7 Ways to Save More for Retirement, Starting Now

Saving for retirement could feel challenging. The fact is, it’s never too late to start building a more secure future, and even small steps could make a real difference. Once you take that very first step, momentum starts to work in your favor. 

You could save more for retirement in a few steps:

• Learn more about how to save for retirement

• Make a plan for how much you’d like to save

• Calculate how much you can afford to set aside

When you invest for retirement throughout your working life, you’re building a more secure future for yourself. It doesn't take a lot of money, either. That's because you have the power of compounding on your side.

Compounding helps you make modest contributions to your retirement accounts and grow a big nest egg over time. And saving just a small amount gets the process started. Your money can be invested and earn returns. Then, those returns can be reinvested to grow your wealth more quickly. 

Accounts and tools are out there to help you. And the earlier you start investing during your career, the more these accounts can help and the more compounding can benefit you. 

If you’re getting a later start, though, that’s okay. You can still make progress toward your retirement goals.

Following just seven simple tips can make it much easier for you to save more for retirement and build a secure future. Let’s dig into the retirement moves that could give your future self the retirement you’re hoping for.

Start Today, No Matter Your Age

The very best time to start investing for retirement is when you are young. The second-best time to start is today. 

Whether you’re 20 or 55, getting started investing could make a big difference in your future financial security. Even small amounts will help. As soon as you start to invest, you have the potential to begin accumulating the benefits of compound interest.  

Here’s how compound interest works: 

Let’s say you start with $100 in your retirement account and add $2,400 each year. That’s $200 a month. Assuming you earn a reasonable 6% annual return, compounded monthly, here’s how much you’d have. You’d have to continue putting in that same $200 a month. 

The more you invest and the longer you have for compound interest to work, the more it can help you. In fact, if you start saving $200 a month when you’re 25, you could have over $1 million when you’re 65, an age many people retire. This assumes a 10% average annual return. 

That’s the power of compound interest. In simple terms, your money earns interest, then that interest earns more interest over time. The earlier you start, the more time your money has to grow on its own.

Returns are never guaranteed, but looking back over the history of the stock market, it’s possible to say that there’s a strong statistical likelihood that it will continue to rise in value.

Getting a late start? You still have time

If you start investing later, compounding can still turn small sums into big ones. However, you’ll have to save a little more to end up financially secure.. Once you’re 50, you can also use catch-up contributions, which let you invest more than the usual annual contribution limits in tax-advantaged retirement plans. This makes it easier to invest since the government helps with a tax break. 

The main thing is to just get started and to make investing a regular habit. Stay positive—it’s great you’re making the right moves. Two factors are key to your success: 

• Make saving and investing automatic 

• Ignore the inner voice that tells you don’t have enough to invest or that you’re too late

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Top Ways to Save for Retirement

The best ways to save for retirement and create a more financially secure future are setting goals and running some numbers. That way, you’ll know how much you’d like to save for your future retirement and how much it will take to get you there. 

1. Set a retirement savings goal

When you have an actual goal it’s one of the best ways to stay motivated and save for retirement. Many Americans say they’d like to retire as millionaires, but that’s not always realistic or even necessary. It really depends on your lifestyle and your spending habits. 

Instead of getting stuck on some arbitrary number, ask: "How much money do I need to retire?” Your answer will help shape your retirement goals. 

You can answer this question in several ways:

• Use an online retirement calculator 

• Ask a financial advisor or other trusted financial expert 

• Aim to have eight to 10 times your final salary saved by the time you retire, which is a common recommendation. 

• Create a budget for your retirement life that details your monthly fixed expenses, and come up with a yearly total. Then, add the extras such as travel or hobbies that you’d need to make your retirement the one you truly want

Once you know the total amount you need to save, you can break your big goal down into smaller monthly goals. You'll need:

• Your age

• Age you want to retire 

• Annual household income you'll need from savings and investments 

• All income sources, such as Social Security, retirement accounts, and pensions

• Amount of your current retirement savings

• Estimate of future returns on investments 

The SEC’s Savings Goal Calculator lets you input this information and then tells you how much to save each month to hit your target. 

You can play around with the numbers by adjusting your retirement age or the amount of money you contribute to your retirement each month. Then you can start working toward that ideal amount. 

If investing enough feels overwhelming, make it incremental. If your $1,000-a month goal doesn’t fit in your budget, start smaller. Even $100 a month for the first year is a great start, and you can add to that amount over time.

