Stash Learn


Jan 2, 2024

How To Plan for Retirement

By Team Stash Reviewed by Heather Comella
Twitter LinkedIn Facebook
An older couple holding each other's side with a confident smile.

While retirement may seem far away, and you have many expenses between where you are now and the life you want in the future, it can take decades to save the money you need for your golden years. The earlier you start, the easier it is to reach your goals. 

According to the Federal Reserve’s 2022 Report on the Economic Well-Being of U.S. Households, only 31% of non-retirees reported thinking their retirement savings were on track. And 28% reported having no retirement savings at all. 

Luckily, how you plan for retirement is a process that can be adapted to fit your lifestyle, age, and goals. And it’s never too late to get started. 

In this article, we’ll cover: 

Retirement planning considerations

How you plan for retirement will be heavily impacted by several factors in your current lifestyle, as well as the needs you anticipate when you retire. Consequently, your retirement planning isn’t going to look the same as your friends, parents, or neighbors. You’ll want to consider factors like: 

  • Your age and how far you are from retirement
  • The age at which you want to retire
  • Your current income and savings 
  • Your projected future income
  • Whether you plan to get married or have dependents
  • Your health and the health of those in your immediate family
  • Where you expect to live
  • Your existing debt
  • Your lifestyle and goals

Of course, you don’t have a crystal ball that allows you to see the future, so you can’t predict everything. But you can adjust your retirement planning as these factors change.

It’s worth noting that the federal government’s definition of retirement age is 62 for social security benefits and 59½ for most retirement-specific accounts like IRAs. That means that at 59½, you can withdraw money from your retirement accounts penalty-free, and at 62, you can start to receive social security benefits. You’ll want to factor these ages into your retirement planning, especially if you hope to retire early

How to plan for retirement in 5 steps

This five-step process will help you define what retirement planning looks like for you. You’ll want to tailor your investment plan to your specific lifestyle and goals and revisit your plan when major life changes occur.

Step 1. Figure out how much money you need to retire

A 2023 survey reported that Americans with 401(k)s estimate they’ll need, on average, $1.7 million to retire comfortably, but that figure will vary quite a bit per individual. Many experts suggest that retirees will need about 80% of their annual pre-retirement income to maintain their lifestyle in retirement. 

You can use the Stash retirement calculator to zero in on how much money you need to save before you retire. Gather the following info to make your calculations:

  • The age at which you want to retire
  • Your annual pre-tax income
  • Your current retirement savings
  • How much you can contribute to a retirement account each month

You may also want to think through what you want your future to look like. The amount of money you realistically need to retire depends on the lifestyle you hope to live in the future. For instance, many retirees downsize from a house to a condo, which lowers their living expenses. A good monthly retirement income is based on the expenses you’ll need to cover once you leave the workforce.

Step 2. Take stock of your assets, debts, and income sources

If you’re starting your retirement planning now, you’ll want to start by looking at your overall networth. How much money do you have in savings? How much debt do you have? You can position yourself for long-term success by paying down any high-interest debt and building an emergency fund now. That way, you aren’t passing financial hurdles on to your future self.

You’ll also want to think about the assets and debts you expect to have at retirement age. Consider whether your home will be paid off, if you’ll own a business, and if you’ll have any extra sources of income (like a rental property or other investments). You may also want to estimate your income from social security benefits using the Social Security Administration’s calculator

The age at which you plan to retire is an important consideration here, as it can affect the income sources you’ll have available. For instance, if you want to retire early, keep in mind that accessing your retirement accounts before you reach age 59½ may incur penalties, and you can’t receive social security benefits until you turn 62.

Step 3. Build retirement savings into your budget 

Saving enough for retirement might sound daunting, but you can get there by consistently putting aside money every month over the course of many years. That’s where your budget comes in: plan to save a portion of every single paycheck for retirement.

How much do you need to save every month? The rule of thumb is to save at least 15% of your pre-tax salary for retirement. The 15% rule is based on the assumption that you’ll start saving for retirement at age 25 in order to retire by 62 or age 35 to retire by 65. Investors who start retirement planning later in life might want to accelerate their savings by putting 20% or even 30% of their income into retirement accounts.

The amount you can save will depend on your current income and expenses. This chart can help you determine the dollar amount you should invest for retirement based on your income. If you can’t put aside at least 15% of your income at the moment, that’s okay; any amount of savings is better than none. Budget for what you can afford now, and increase that amount as your income grows or you find opportunities to reduce your expenses.  

Step 4. Set up retirement accounts

While you could technically store your retirement savings in a savings account or under your mattress, that would be an inefficient way to grow your money. Many investors store their retirement savings in tax-advantaged retirement accounts where their money can go to work earning returns. 

