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Investing & Retirement

How to Save for Retirement

12 Minute Read

A recent study conducted by Ramsey Solutions looked at the state of retirement in the U.S. and found nearly half of Americans aren’t saving for retirement. And even those who do save for retirement aren’t saving enough.(1)

Folks, that’s a problem! That means a lot of people have some serious work to do!

The good news is that people are thinking about it. Most people wish they could save more. In fact, 37% of Americans said saving money was one of their New Year’s resolutions in 2018. Saving money tied with eating healthier and getting more exercise as the most popular resolution people made.(2)

But wishing without action is just a pipe dream. You have to do something different if you want your habits—and your future—to change!

So, what’s standing in the way? Let me start by answering some of the most common questions people have about how to save for retirement, and then I’ll give you a few practical ways you can turbocharge your savings plan!

How Much Should I Save for Retirement?

How much you need to save every month will depend on your age and your dreams for retirement. However, no matter what your age or income, you need to be saving at least 15% of your gross income every month. Yes, every month! 

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If you don’t believe me, then check out this study from International Longevity Centre. It found that Americans need to save between 11% and 18% of their income to achieve a "comfortable retirement."(3) Likewise, Fidelity recommends saving at least 15% of your income, but adds that you may need to save even more depending on your age and retirement goals.(4)

If 15% is the goal, how many of us are hitting that mark? Here’s the reality: Only one in 10 Americans actually save 15% or more of their income.(5) Houston, we have a problem.

Here’s the reality: Only one in 10 Americans actually save 15% or more of their income.(5

—Chris Hogan

You simply cannot expect your monthly income from social security to provide enough money in your retirement—unless you want to scrape by. Any money from the government should be the icing on the cake, not the cake itself. You need a plan—and a good one—if you want to cover your future expenses and enjoy retirement.

When Should I Start Saving for Retirement?

The sooner you start saving for retirement, the longer your money has to grow. That’s the power of compound growth. And that growth can add hundreds of thousands of dollars to your nest egg. Here’s what I mean:

Let’s say Mike starts to invest $500 a month at age 40. When he retires, he could have almost $800,000 if his money grows at the historical average annual return of the S&P 500. Mike contributed only $162,000 to that total; the rest was compound growth on his investment. Not too shabby!

But let’s compare Mike’s investing approach with Susan’s. She only invests $250 per month, but she starts at age 25. Her money grows at the same rate of return as Mike’s investment. But when Susan retires, her nest egg could be worth over $1.7 million! She only contributed $126,000 to that total. Over $1.6 million was compound growth. Wow! Which amount do you want in your bank account? Yeah, over $1 million sounds a whole lot better to me too. And folks, becoming a millionaire is possible for everyone, not just the trust-fund babies.

It's important to save for retirement as early as you can. But, if you’re still in debt or have no cash savings set aside, I recommend doing a few things before you start contributing to retirement accounts:

  1. Save $1,000 quickly so you have a buffer against life’s emergencies. 
  2. Use the debt snowball method to knock out all debt except your mortgage.
  3. Boost your emergency fund so it can cover three to six months of expenses.

With those steps taken, you’ll free up your income and have savings to cover any emergencies—without being tempted to tap into your retirement (and believe me, you’ll be tempted). Once you have that foundation in place, you’re ready to start saving for retirement. Way to go!

How Should I Save for Retirement?

If your employer offers a 401(k) with a match on your contributions, that’s the first place to start. Make sure you invest at least up to the match to take full advantage of that free money.

If your employer offers a 401(k) with a match on your contributions, that’s the first place to start. Make sure you invest at least up to the match to take full advantage of that free money. 

—Chris Hogan

With a traditional 401(k), you should invest up to the match and then work with a financial advisor to open a Roth IRA. Then invest the remainder of your 15% there. If you fully fund a Roth IRA and still haven’t reached 15% of your monthly income, simply increase your monthly 401(k) contributions until you reach that percentage. If you have questions, talk to your advisor.

Does your company offer a Roth 401(k)? Perfect! As long as you’ve got good mutual fund options, you can invest your whole 15% there. The key to saving is consistency, so make sure your money is automatically taken out of your check every month.

How Can I Start Saving if I Don’t Have a 401(k)?

If you don’t have a 401(k) option at work, that’s okay. Work with a financial advisor to get more information about your retirement savings options. Most likely, a Roth IRA will be a great fit for your investment needs if you don’t have a 401(k) at work or if your fund options aren’t that great. 

How Can I Save More for Retirement?

So, what’s keeping people from going the distance with saving their nest egg? The truth is that saving for retirement is a challenge, especially when the expenses of right now stand in your way. Let’s look at four common retirement savings barriers and the solutions to overcome them. 

Retirement Savings Barrier #1: Cost of Living

A Ramsey Solutions’ research study found that across all demographic groups, cost of living is the top reason people don’t save for retirement.(6)

Another study found that the median household income has grown almost 20% over the past decade, while the cost of living has increased 18%.(7) That doesn’t leave much wiggle room for families to tackle everyday expenses. But that doesn’t have to spell disaster for your retirement!

Here are two tips to help you stay on track:

  • Don’t spend your raises. A lot of people increase their lifestyle to match that income increase. A fancier car. A new kitchen. A nicer wardrobe. But remember, investing 15% of your income means investing 15% of any pay increases too. As your income grows over time, those bumps in pay can add some serious cash to your nest egg!

