Retirement Planning by the Decade: A Savings Guide

Retirement may seem impossibly far away when you're just entering the workforce, but that's when many are at their most powerful from a savings perspective. "The younger you are, the more time your money has to potentially benefit from compound growth," says Chris Kawashima, CFP^®, director of financial planning at the Schwab Center for Financial Research. "So, saving even small amounts now can pay off big down the line." Here's how to start:

Your company-sponsored retirement plan, such as a 401(k), may be your most powerful savings tool. "Many employers automatically enroll new employees in their retirement plans—but you still need to make sure you're contributing enough to reach your goals," Chris says. "Ideally, you would aim to save 10% to 15% of your pretax income at this age, but if your income can't stretch that far, at least try to save enough to get the full matching contribution from your employer, if offered."

And don't forget: As your income grows, you can more readily increase your contributions—up to $23,500 in 2025 for 401(k) and similar retirement plans.

The more of your credit card balance you carry over from month to month, the more of your income goes toward interest payments—and the less is left over for savings.

"While compound interest is a good thing when it comes to your savings, it's a terrible thing when it comes to revolving credit lines," Chris says. "Debt control is essential for building long-term wealth."

Likewise, having a pot of money for emergencies like car repairs or an unexpected medical bill means you'll be less likely to reduce or pause your retirement savings to help cover the cost.

If your employer offers an eligible high-deductible health plan, you typically can set up an HSA, which offers three distinct tax advantages: Generally, contributions are tax deductible, assets can potentially grow tax-free, and withdrawals are tax-free for qualified medical expenses.

"A young, healthy saver is unlikely to use all the money in their HSA each year, so the remainder can stay invested until they really need it," Chris says. "Of course, investing involves risk, but it can be a great way to save for health care in retirement." (For 2025, annual contribution limits are $4,300 per individual and $8,550 for families.)

Welcome to the years of competing goals—including kids, aging parents, a home, and perhaps even your own business. "It can feel like a lot to juggle, but try not to lose sight of your future self," Chris says. "Time is still very much on your side at this stage, so it's important to maintain that momentum." To keep retirement at the forefront of your planning, try to:

"Your everyday expenses tend to increase during these years—think child care, a bigger house, a second car," Chris says. "Now more than ever, it's important to be really honest with yourself about what's a need-to-have and what's a nice-to-have."

For example, a hypothetical saver who freed up just $100 a month to invest could potentially have an additional $50,000 saved after 20 years, assuming a 7% annual return.

"As your income grows, avoid the temptation to up the ante on your financial commitments," Chris says. "Think about how much further along you could get by only modestly increasing your expenses and investing the extra money instead."

One of the best ways around this trap is to "pay yourself first" and fund your savings before paying for anything else. If you're already maxing out your 401(k) and can save even more, consider contributing to a tax-advantaged IRA—up to $7,000 in 2025—or a taxable brokerage account.

As parents, we want to do everything we can to support our kids—but when it comes to saving for retirement and college, it's important to prioritize your own future.

"That's not to say you shouldn't help fund your kids' education, but you shouldn't do it at the expense of your retirement," Chris says. "After all, you can't borrow for retirement the way you can for college."

What's more, you generally don't need to save 100% of the cost of college. "We like the rule of thirds—pay a third with savings, a third with current income, and a third with loans," Chris says.

Now's also the time when many savers are struggling to cobble together a down payment on a first home or a larger one to accommodate a growing family.

"While it's tempting to tap your retirement savings for a loan, that really should be a last resort," Chris notes. "Taking a big chunk of money out of your 401(k), even if you pay it back with interest, often means missing out on years of potential growth."

This is often when you're at your earnings peak, so you may have extra discretionary income to put toward your retirement savings—which ideally should be somewhere between eight and 12 times your salary by the time you reach 60 (see "Progress check"). Now's the time to:

In 2025, savers ages 50 and older can contribute an extra $7,500 to a 401(k) plan, for a total of $31,000—and an additional $1,000 to an IRA, for a total of $8,000.

Note, however, that starting in 2026, catch-up contributions must go into a Roth 401(k) account using after-tax dollars if you make more than $145,000 a year.

