How to save for retirement: a beginner’s guide

If you feel overwhelmed about saving for retirement, you’re not alone. But learning about different kinds of accounts, tips on saving and how to create a savings goal can help you get started. And talking to a qualified financial professional may be a good idea too.

What you’ll learn:

• Experts recommend saving 70% to 90% of your pre-retirement income to maintain your current lifestyle after you stop working.

• There are multiple retirement accounts a person might use, including 401(k) plans, 403(b) plans, individual retirement accounts (IRAs) and more.

• Contributing to your retirement savings early can help you enjoy financial security post-retirement.

According to the Department of Labor, most people need around 70% to 90% of their pre-retirement income to maintain the same standard of living after they stop working full time. Other experts recommend saving 10 times your income by the time you’re 67 years old.

Social Security might contribute to your retirement income, but remember to also account for inflation. And other factors can affect your spending habits and how much money you’ll need in retirement too:

• When and where you plan to retire

• What your annual contributions to retirement savings plans are

• What other sources of savings and income you have

• Your property value

• Your health

• The lifestyle you want after you stop working

• What you plan to allocate for your loved ones

If you need some help creating a goal, there are online tools that can help you estimate how much you’ll need to save. And if you want more personal guidance, talking to a qualified financial professional can help.

To stay on track for your retirement goals, experts recommend saving at least 15% of each year’s income for your retirement. For example, if you earn $120,000 a year, saving 15% means setting aside $18,000 annually, which breaks down to $1,500 per month.

If you have a retirement account through your job and receive employer matching contributions, that counts toward your 15%. So if your employer matches your 401(k) contributions up to 5%, you would only need to set aside 10% of your income for your retirement savings.

To save for retirement, it can help to use retirement accounts specially designed for that purpose. There are many different types of retirement accounts, and each one has rules and regulations for things like contributions and withdrawals.

A great place to start saving for retirement is employer-sponsored plans. They’re among the most common and accessible ways to start building your retirement nest egg. Three common types are:

• Traditional 401(k): A traditional 401(k) lets you automatically contribute a percentage of your paycheck before it’s taxed. And you won’t have to pay taxes on contributions or earnings until you withdraw funds from the account. You also get to choose how your 401(k) is invested.

• Roth 401(k): A Roth 401(k) works similarly but is funded with money that’s already been taxed, so qualified withdrawals are tax-free. In this case, you pay the taxes upfront, and you can also reduce your overall tax liability.

• 403(b): 403(b) plans are a lot like 401(k) plans, but they’re only offered by public schools and certain tax-exempt organizations. They’re also referred to as tax-sheltered annuity plans or tax-deferred annuity plans. That means you don’t have to pay taxes on the contributions or earnings until you withdraw funds from the account.

IRAs are a great way to take charge of your retirement savings independently since they’re self-directed retirement plans—meaning they’re not sponsored by an employer. And there are two different types of IRAs:

• Traditional IRA: As long as you have an income, you may be able to make tax-deductible, pretax contributions to traditional IRAs. That means you’ll owe taxes on withdrawals you make in retirement versus paying those taxes upfront.

• Roth IRA: Roth IRAs work similarly to traditional IRAs, but any contributions you make are non-tax-deductible and post-tax. Withdrawals you make in retirement are tax-free.

Choosing between the two might involve considering your current tax rates, expected growth of the assets in the account and your expected future tax rates. If you feel your taxes will be lower in the future, you might opt for a traditional IRA. If you feel your income taxes may be higher in retirement, a Roth IRA may be more advantageous.

Once you’ve contributed the maximum amount to your retirement accounts, taxable accounts are an excellent way to continue putting money away for your future. You can put this money into a high-yield savings or brokerage account, which may grow over time.

There are also many other kinds of retirement savings plans. And different plans work for different people. If you’re not sure what type of plan fits your needs, you can learn more about retirement plans on the IRS website or talk to an expert for advice.

The IRS determines the annual contribution limits for retirement plans. For individuals using the employer-sponsored plan, that number is $24,500 for 2026. Those ages 50 and over may make catch-up contributions up to $8,000, for a total annual contribution of $32,500. Those ages 60-63 may contribute an additional $11,250 instead of $8,000 for a total of $35,750.

The IRS also determines annual contribution limits for IRAs. For 2026, the limit is $7,500, with an additional $1,100 in catch-up contributions for those 50 and over for a total of $8,600.

For traditional IRAs, contributions are tax-deductible if you also have an employer-sponsored retirement plan and fall below the following thresholds:

• Single taxpayers: $81,000 for full deductions, $91,000 for partial deductions

• Married couples filing jointly: $129,000 for full deductions, $149,000 for partial deductions

• Married couples filing separately: $10,000 for partial deductions

For Roth IRAs, contribution limits may be restricted if savers approach the following phase-out ranges:

• Single taxpayers and heads of household: $153,000 to $168,000

• Married couples filing jointly: $242,000 to $252,000

• Married couples filing separately: $0 to $10,000

A major reason retirement accounts can help you save for retirement so well is because they use compound interest. When you have money in an account with compound interest, the initial deposit earns interest over a set period of time. In every subsequent period, you earn interest on the deposit plus all previously accumulated interest. This produces a snowball effect where you can grow your savings at a faster rate.

Let’s say you put $5,000 into a retirement account and added $200 every month for 30 years. Without interest, you would have $77,000 saved. But with an interest rate of 7% that compounds annually, you’d have $264,767.16—over three times as much.

The earlier you start saving for retirement, the more opportunity your money has to grow. You can start small and increase your savings as you get more comfortable. 

If you need help, talk to a qualified financial professional. If you’re curious to know more, explore ways to use passive income during retirement.