How much return on investment should I expect?

There’s no way to predict how the stock market will perform, so you can’t know exactly how much you’ll earn over time. However, past investment performance could give you an idea of returns. For nearly a century, the U.S. stock market has delivered strong long-term growth. From 1928 through 2024, it has produced an average annual return of about 10%, including dividends. 

That said, you can’t assume a 10% average in any one year, because stock market returns fluctuate wildly year to year. Some years may have +25% growth, others −20%. Over the long run, you might get a 10% average, but it’s best to expect a lot of hills and valleys along the way.

2. Reduce debt to free up money for retirement savings

Paying off your debt could free up more money for retirement savings. You'll also benefit if you can enter retirement free from debt. In fact, debt-free older adults tended to have better mental health than those who still carried debt, research found. Other studies have also found a link between stable finances and good mental health.

One of the biggest benefits of paying off debt ASAP is that it could help you save more for retirement sooner. Getting rid of your debts eliminates some monthly obligations, and you can then use the money for retirement savings. As soon as you pay back your debt, you can start focusing on your future and using your money to build your nest egg. 

Remember, you can invest every dollar you claw back from debt payment so that compound interest works even harder for you. Take a minute to imagine how your savings would grow if you could take what you pay in interest on debt and put it toward your dream retirement 

Let's say that at age 40, you pay $500 a month to credit card companies and other creditors. If you pay off that debt and invest the $500 instead, and you earn a 10% average annual return until age 65, the monthly $500 will turn into around $590,000 over 25 years, according to Investor.gov calculators. 

There are several techniques to reduce your debt and free up more money for retirement savings:

• Use the debt snowball or avalanche methods, which involve paying extra to one debt at a time. Focus on the lowest balance with the snowball method or the highest interest rate with the avalanche method.

• Consolidate your debt, which involves getting a new loan to pay off existing debt. Consolidating could make sense if the interest rate you qualify for is lower than what you currently pay.  

• Credit counseling and other credit card debt relief solutions could help you organize your finances. Take the time to learn about debt relief programs so you can decide if they are right for you. 

• Debt settlement is the process of negotiating with your creditors to accept less than the full amount you owe, but consider it paid in full. The rest is forgiven. You can negotiate yourself or work with a professional debt settlement company. 

Learn how Freedom Debt Relief works to help you if you're interested in getting help. 

3. Contribute to a 401(k)

If you have access to a 401(k) through your job, you should definitely contribute—especially if your employer offers a match. 

A 401(k) retirement account is an employer-sponsored retirement account. The way it works is, you contribute some percentage of your earnings into the account before taxes are taken out. This lowers your taxable income now. You may also be able to put money into a Roth 401(k). You won’t get the upfront tax break, but you’ll have some tax-free income in retirement.

The tax savings can make it easier to invest. Let's say you contribute $500 a month, or $6,000 a year, to your 401(k) and you are in the 22% tax bracket. You get to deduct or subtract $6,000 from your taxable income. Here’s the math:

6,000 × 22% = 1,320

Government discount on 401(k) contributions

Another great thing about pre-tax contributions is that you’re not actually parting with $6,000. In fact, you’re only giving up about $4,680 of take-home pay. Why? Because that $6,000 lowers your taxable income, saving you roughly $1,320 in taxes.

In other words, Uncle Sam is pitching in part of your retirement contribution. Investing for your future is more affordable today because of the tax savings.

401(k) contribution limits

Every year, the IRS sets annual contribution limits for retirement contributions. The limits generally go up each year. People over 50 can make catch-up contributions.

You may not  always be able to max out your 401(k), but it’s still a good idea to contribute enough to earn your full employer match if you have one available. If you have a match, that means that if you make retirement contributions, your employer will match up to a certain percentage of the money you put in. 

Here’s how an employer match on your contributions could work on a $50,000 salary:

The employer match is free money. But you can’t get it unless you contribute to your retirement account. It’s a good idea to contribute at least enough to be eligible for the full match. 

Ultimately, you want to be able to put in enough to hit your target retirement savings goal. 

There are good options to encourage you to increase your savings, such as the 1% challenge. You simply increase your 401(k) contributions by 1% each year until you're saving your goal amount. Since the increase is so minimal, you’re unlikely even to notice it.

If you get a raise, aim to contribute at least half to your 401(k) right away before getting used to the extra money. Say you get a 3% salary bump. Consider raising your retirement contributions by at least 1.5% more. 

