How to Save for Retirement

10 MINUTE READ                                                                                                                                                                 by Chris Hogan

A recent research study conducted by Ramsey Solutions looked at the overall state of retirement in America and found nearly half of Americans aren’t saving for retirement. And even those who do save for retirement aren’t saving enough.(1) Folks, that’s a serious problem!

Most people wish they could save more. In fact, 37% of Americans cited "save money" as a New Year’s resolution in 2018, tied with "eat healthier" and "get more exercise" for the most popular resolution.(2)

So, what’s standing in the way? Let’s start by answering some of the most common questions people have about how to save for retirement, and then we’ll look at a few practical ways you can turbocharge your savings plan!

How Much Should I Save for Retirement?

While it’s true that how much you need to save every month will depend on your age and your dreams for retirement, experts generally agree that saving 15% of your gross income is the right target.

A study conducted by the International Longevity Centre found that Americans need to save between 11% and 18% of their income to achieve a "comfortable retirement."(3) And Fidelity recommends saving at least 15%, but maybe even more depending on your age and retirement goals.(4)

How does that compare with how much people are actually saving? Here’s the reality: Only one in 10 Americans are actually saving 15% or more of their income.(5) Houston, we have a problem.

You simply cannot plan to live on Social Security and no savings in retirement. That money from the government should be the icing on the cake, not the cake itself. You need a plan—and a good one—if you want to cover your future expenses.

When Should I Start Saving for Retirement?

The sooner you start saving for retirement, the longer your money has to grow. That’s the power of compound growth. And that growth can add hundreds of thousands of dollars to your nest egg. Here’s what I mean:

Let’s say Mike starts to invest $500 a month at age 40. When he retires, he could have almost $800,000 if his money grows at the historical average annual return of the S&P 500. Mike contributed only $162,000 to that total; the rest was compound growth on his investment. Not too shabby!

But let’s compare Mike’s investing approach with Susan’s. She only invests $250 per month, but she starts at age 25. Her money grows at the same rate of return as Mike’s investment. But when Susan retires, her nest egg could be worth over $1.7 million! She only contributed $126,000 to that total. Over $1.6 million was compound growth. Wow! Which amount do you want in your bank account? Yeah, an excess of $1 million sounds a whole lot better to me too.

Starting to save for retirement early is important. But, if you’re still in debt or have no cash savings set aside, I recommend doing a few things before you start contributing to retirement accounts:

  1. Save $1,000 quickly so you have a buffer against life’s emergencies.
  2. Use the debt snowball method to knock out all debt except your mortgage.
  3. Boost your emergency fund so it can cover three to six months of expenses.

With those steps taken, you’ll free up your income and have savings to cover any emergencies without being tempted to tap into your retirement. Once you have that foundation in place, you’re ready to start saving for retirement.

How Should I Save for Retirement?

If your employer offers a 401(k) with a match on your contributions, that’s the first place to start. Make sure you invest at least up to the match to take full advantage of that free money.

With a traditional 401(k), you should invest up to the match, and then work with a financial advisor to open a Roth IRA. You can invest the remainder of your 15% there. If you fully fund a Roth IRA and still have money left over to invest, simply go back to your 401(k).

Have a Roth 401(k)? Even better. As long as you’ve got good growth stock mutual fund options, you can invest your whole 15% there.

How Can I Start Saving if I Don’t Have a 401(k)?

If you don’t have a 401(k) option at work, that’s okay. Work with a financial advisor to get more information about your retirement savings options. Most likely, a Roth IRA will be a great fit for your investment needs if you don’t have a 401(k) at work.

How Can I Save More for Retirement?

So, what’s keeping savers from going the distance with their nest egg? The truth is that saving for retirement is hard, especially when the expenses of right now stand in your way. Let’s look at four common retirement savings barriers and possible solutions to overcome them.


Ramsey Solutions’ Retirement in America research study found that cost of living is the top reason people don’t save for retirement across all demographic groups.(6)

According to NerdWallet, the median household income has grown almost 20% over the past decade while the cost of living has increased 18%.(7) That doesn’t leave much wiggle room as families tackle everyday expenses. But that doesn’t have to spell disaster for retirement.

Here are two tips to help you stay on track:

  • Don’t spend your raises. It’s tempting to just pocket your raise or bonus. But remember, investing 15% of your income means investing 15% of any pay increases too. Over time as your income grows, those bumps can add some serious cash to your nest egg.

