How Can I Be Sure I’m Saving Enough for Retirement?

Saving up for retirement is one of the most important financial actions you can take throughout your career. Wherever you are in your journey, you likely have many questions about how much you should actually be saving.

Most people need to save money in investment accounts like 401(k)s to supplement retirement income they may receive from their Social Security benefits or a pension plan. To assist in the process, we’ve put together these tips to help you build up the savings you need to retire when and how you want to.

7 smart ways to build your retirement savings

These savvy retirement savings tips can help you answer the question "Am I saving enough for retirement?" Then, you can make adjustments if you think you're not.

1. Use tax-advantaged retirement savings accounts. 

Many retirement accounts offer special tax advantages that can help you grow your money. For example, investing in a traditional 401(k) allows you to allot a pre-tax portion of each paycheck toward your total savings.

2. Aim to contribute at least 15% of your income.

If that amount doesn’t fit into your budget, contribute as much as you can to your retirement plan. If you have an employer plan and your employer matches a portion of your contributions, be sure to contribute enough to earn the full match.

3. Increase the amount you save over time. 

Consider increasing your savings percentage every year or each time your annual income goes up. Also, think about ways you can trim your budget and expenses to save more. Increasing your savings rate by 1% every year can help you reach your goals and keep up with inflation.

4. Set smaller interim goals.

Most people will need at least 10 times their final annual salary by age 67 to maintain their current lifestyle in retirement. (For example, a final salary of $60,000 would mean retirees would need $600,000 in savings.) 

Use the chart below as a benchmark for savings. According to these age-based milestones, the salary you’re earning at each age can serve as your savings goal.

Source: Fidelity Viewpoints

5. Maintain a well-balanced portfolio. 

Holding a mix of asset classes—such as stocks, bonds and cash equivalents—can help you manage investment risk while pursuing returns. The percentage of your total investments that you devote to each asset class is your target asset allocation.

6. Rebalance regularly.

As one asset class outperforms the others, your holdings will stray from their original targets. For example, let’s say you set a target of having stocks represent 70% of the value of your portfolio. If stocks have a good year, you might increase that to 80%. Rebalancing involves buying and/or selling to restore each asset class to its original target. Because of this, many people choose to make their targets more conservative as they approach retirement.

7. Finish strong.

When you reach age 50, you can take advantage of catch-up contribution limits for tax-advantaged retirement plans. These contributions let you save extra money in your traditional IRA, Roth IRA and workplace retirement plans like the Thrift Savings Plan, 401(k), 403(b) or 457 plans. Contribution limits are adjusted for inflation, so check the official IRS website for current limits and catch-up contribution amounts.

Make a savings plan with Navy Federal Credit Union

Navy Federal is here to help you on your path toward retirement. Our retirement education resources can give you the knowledge you need to make smart money decisions. Run your numbers in a retirement calculator like our Savings Goal Calculator to see if you are putting enough away for your golden years. 

We also invite you to look into our retirement savings accounts to supplement your savings. Our investment services can help you build a retirement strategy that will suit your needs and help keep you on track. Contact our financial advisors today to start planning for your future.