"Most retirees hold the majority of their savings in a traditional 401(k), so any withdrawals in retirement will be taxed as ordinary income," Michelle says. "There's no way of knowing what future tax rates will be, but building in some tax diversity can give you more control over your tax exposure down the road." To do so, you could:

• Max out your HSA. "Given the rising costs of health care in retirement, building up tax-free savings for such expenses can help keep your taxable income low," Chris says. Plus, once you reach age 65, you can make withdrawals for nonmedical purposes, which will be taxed only at your ordinary tax rate—similar to an IRA. In addition to the annual limits, you are eligible for an extra $1,000 catch-up contribution if you're 55 or older.
• Contribute or convert some funds to a Roth IRA. If you have substantial savings in a tax-deferred 401(k) or IRA, required minimum distributions (RMDs) at age 73 (or 75 if born in 1960 or later) could trigger a large tax bill. To mitigate this, you could start contributing after-tax dollars to a Roth IRA—which has no RMDs and whose withdrawals are generally tax-free, so long as you're 59½ or older and it's been at least five years since your first contribution. If you exceed contribution income limits, you could instead convert a portion of your traditional IRA to a Roth IRA. You'll pay income taxes on the converted amounts, but a Roth conversion will reduce the tax-deferred balance subject to RMDs.
• Save more in a taxable brokerage account. While realized gains in such accounts are subject to taxation, the principal is not.

"Many people count on spending significantly less in retirement—but that may not be the case for you," Michelle says. "Work on a realistic spending plan—which means not just subtracting expenses you no longer expect, like college tuition and possibly your mortgage, but also adding in those associated with the kind of retirement you're envisioning, like travel, health care, and annual gifts to children or grandchildren."

Nearly 70% of those over age 65 will require some type of long-term care¹—often at considerable expense.

"Long-term care insurance can help protect you from having to sell assets to pay for your care," Chris says. "The most cost-effective time to buy is between ages 55 and 65, but—cost aside—you need to be healthy enough to qualify for it, so buying earlier may make sense if you want to insure against long-term care needs."

To maintain your current lifestyle in retirement, here's how much you should have in savings at various points along the way.

High earners and those planning to splurge in retirement should consider using the higher end of the multiplier ranges. If you're in between ages, you can use either the multiplier closer to your age or average the multiplier ranges of the ages you fall between to estimate your savings goal.

For example, if your current age is 50 and your current income is $200,000, you should have between $1 million and $1.4 million saved by now.

Even if you're still working, it's time to set the table for retirement—especially since 58% of retirees leave the workforce sooner than planned.² Toward that end, you could:

Starting in 2025, workers ages 60 to 63 can contribute an additional amount over the regular catch-up contribution amount to their 401(k) or similar plan. This year, that means $11,250, for a total contribution limit of $34,750.

In retirement, you want to avoid having to sell assets in a down market to fund your expenses—especially early on, which would undercut your remaining years of growth potential.

"Having two to four years' worth of expenses in conservative investments, such as CDs or short-term bond funds, is usually sufficient to ride out a typical bear market," Michelle says.

Now's the time to start figuring out your cash flow from tax-advantaged accounts, taxable accounts, pensions, Social Security, and other sources. The mix may look different early in retirement—before, say, Social Security kicks in (see "Strategize for Social Security")—but a financial professional can help you create a tax-smart cash flow plan.

You can start taking reduced benefits at 62, but you significantly increase your lifetime benefit by waiting until full retirement age (66 or 67, depending on your birth year). If you can afford to wait even longer, each year you delay past your full retirement age will get you an extra 8% in benefits, up to age 70—after which point there is no incremental benefit.

When you become eligible for Medicare, you must apply during your enrollment window—typically the seven-month period starting three months before you turn 65 and ending three months after your birthday—or face penalties. However, you may be able to delay Medicare enrollment if you have health insurance through your or your spouse's employer.

By now, many people have adjusted to retired life—but that doesn't mean your circumstances won't continue to shift. Here's what to keep on your radar:

At age 70½, you're eligible to make up to $108,000 in qualified charitable distributions (QCDs) from any tax-deferred IRA account in 2025. That can satisfy all or part of your RMDs, and you can exclude your distributions—up to the limit—from your federal taxable income. State taxes may differ.

If you have tax-deferred savings, you must start taking RMDs once you turn 73 or face a penalty of up to 25% on the amount you failed to withdraw. You can delay your first RMD until April 1 of the year after your 73rd birthday, but you still must take your second RMD by December 31—which could trigger an especially large tax bill that year.

An annual check-in with a financial planner can help ensure your retirement paycheck is sufficient—and sustainable. "If you're a healthy person of means, you should expect to live into your 90s—so make sure your plan is designed to go the distance," Chris says.