Saving for retirement can seem like a numbers game, and it will require a little math to get started, and here’s a formula to help kickstart your journey to reaching your retirement goals.

When you want to start saving for retirement, you’ll need to do some retirement calculations. This is a scenario where working with a certified financial planner or advisor to run some retirement projections can be very helpful.

To begin, how old are you today and what is your target retirement age? It’s typically 65 or 70 years old, but choosing a target age is crucial to calculating your retirement figures. 

Then you want to determine what type of retirement lifestyle you want in order to determine how much retirement income you’ll need per year starting at retirement age. For example, do you plan to have split residences in your golden years? Or perhaps you have a passion project, like opening a bed and breakfast or traveling the world. Bottom line, how do you want to spend your time during retirement?

Then, keeping a lot of other assumptions in mind — like average rate of return both now and in retirement, inflation, and more — work backward to figure out how much you should be saving for retirement to reach your goal.

It's not always a simple solve; it does take some assumptions and adjustments, which is why working with a financial planner is a good idea. Your advisor can help you design the right retirement strategy so you know how much you should be saving every year.

So once you have that number — your annual retirement savings amount — then you can start incorporating that figure into your overall financial plan.

Now let’s say you run the numbers and find that you aren’t able to save exactly that this year. Don’t get discouraged! For example, if you have to save $10,000 per year in order to reach your goal, but after taking a look at the other financial priorities in your life, you realize you can only put away $5,000 per year — that’s still a great start! Continue putting away that amount and then try to increase the number every year when you set your financial goals. 

And where should you be putting your money? 

If your employer offers a 401(k) plan, that’s usually a good place to start. Especially if your company has an employer match program, you’ll want to take advantage of the entire amount — it’s basically free money!

If you’re unable to contribute to a traditional 401(k), there are many other types of retirement savings accounts available. From simple IRAs to SEP IRAs to spousal IRAs, a financial planner can help you determine the right type of account — or mix of accounts — that will help you meet your goal.

So now that you’ve determined how much to put away, and where to save it, how do you get started? 

The easiest way to begin saving for any financial goal is to set up automatic contributions from your account. This way, you’re not thinking about it every month or accidentally withdrawing it for other use. The contribution is just being taken from your account and then you can start reviewing your numbers on an annual basis to see if there’s room for a more aggressive savings plan or if you’re on track to meet your retirement goal. 


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Financial advice for real people, by real people. You shouldn't need a degree to understand your money. Join Head of Education, Brittney Castro and Altruist mentors as they break down financial tips and strategies in a real way to help you finally understand how to achieve your financial goals faster.