. But if you're going to be financially savvy, it's essential to start considering your retirement. Planning for retirement is one of the critical pillars of financial well-being. After all, you don't want to turn 60 and realize your retirement plan is to basically scratch-off lotto tickets and hope.

If you're a retirement planning newbie, don't worry—we've got you covered. We can answer all your burning questions, like when you should start saving for retirement and how much you should save, and give you some tips to make saving easier. 

When should I start saving for retirement?

You might not love this answer, but you'll need to start saving for retirement immediately. The more you can save now, the more your money will grow, thanks to compound interest.

In a perfect world, you would start setting money aside for retirement as soon as you get a steady paycheck. However, that's simply not how life works for most people. Most people don't start worrying about retirement until a little later on in their adulthood. 

The good news is you can catch up. It all starts with knowing how much you need to save and how to get to that goal. 

How much should I save for retirement?

Wondering how much to save for retirement by age? Well, how much you need for retirement is a personal decision based on a few factors, including:

• Where you plan to live when you retire

• What lifestyle you want to maintain

• If you'll own property

• If you'll be mortgage-free

A general rule of thumb is that you'll need 70% of your pre-retirement annual salary. However, that number assumes you own your own home, don't have debt, are in good health and don't plan to travel too much. If any of those factors aren't accurate for you, you'll likely need more than 70% of your income. 

Let's say you make $80,000. You're going to retire at 65 and hope to live until 80 (the U.S. average lifespan in 2020 was 76.4 years). Let's assume you wish to travel, so you want to save 80% of your pre-retirement income. That means you'll need to have $960,000 saved for a comfortable retirement. 

We know that's a lot of money, but compound interest and investing your money can help you get there. 

And the good news is that you can also be flexible with your plans to make your retirement goal more achievable. If the amount you need to live comfortably in retirement feels too high, consider what you can change in retirement to lower your cost of living. You could move to a cheaper state or a cheaper country or consider downsizing your home.

Regardless of what your life looks like in retirement, one thing is certain. You'll need a decent amount saved to survive. 

What to do if you’re “behind”

Most experts suggest that if you put away 15% of your pre-tax income annually starting at 25, you should be set for retirement. Of course, many of us may be reading that advice in our 30s and 40s and starting to fret.

Luckily, it's not too late. Take a deep breath. You can do this. 

First, calculate how much you'll need for retirement. You'll need to start putting money aside for that goal as soon as you can manage it.

You might be starting a little "late," but you can still catch up and have the wonderful retirement you deserve. You'll just have to take saving as seriously as possible. 

How to save for retirement in 6 steps

Now that we know why saving for retirement is so important and how to calculate how much we need, all that is left is to start saving. But saving can actually be quite challenging. It’s difficult to resist the temptation to spend now and instead put aside your hard-earned money for the future. 

Here’s how to prepare for retirement in six easy steps.

1. Automate the process

If you're counting on yourself to set money aside manually, you can guarantee there will be times when you forget to do so or find excuses to spend the money instead. Take all the work and thought out of it, and set up automatic withdrawals with your bank. The day you get paid, the contributions to your retirement accounts are immediately taken out. 

2. Take advantage of company matching programs

Take advantage of your workplace's company matching program for your 401(k). Max out the account, so you're getting every dollar out of your company. This is essentially free money from your organization that is directly benefiting your retirement. 

3. Use tax refunds wisely

Many Americans receive a tax refund after filing their annual taxes. If you fall into this category, you can put that money into your retirement fund. It's not very fun, but it can be one of the most practical things to do with your annual tax refund.  

4. Put raises toward retirement

Many of us are lucky enough to receive a raise every year or so at work. Make it a habit to increase your retirement contributions as soon as you get a raise. 

5. Take the 1% challenge

Consider pushing yourself to contribute 1% more than you did the previous year to your retirement savings. It's a slight increase, so it's manageable, but over time, this tiny amount can add up.  

6. Track your progress 

Make sure you keep an eye on your progress. As your numbers slowly climb, you'll likely find it very motivating to see the headway you're making. Tracking your progress might help you keep your eye on the prize and push yourself to contribute more.

Why you should care about planning for retirement 

The idea of saving for retirement may not feel very exciting. But remember why you're doing this. At the end of your career, you'll want a comfortable retirement with minimal worries. You can start saving now so that your future self can sit back and enjoy some hard-earned relaxation time.