  • Stick to a monthly budget. If you haven’t been budgeting, now’s the time to start! A budget helps you take control of your money and make a plan for every dollar. You’re telling your money where to go instead of wondering where it all went. Budgeting is a habit that takes time to develop—so give yourself a couple of months to get the hang of it. Soon, you’ll be budgeting like a pro!

Retirement Savings Barrier #2: Spending Too Much on Kids’ Activities

Driving your kids around town for soccer practice and piano lessons doesn’t just drain your gas tank. It can leave your nest egg riding on empty too.

Think about this: The average cost for extracurricular activities in 2016 was nearly $739 per student—about a $50 increase from the prior year, according to Backpack Index.(8) That’s a lot of money for a hobby! Saving $739 annually for 13 years could add almost $20,000 to your retirement account. That’s nothing to sneeze at. 

Don’t get me wrong, those activities are important. But they don’t need to hijack your future. Here are a couple tips for keeping expenses in check:

  • Limit your kids to one extracurricular per season. Not only will this help your budget, but it also might increase your family time. Let’s say your child plays piano and guitar. If you cut back on guitar lessons and save $150 each month, that’s $1,800 a year. Over 10 years, that could grow into over $30,000.

  • Trade travel teams for rec leagues. Let’s face it. The chances of your kid going pro with any sport are pretty slim, so it doesn’t make sense to spend thousands of dollars and countless hours traveling throughout the year. Keeping to local rec teams could add thousands of dollars to your retirement nest egg. And later on, your adult kids will appreciate not having to worry about your future. That peace of mind is more important than trophies in the attic. 

Retirement Savings Barrier #3: Medical Expenses, Especially for Baby Boomers

According to the Retirement in America study, 54% of baby boomers still in the workforce have less than $25,000 in their retirement fund—and more than half of boomers have no retirement savings at all!(9)

Health care costs may be partially to blame for holding this generation back. The study found that medical expenses are a top financial hurdle for baby boomers who are trying to save for retirement.(10)

Even with those alarming stats, baby boomers—and anyone else who’s behind on retirement savings—can turn things around. Here are some tips:

  • Open a Health Savings Account (HSA). An HSA is a great choice for those who are healthy and don’t visit the doctor often. Here’s why: An HSA is a tax-advantaged medical savings account for those who also have a high-deductible health insurance plan. Many plans cover 100% of medical expenses once the deductible is met. With an HSA, you can save—and even invest—money to pay for deductibles and other medical expenses tax-free.

  • If you’re over age 50, take advantage of catch-up contributions. Hitting the big 5-0 comes with one big benefit: You can invest an additional $1,000 in your Roth IRA and an extra $6,000 in your workplace retirement plan—each year! If you max out both accounts, that’s a grand total of $31,000 in potential annual contributions. Max out your 401(k) and Roth IRA for 10 years and you could have $543,000 saved for retirement. In 20 years? You could have $1.95 million! See, I told you becoming a millionaire is possible!

  • Connect with an investing professional. A pro can help you customize a plan for reaching your savings goals, especially if you have some catching up to do. They can also help you spot holes in your budget where money may be leaking out.

Retirement Savings Barrier #4: Credit Card Debt

The Retirement in America study found that almost one-third of savers who are in debt (31%) ranked credit card debt as a top reason they don’t save more for retirement.(11) Listen up: Debt isn’t just borrowing money that you don’t have from the bank; it’s also borrowing from your future! Every dollar that goes to debt payments is money that you could have invested. If you want to be serious about saving for the future, debt has got to go.

Every dollar that goes to debt payments is money that you could have invested. If you want to be serious about saving for the future, debt has got to go

—Chris Hogan

You might have already kicked the plastic habit, but if not, here’s how to get started:

  • Knock out your debt using the debt snowball method. List your debts in order from smallest to largest. Make the minimum payment on all of them except the smallest. Attack that one! When you pay off the smallest debt, roll the extra money into the next smallest balance. As you work the debt snowball, you’ll gain momentum with each debt you pay off!

  • Once you’re out of debt, stay out! Without payments, you’ll have margin in your budget. And when you’ve got breathing room in your finances, it’s so much easier to save 15% of your income without cramping your lifestyle.

Check out my new book Everyday Millionaires to read more about building wealth and retiring a millionaire.

Stay Focused on Your Retirement Savings Goal

Remember, retirement isn’t an age; it’s a financial number. Keep that goal in mind and remember that saving for the future is a marathon, not a sprint. I know how easy it can be to let life get in the way of your retirement savings. But with the right plan and the right actions, you can enjoy your life now and still make progress toward your financial goals—even that million-dollar mark!

Ready to break through the savings barriers? A SmartVestor Pro can help you outline a plan no matter your financial situation.

Find a SmartVestor Pro today!

About Chris Hogan

Chris Hogan is a #1 national best-selling author, dynamic speaker and financial expert. For more than a decade, Hogan has served at Ramsey Solutions, spreading a message of hope to audiences across the country as a financial coach and Ramsey Personality. Hogan challenges and equips people to take control of their money and reach their financial goals using The Chris Hogan Show as well as his national TV appearances and live events across the nation. His second book, Everyday Millionaires: How Ordinary People Built Extraordinary Wealth—And How You Can Too is based on the largest study of net-worth millionaires ever conducted. You can follow Hogan on Twitter and Instagram at @ChrisHogan360 and online at or

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