How much should you contribute to a 401(k)?

Your contributions will likely change over your career as your needs change. Here are a few guidelines to show how much you should contribute at different ages. 

In your 20s

If you’re just starting your career and looking for ways to save, time is on your side. 

Even if you don’t make a ton of money, contributing some of your income to retirement is a smart choice because you can get compound growth working for you. Time also gives you the advantage of being able to invest in more aggressive funds and potentially earn higher returns. 

In your 30s and 40s 

You're most likely in the prime of your career and earning more. Continue upping your 401(k) contributions as your income increases. 

By now you may have other financial priorities—buying a home, raising kids—and perhaps you're adjusting your retirement strategy. You could sit down with a financial advisor to go over your whole financial picture. You may need help balancing buying a bigger home or contributing to a 529 plan to save for college with retirement savings.

In your 50s and 60s

This is an exciting stage of your retirement journey, and perhaps the most important stage. You could be starting the home stretch before retirement. 

You’ll want to consider several things:  

• Retirement account withdrawals. The 4% rule says you can safely withdraw up to 4% of your balance in your first year of retirement, then adjust for inflation in subsequent years. A safer amount might be 3.7% 

• Required minimum distributions (RMDs). The IRS requires you to take mandatory withdrawals from your pre-tax retirement accounts when you reach age 73. The size of your RMD could push you into a higher tax bracket—you’ll pay more in taxes.

• Social Security. Start thinking about your Social Security benefit, which you can start collecting at 62. Your benefit check amount will be lower, but you’ll receive benefits for longer. You can delay until age 70, and the longer you delay, the bigger the amount. 

4. Open an IRA

An individual retirement account (IRA) is one of the best ways to save for retirement. 

The two main types of IRA are Roth and traditional, and both offer some form of tax advantage.

Both traditional and Roth IRAs have contribution limits, and no matter how many IRAs you have, the limit applies to all accounts combined. In short, if you have two IRAs, you can split the annual contribution limit between both accounts. 

Both traditional and Roth IRA accounts can be opened with just about any brokerage firm. You can usually open an account with no minimum. 

A great way to get your IRA started is to set up automatic contributions. Even if $7,000 or $7,500 seems like an impossibly large sum to put in, you can break it into semi-monthly amounts. If you automate a twice-a-month payment of $312, you’ll have your $7,500 by the end of the year. Sign up with your bank or brokerage firm to have the money sent on payday. 

When you set up your account, make sure you pick the right kind of IRA for you. 

Traditional IRA

You contribute tax-deductible dollars to a traditional IRA. That means you slice the deduction off your income. The money that goes into your account then grows tax-deferred. When you're ready to withdraw from the account during retirement, you’re taxed on withdrawals. 

If you think you pay a higher tax rate now than you will in retirement, opt for a traditional IRA to claim the tax savings up front.

Roth IRA

A Roth IRA doesn’t lower your taxable income. You’re putting post-tax dollars into the account. 

The benefit is, you won’t pay taxes on the earnings or the money you withdraw in retirement. Also, Roth IRAs aren’t subject to required minimum distributions. You can hold your money in a Roth IRA for as long as you want, without penalty.

If you think you’ll be in a higher tax bracket when you retire, a Roth IRA could make sense—you’ll pay taxes now and enjoy tax-free withdrawals later. 

5. Reduce fees

By now, you know it’s important to set up and diversify your retirement savings. However, one mistake many people make is forgetting to research accounts and investment fees.

Before you sign up for a new retirement account or buy a particular asset, ask about the costs . Hefty fees could drastically cut into your nest egg. The more fees you pay, the less of your money goes toward your retirement. Here are a few things to look for:

• Annual account management fees

• Expense ratios (the annual fee a fund charges)

• Commission fees (the fees you pay a broker or financial professional)

• Transaction fees

Some fees can be found in your latest account statement. Take a close look so you can make an informed decision about your retirement accounts and move money if needed.

6. Consider a health savings account

A health savings account (HSA) is a tax-advantaged account to help save for qualified medical expenses. But it could also help you save more for retirement. An HSA has three major benefits:

• Tax-deductible contributions 

• Tax-free growth

• Tax-free withdrawals when used for qualified medical expenses

Many companies offer high-deductible health insurance plans with an HSA plan, and your employer may even contribute to your account.