  • 401(k) or 403(b): These are employer-sponsored retirement accounts that allow you to set aside a portion of your paycheck before taxes are taken out. Contributions are capped at $23,000 per year for 2024, and employers may match a portion of your contributions. 
  • Solo 401(k): A Solo 401(k) is designed for self-employed workers and mimics many of the features of an employer-sponsored plan. The 2024 contribution limit is higher at $69,000, but you don’t get employer-matching benefits. 
  • Roth or traditional IRA: IRAs are among the most common types of investment accounts. Investors can only contribute to a Roth IRA if they have an income limit below $161,000 (single filers) or $240,000 (joint filers), and contributions are made post-tax. You don’t pay any taxes on qualified withdrawals after the retirement age of 59½. Traditional IRAs, on the other hand, have no income limits, and contributions may be tax deductible, in which case you can delay paying income tax until you withdraw your money from a traditional IRA in retirement. The two accounts have a total contribution limit of $7,000 annually (those over age 50 can make an additional catch-up contribution of $1,000 per year).
  • Self-directed IRA: This account type functions like other IRAs, but allows you to invest in more types of assets, such as precious metals, commodities, private placements, real estate, and more.
  • Simple IRA: A Simple IRA is a savings incentive match plan for employees that allows you and your employer to contribute to a traditional IRA. Generally, these are used by small employers that don’t offer a 401(k) or 403(b). The most an employee can contribute to a SIMPLE IRA is $16,000 (those over age 50 can make an additional catch-up contribution of $3,500. 
  • SEP IRA: A SEP IRA is a simplified employee pension where employers can make tax-deductible contributions for eligible employees. Employees cannot contribute to these accounts, but you can open your own IRA even if you have a SEP IRA from your employer. Annual contributions are limited to the lesser of a) 25% of the employees compensation or b) $69,000.

Many investors will have multiple retirement investment accounts, pairing an employer-sponsored plan like a 401(k) with an individual retirement account like a Roth IRA to take advantage of the different benefits offered by each. 

Take control of your tomorrow with an IRA.

Set aside money for retirement-and save on taxes-with a traditional or Roth IRA.

Step 5. Put together an investment plan

Once you have your retirement account(s) and start making contributions, it’s time to choose your actual investments. Think of an account as your investing vehicle, not an investment in and of itself. You still need to determine the right mix of investments for you and build your portfolio. There are many retirement investing options and the rules about which assets you can hold vary among types of retirement accounts. 

So what kinds of investments belong in your retirement portfolio? Many people invest more aggressively when they’re young and slowly shift to a more conservative approach as they get closer to retirement. When you have decades before you retire, your investments still have a lot of time to bounce back from market turbulence, so you might go for higher-risk options with potentially higher rewards, such as stocks. But when you’re close to retirement, a bad year could have a much bigger impact on your plan, so less volatile securities like bonds might be more appealing.

Diversification is a strategy you might consider to spread your investments around. Diversification involves investing in both stocks and bonds, allowing exposure to the growth potential in stocks while balancing risk with the stability of bonds.

Revisit your plan as things change

 Investing would be much easier if we could see the future. Since we can’t, we have to work with our current knowledge and update our plans along the way. As you go through major life changes like getting married, having kids, owning or selling businesses, buying or selling homes, etc., you may want to revisit your retirement plan and make adjustments. 

Similarly, you’ll want to check in on your portfolio periodically (semi-annually or annually) to rebalance or adjust your mix of investments to accommodate changes in the market, if necessary. If you’re confident in your investing knowledge, you might manage your portfolio yourself. But you can also seek investing advice from several sources, including a robo-advisor or a human financial advisor.

It’s never too late or early to get started

The best time to start investing is yesterday; the second best is today. The longer your money is invested, the more it can grow through the power of compounding.  

Regardless of your age, you can start investing for your future now. Stash Retire gives you access to automated, zero-commission Roth and traditional IRA accounts so you can start taking control of your tomorrow, today. 

Investing made easy.

Start today with any dollar amount.


Written by

Team Stash

Disclosure: Nothing in this article should be construed as tax advice, and is for educational and information purposes only. Stash does not monitor whether a customer is eligible for a particular type of IRA, or a tax deduction, or if a reduced contribution limit applies to a customer. These are based on a customer’s individual circumstances. You should consult with a tax advisor for additional questions.

Ancillary fees charged by Stash and/or its custodian are not included in the subscription fee


Invest in

By using this website you agree to our Terms of Use and Privacy Policy. To begin investing on Stash, you must be approved from an account verification perspective and open a brokerage account.