Top 10 Ways to Prepare for Retirement
TOP WAYSTO
PREPAREFOR
RETIREMENT
Financial security in retirement doesn’t just
happen. It takes planning and commitment
and, yes, money.
Facts
n Only about half of Americans have calculated how
much they need to save for retirement.
n In 2022, more than a quarter of private industry
workers with access to a dened contribution plan
(such as a 401(k) plan) did not participate.
n The average American spends roughly 20 years in
retirement.
Putting money away for retirement is a habit we can
all live with.
Remember…Saving Matters!
1. Start saving, keep saving, and stick to
your goals
If you are already saving, whether for retirement or
another goal, keep going! You know that saving is a
rewarding habit. If you’re not saving, it’s time to get
started. Start small if you have to and try to increase
the amount you save each month. The sooner you start
saving, the more time your money has to grow (see the
chart below). Make saving for retirement a priority.
Devise a plan, stick to it, and set goals. Remember, it’s
never too early or too late to start saving.
2. Know your retirement needs
Retirement is expensive. Experts estimate that you
will need 70 to 90 percent of your preretirement
income to maintain your standard of living when you
stop working. Take charge of your nancial future.
The key to a secure retirement is to plan ahead. Start
by requesting Savings Fitness: A Guide to Your
Money and Your Financial Future and, for those near
retirement, Taking the Mystery Out of Retirement
Planning. (See back panel to order a copy.)
3. Contribute to your employer’s retirement
savings plan
If your employer offers a retirement savings plan,
such as a 401(k) plan, sign up and contribute all you
can. Your taxes will be lower, your company may
kick in more, and automatic deductions make it easy.
Over time, compound interest and tax deferrals make
a big difference in the amount you will accumulate.
Find out about your plan. For example, how much
would you need to contribute to get the full employer
contribution and how long would you need to stay in
the plan to get that money.
4. Learn about your employer’s pension plan
If your employer has a traditional pension plan,
check to see if you are covered by the plan and
understand how it works. Ask for an individual
benet statement to see what your benet is
worth. Before you change jobs, nd out what
will happen to your pension benet. Learn what
benets you may have from a previous employer.
Find out if you will be entitled to benets from
your spouse’s plan. For more information,
request What You Should Know about Your
Retirement Plan. (See back panel for more
information.)
5. Consider basic investment principles
How you save can be as important as how much
you save. Ination and the type of investments
you make play important roles in how much
you’ll have saved at retirement. Know how
your savings or pension plan is invested. Learn
about your plan’s investment options and ask
questions. Put your savings in different types of
investments. By diversifying this way, you are
more likely to reduce risk and improve return.
Your investment mix may change over time
depending on a number of factors such as your
age, goals, and nancial circumstances. Financial
security and knowledge go hand in hand.
6. Don’t touch your retirement savings
If you withdraw your retirement savings now,
you’ll lose principal and interest and you may lose
tax benets or have to pay withdrawal penalties.
If you change jobs, leave your savings invested in
your current retirement plan, or roll them over to
an IRA or your new employer’s plan.
7. Ask your employer to start a plan
If your employer doesn’t offer a retirement plan,
suggest that it start one. There are a number of
retirement saving plan options available. Your
employer may be able to set up a simplied plan
that can help both you and your employer. For
more information, request a copy of Choosing
a Retirement Solution for Your Small Business.
(See back panel for more information.)
For More Information:
Visit the Employee Benefits Security Administration’s
website
to view the following publications:
• Savings Fitness: A Guide to Your Money and Your
Financial Future
• Taking the Mystery Out of Retirement Planning
• What You Should Know About Your Retirement
Plan
• Filing a Claim for Your Retirement Benefits
• Women and Retirement Savings
• Retirement Toolkit
• Choosing a Retirement Solution for Your Small
Business
To order copies, contact EBSA
electronically or by
calling toll free
1-866-444-3272.
The following websites can also be helpful:
AARP
American Savings Education Council
Certified Financial Planner Board of Standards
Consumer Federation of America
The Actuarial Foundation
U.S. Department of the Treasury
U.S. Securities and Exchange Commission
8. Put money into an Individual Retirement
Account
You can put up to $6,500 a year into an Individual
Retirement Account (IRA); you can contribute even
more if you are 50 or older. You can also start with
much less. IRAs also provide tax advantages.
When you open an IRA, you have two options – a
traditional IRA or a Roth IRA. The tax treatment
of your contributions and withdrawals will depend
on which option you select. Also, the after-tax value
of your withdrawal will depend on ination and the
type of IRA you choose. IRAs can provide an easy
way to save. You can set it up so that an amount is
automatically deducted from your checking or savings
account and deposited in the IRA.
9. Find out about your Social Security
benefits
On average, Social Security retirement benets
replace 40 percent of pre-retirement income for
retirement beneciaries. The amount of your wages
that Social Security retirement benets replace varies
depending on your earnings and the age you choose to
start receiving benets. You may be able to estimate
your benet by using the retirement estimator on the
Social Security Administration’s website
. For more
information, visit their website or call 1-800-772-1213.
10. Ask Questions
While these tips are meant to point you in the right
direction, you’ll need more information. Read our
publications listed on the back panel. Talk to your
employer, your bank, your union, or a nancial
adviser. Ask questions and make sure you understand
the answers. Get practical advice and act now.
September 2023