You can only contribute to an HSA when you’re enrolled in an eligible high-deductible health plan, and you can’t be covered by Medicare or Medicaid. 

Your HSA money can continue growing, or you can use it at any age on qualifying medical expenses. If you leave your job, the funds come with you. They are yours forever. 

Once you turn 65, you can withdraw from your HSA penalty-free and use the money for any purpose. If the money isn’t for qualifying medical expenses, it’ll be taxed as ordinary income. To avoid a tax bill, HSA funds can pay for out-of-pocket healthcare costs in retirement, including health insurance premiums and any qualifying medical expenses.

7. Automate savings 

There’s one almost perfect way to simplify your retirement savings, and it makes your life easier, too: put your contributions on autopilot. Most retirement apps and platforms offer automatic investing that connects with your bank account so you don’t have to think about it.

If you invest outside a 401(k), your retirement savings will most likely come from your monthly budget. Decide how much you want to set aside each month toward retirement. Even if it’s a small amount, include it just like any bill you have to pay. Then automate it. Your savings will have a chance to grow consistently, without any further stress on your part.

Investment Basics Principles for Retirement Savings

You don’t need to be an expert investor to invest for your retirement. You just need to actually invest—because that’s the key to compounding.

Expect inflation

 Investing can also help you keep pace with inflation. Prices rise every year, which means a dollar is worth less.  Invested funds help beat inflation. 

To get started, you just need a few basic concepts.

What is risk tolerance and how does it change?

First, know your risk tolerance—your comfort level with risk. It generally makes sense to start out taking on more risk when you’re younger, because you have: 

• More potential for bigger rewards

• Longer investing horizon for downturns and market corrections  

Many people become less risk-tolerant as they age since there’s less time to wait for recovery from a market downturn. That’s when people often change their asset allocation—how you divide up investments. For example, you may have some of your money in stocks (equities) and some in bonds. One rule of thumb is to subtract your age from 110 or 120 and put that amount in stocks and the rest in safer investments like bonds. 

What is diversification and how does it concern me?

Diversification is the investment strategy of keeping your money in a variety of assets, like stocks, bonds, and mutual funds. That way if one type of investment loses value, the value of your portfolio isn’t completely lost. Invest in funds that provide exposure to different parts of the economy, like tech, infrastructure, and healthcare.

If your money is in a managed account, you don't need to worry,  but if you choose your own investments, it's critical to create a good mix. 

Target-date funds are a simple solution that could work for anyone

A target-date fund (TDF) could simplify this process. With TDFs, you pick your chosen retirement date and the fund automatically adjusts your investments over time. The goal of a TDF is to balance growth and risk. It starts out with more stocks for growth and gradually shifts toward safer investments like bonds as you near retirement.

You can usually find tools and resources to decide how to invest through your retirement plan provider or the brokerage firm that holds your IRA. Lots of DIY solutions for successful retirement investing exist, such as TDFs or other low-cost index funds. It might be a good idea to discuss your investment plans and strategy with a financial advisor. 

How Much Income Will You Need in Retirement?

Calculating what you need for a comfortable retirement helps shape your retirement goals. Once you have an income target in mind, you can calculate the balance needed. Then you’ll have an amount to set for your retirement savings goal.

One commonly recommended replacement rate for retirement income is 80% of your pre-retirement income. Social Security replaces around 40%, so you’ll want to find a way to replace the other 40% of what you earned in your working years. 

Here’s some simple math that could give you a starting point for your savings goal.

Let’s say the last salary you earn before you retire is $60,000. Calculate 40% of that amount:

60,000 / .40 = 24,000

Now, you want to be able to safely withdraw $24,000 a year from your investments. That means you’d like to have an investment portfolio that would produce $24,000. 

Multiply your desired withdrawal amount by 25: 

24,000 x 25 = 600,000

There’s your goal. You hope to have $600,000 when you go into retirement. You can use this same formula to calculate different withdrawal amounts. The 4% rule is a simple way to reverse-engineer your savings goal based on how much annual income you want in retirement. Remember: you don’t actually have to put in $600,000. Compound interest will get you there. The actual amount you put in will likely be far lower. 

If you can become debt-free before retirement, you may not need as much money. This is especially true if you've paid off your house because your bills will be lower. If you think you may need help becoming debt-free before the big day, check out some Freedom Debt Relief FAQS to learn if the debt relief program could be right for you. 

People just like you are seeking debt relief in Arizona and across the country. The first step is the most important one—explore your options.