Retirement Planning Basics: When and How Much to Save

Most people think retirement is something that happens far off in the future - maybe when they’re 60 or 65. But if you’re waiting until then to start saving, you’re already behind. The truth is, retirement planning isn’t about picking a perfect investment or timing the market. It’s about starting early, saving consistently, and knowing exactly how much you need to live on when you stop working.

Why Retirement Planning Matters More Than Ever

Back in the 1980s, about 62% of big companies offered traditional pensions. By 2023, that number dropped to just 13%. Today, almost every worker is on their own. Your employer might offer a 401(k), but they’re not guaranteeing your income in retirement - you are.

Add to that the fact that people are living longer. The average U.S. life expectancy is now 79.1 years. If you retire at 67, you could be living on your savings for 12 to 15 years - maybe more. And healthcare? Fidelity estimates a 65-year-old couple retiring in 2024 will need about $315,000 just for medical costs, not including long-term care. That’s not a small number. That’s a major part of your retirement budget.

When Should You Start Saving?

The best time to start saving for retirement was 10 years ago. The second-best time? Right now.

Fidelity’s research shows that if you start saving at age 25, you only need to put away about 15% of your income each year to replace 45% of your pre-retirement income. If you wait until 35, that jumps to 18%. At 45? You need to save 24%. Why? Because compound growth works best over time.

Take two people: one starts saving $1,000 a year at 25, the other at 35. Both earn 7% annually. By 65, the person who started early has $86,154. The one who waited? Only $43,425. That’s more than $42,000 lost just because of a 10-year delay.

It’s not about being perfect. It’s about being early. Even if you can only save $50 a month at 28, that’s $600 a year. At 7% returns, that grows to over $127,000 by age 40 - as one Reddit user demonstrated. Start small, but start now.

How Much Should You Save Each Year?

The standard advice? Save 15% of your gross income. That includes any money your employer puts in. If your company matches 50 cents on the dollar up to 6% of your salary, and you contribute 6%, you’re already at 9% total. You only need to add 6% more from your own pocket to hit 15%.

But 15% isn’t magic. It’s a baseline. If you want to retire early, live in a high-cost area, or expect higher medical bills, you might need more. Some experts, like Stanford’s Laura Carstensen, argue that with lifespans stretching past 100, you should aim for 25%.

Fidelity gives clear benchmarks for where your savings should be at different ages:

• By 30: 1x your annual salary
• By 40: 3x your salary
• By 50: 6x your salary
• By 60: 8x your salary
• By 67: 10x your salary

If you make $70,000 a year, that means you should have $70,000 saved by 30, $210,000 by 40, and so on. These aren’t targets you hit overnight - they’re milestones to keep you on track.

Where Should You Save?

Not all accounts are created equal. Here’s how to prioritize:

1. 401(k) with employer match - Always contribute enough to get the full match. It’s free money. For a $60,000 earner with a 50% match up to 6%, that’s $1,800 extra a year.
2. Roth IRA - If you expect to be in a higher tax bracket in retirement, this is your best friend. Contributions are made after tax, but withdrawals are tax-free. Max out at $7,000 in 2024 ($8,000 if you’re 50+).
3. Traditional IRA or 401(k) - Good if you want a tax break now. But you’ll pay taxes later.
4. After-tax brokerage accounts - For those who’ve maxed out tax-advantaged accounts and still want to save more. No tax breaks, but no contribution limits either.

High earners hit limits fast. The 401(k) cap is $23,000 in 2024. If you make $150,000 and want to save 20%, you’ll need to use taxable accounts to fill the gap.

What Most People Get Wrong

Many think they’re saving enough because they’re putting away 10%. But 10% is outdated. The average worker contributes just 7% to their 401(k), and 56% of those with employer plans don’t even contribute enough to get the full match. That means they’re leaving an average of $1,123 a year on the table.

Another big mistake? Underestimating healthcare. One Trustpilot reviewer said they followed the “save 10%” rule but didn’t account for medical costs - and ended up $180,000 short. That’s not a rare story.

Then there’s lifestyle inflation. As your salary grows, so do your expenses. You get a raise? You upgrade your car, your rent, your dining out. That’s normal. But if you don’t automatically increase your savings rate, you’ll never catch up. That’s why “save more tomorrow” programs - which auto-increase your contribution by 1% each year - work so well. Fidelity found they boost savings rates by 2.1 percentage points annually.

Automation Is Your Secret Weapon

The biggest predictor of retirement success? Consistency. And the best way to be consistent? Automation.

Set up automatic payroll deductions the day you start your job. If your employer lets you choose your contribution percentage, pick 10% right away. Then increase it by 1% every six months. You won’t feel the pinch - you’ll never even see the money.

Fidelity’s data shows that people who use auto-deductions save 83% more consistently than those who transfer money manually. You don’t need discipline. You need a system.

What About Social Security?

Social Security will replace about 40% of your pre-retirement income - if you’re an average earner. But here’s the catch: the trust fund is projected to run out in 2035. If nothing changes, benefits could drop by 23% for everyone.

Don’t count on Social Security to carry you. Treat it like a bonus, not a safety net. Your retirement income should come from your savings, investments, and maybe a part-time job - not just government checks.

What If You’re Behind?

37% of Americans have less than $25,000 saved for retirement. If you’re in that group, don’t panic. Catch-up is possible.

Start by maxing out your 401(k) and IRA. If you’re 50 or older, you can make catch-up contributions: $30,500 in your 401(k) and $8,000 in your IRA in 2024. In 2025, those limits go even higher for people 60-63.

Fidelity’s new “Catch-Up 2.0” accounts let those 50-60 contribute up to $50,000 a year through after-tax channels. It’s not tax-deductible, but it lets you build wealth fast.

Also, consider working a few extra years. Even two more years of saving and delaying Social Security can add tens of thousands to your retirement income.

Your Next Steps

You don’t need a financial advisor to get started. You need a plan. Here’s what to do in the next 30 days:

1. Check your latest 401(k) statement. How much do you have saved? How much are you contributing?
2. Calculate 15% of your annual income. That’s your target.
3. Make sure you’re getting your full employer match. If not, increase your contribution.
4. Set up an automatic transfer to a Roth IRA if you don’t have one.
5. Use the Department of Labor’s free retirement calculator to estimate how much you’ll need based on your expenses.

The goal isn’t to be perfect. It’s to be consistent. One small step today - even $50 - adds up over decades. The people who retire comfortably aren’t the ones who made the smartest investments. They’re the ones who started early and never stopped.