Saving for retirement
When it comes to retirement, it’s normal to wonder where you stand and what to do next. We’ll help you get on the right track.
Why it's important to save now
Saving for retirement is about creating the future you want. It means setting aside enough money to do what matters most to you, whether that’s retiring early, living comfortably or leaving a legacy.
It also means starting to save—and invest —as early as possible so you don’t miss out on the potential snowball effect of compound growth.
Here's an example:
Say you start saving $100 a month today. Assuming a 6% average annualized return on your investment, you’d have about $46,000 in 20 years and about $192,000 in 40 years. But if you wait 10 years to start saving and investing, you’d only have about $17,000 in 20 years and about $99,000 in 40 years.-1
Source: Schwab Center for Financial Research
How to prioritize retirement and other goals
We get it—retirement isn’t your only goal. You might also be trying to pay off debt, buy a car or home, or save for your kids’ education.
Still, saving and investing for retirement should be a high priority.
How much to save based on your age
To get an accurate estimate of how much you’ll need to retire, you’ll need a personal retirement plan. But you can get a general idea by multiplying the amount you expect to spend in your first year of retirement by 25.
Here's an example:
Say you want to spend about $40,000 every year of a 30-year retirement. $40,000 times 25 equals $1 million. So your retirement portfolio value will need to be at least $1 million to provide the money you need. In most cases, you’ll have other sources of income, like Social Security. But your savings will need to cover a large part of your spending needs.
Here are some guidelines to help you set aside enough, based on when you start saving:2
If your employer offers a company match, include it in the percentages above. Keep in mind that most retirement accounts have annual contribution limits.
Learn how to get the full company match, if your employer offers one.
Which retirement accounts to use
You understand the power of compound growth—and you know how much to save. But where should you put your retirement savings? And what if you’ve already maxed out your 401(k) or IRA, or have a 401(k) from your old job?
Here’s what we recommend:
Save at least enough in your employer-sponsored account—401(k), 403(b), 457(b) or Thrift Savings Plan—to get the full company match, if your employer offers one. If you have more than one 401(k), find out if a rollover is right for you.3
Use a Health Savings Account (HSA) Tooltip to put money away for future health care costs, if you’re eligible.
If you’ve maxed out your employer-sponsored account or don’t have one, consider a traditional or Roth IRA Tooltip to boost your savings.
If you’ve maxed out your IRA, consider a brokerage account Tooltip to save even more.
Compare account types, including eligibility, contribution limits and tax rules.
How to create your retirement plan
Saving a percentage of your income in your employer-sponsored retirement account—at least enough to get the full company match—is a good start.
But without a more specific, long-term plan, you won’t know if your money will last as long as you need it to—or if you’ll be able to do all the things that matter to you, and still have the retirement you want. That’s where a personal retirement plan comes in.
A good plan gives you a roadmap to the retirement you want, based on:
When you want to retire
How long you expect to be retire
Your future expenses for needs, wants and wishes
Your savings and income
It also takes into account your investment portfolio and risk tolerance Tooltip and other needs and goals, like gift-giving, legacy planning and major life events.
What you can do next
Use our retirement calculator to see where you stand.
Find out if a Schwab IRA or brokerage account is right for you.
Get help with retirement planning and investing from our robo advisor.
Important Disclosures
1-Assumes $100 monthly contributions that occur at the beginning of each month and a 6% average annualized return. Does not include taxes or investment fees. The actual rate of return will change with market conditions. Hypothetical example for illustration only.
2-Percentages are general guidelines that assume you're just starting to save and will maintain a similar lifestyle over 30 years of retirement. In reality, your spending needs may change over time due to changes in your needs, goals or inflation. For example, health care costs are likely to increase as you get older.
3-A rollover of retirement plan assets to an IRA is not your only option. Carefully consider all of your available options, which may include but not be limited to: keeping your assets in your former employer’s plan; rolling over assets to a new employer’s plan; or taking a cash distribution (taxes and possible withdrawal penalties may apply). Prior to a decision, be sure to understand the benefits and limitations of your available options and consider factors such as differences investment related expenses, plan or account fees, available investment options, distribution options, legal and creditor protections, the availability of loan provisions, tax treatment, and other concerns specific to your individual circumstances.
Withdrawals from an IRA or qualified retirement plan are subject to ordinary income tax. Prior to age 59 ½, they may also be subject to a 10% federal tax penalty.
Investing involves risk, including loss of principal. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
The information provided is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner or investment manager.
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