  • Stick to a written monthly budget. If you haven’t budgeted in the past, now’s a great time to start! A budget helps you to take control of your money and make a plan for every dollar. You’re telling your money where to go instead of wondering where it all went. But, budgeting is an acquired habit—so give yourself time to get the hang of it.


Driving your kids around town for soccer practice and piano lessons doesn’t just drain your gas tank. It can leave your nest egg riding on empty too.

Consider this: The average cost for extracurricular activities in 2016 was nearly $739 per student—about a $50 increase from the prior year, according to Backpack Index.(8) Saving $739 annually for 13 years could add almost $20,000 to your retirement account!

Believe it or not, you can still save for retirement while juggling kids’ expenses. Here are a couple tips to give you some ideas:

  • Encourage your kids to play one sport—or musical instrument—per season. Not only will this help your budget, but it also might increase your family time. Let’s say your child plays the piano and guitar. If you cut back on guitar lessons and save $150 each month, that’s $1,800 a year!

  • Trade travel teams for recreational leagues. Not only do rec leagues cost less, but they’re also a great way to build relationships with community leaders. Keeping it local could help you add thousands of dollars to your retirement nest egg in the long run.


According to the Retirement in America study, 54% of Baby Boomers still in the workforce have less than $25,000 in their retirement fund. And of that group, more than half have no retirement savings at all.(9)

Health care costs may be to blame for holding this generation back. The study also found that medical expenses are a top financial hurdle for Baby Boomers.(10)

Even with those alarming stats, Baby Boomers—or anyone who’s behind on retirement savings—can turn things around. Check out these tips:

  • Open a Health Savings Account (HSA). An HSA is a great choice for those who are healthy and don’t visit the doctor often. Here’s why: An HSA is a tax-advantaged medical savings account for those who have a high-deductible health insurance plan. Many plans cover 100% of medical expenses once the deductible is met. With an HSA, you can save—and even invest—money to pay for deductibles and other medical expenses tax-free.

  • If you’re over age 50, take advantage of catch-up contributions. Hitting the big 5-0 comes with one big benefit: You can invest an additional $1,000 in your Roth IRA and an extra $6,000 in your workplace retirement plan each year. If you max out both accounts, that’s a grand total of $31,000 in potential annual contributions. Max out your 401(k) and Roth IRA for 10 years and you could have $543,000 saved for retirement. In 20 years? You could have $1.95 million!

  • Connect with an investing professional. A pro can help you customize a plan for reaching your goal, especially if you have some catching up to do.


Ramsey Solutions’ Retirement in America study found that almost one-third of savers who are in debt (31%) ranked credit card debt as a top reason they don’t save more for retirement.(11)

When you’re still making payments for purchases in the past, it’s hard to find the margin in your budget to save for what’s ahead. If you want to be serious about saving for the future, debt has got to go.

You might have already kicked the plastic habit, but if not, here’s how to get started:

  • Knock out your debt using the debt snowball method. List your debts in order from smallest to largest. Make the minimum payment on all of them except the smallest. Attack that one! When you pay off the smallest debt, roll the extra money into the next smallest balance. As you work the debt snowball, you’ll gain momentum with each debt you pay off!

  • Once you’re out of debt, stay out. Without payments, you’ll have margin in your budget. And when you’ve got breathing room in your finances, it’s so much easier to save 15% of your income without cramping your lifestyle.

Stay Focused on Your Retirement Savings Goal

Remember, retirement isn’t an age; it’s a financial number. Keep that goal in mind and stay invested for the long haul. I know how easy it can be to let life get in the way of your retirement savings. But with the right plan, you can enjoy your life now and still make progress toward your financial goals for the future.

Ready to break through the savings barriers? A SmartVestor Pro can help you outline a plan no matter how much you’re currently contributing to your retirement.

Find a SmartVestor Pro today!

About Chris Hogan

Chris Hogan is the #1 national best-selling author of Retire Inspired: It’s Not an Age; It’s a Financial Number and host of the Retire Inspired Podcast. A popular and dynamic speaker on the topics of personal finance, retirement and leadership, Hogan helps people across the country develop successful strategies to manage their money in both their personal lives and businesses. You can follow Hogan on Twitter and Instagram at @ChrisHogan360 and online at or


Posted on March 5, 2018