How To Plan for Retirement

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Two big misconceptions could be undermining your financial future: that you do not make enough money to save for retirement and that your social security should be enough to live on when you stop working. Finance experts say neither is likely. People with lower-to-middle-range incomes can—and should—save enough to retire comfortably. The trick is to start as early as you can and to be consistent.

“There is a common misconception in our society that to become a millionaire or have a great retirement, your income must be extremely high. Nothing can be further from the truth,” says Melvin Gonzalez, CPA, a personal finance advisor with “Several studies have shown that time and consistent investing are what create a comfortable retirement.”

Another thing to be aware of is that if you do not start saving now, you are making less money over time due to inflation. The historical rate of inflation has been about 3%, says Laura Adams, MBA, a retirement savings expert with So, if you earn less than 3% interest on your savings, you are losing money over the long term.

To put retirement saving in perspective, here are a couple of examples: Say you make $35,000 a year. Investing 10% a year, or $3,500, for 40 years (assuming a 7% annual return and a 2% annual salary increase) would give you $828,000 for retirement, says Andrew Latham, a certified personal finance counselor and the managing editor of

“A nail tech who started saving 10% of her income at age 35 would have $330,605 by the time she turned 65, assuming a 7% interest rate,” Latham says. “In contrast, the same nail tech would only have $104,997 if she kept those monthly contributions under her mattress or in a regular checking account.”

If you are young, time is on your side in terms of growing wealth. A 25-year-old who takes $5,000 a year and invests it consistently in a Roth IRA for a period of 40 years in good growth stock mutual funds will have $1 million by the time they reach 65, Gonzalez notes.

But, if you are starting to save for retirement later in life, do not worry—you can still grow a solid nest egg.

“While investing for retirement can seem complicated and risky, it does not have to be,” Adams says. Here is how to do it.

Make a Plan

It might sound tedious, or anxiety-provoking if your income is not as high as you would like, but making a financial plan can give you an empowering sense of control over your future.

“Any plan will change over time. The closer you get to retirement, the more specific the plan will become,” says debt and consumer finance expert Sean Fox, president of Freedom Debt Relief in San Mateo, California.

First, check out one of the many free online retirement calculators, such as, to determine how much savings you will need to pay for your retirement needs, Fox says. Also, visit the social security website ( to get an idea of what your payments will be.

Generally, you want to have enough money saved to cover three to six months of expenses in case of an emergency, such as housing needs or an injury that keeps you from working. It might sound daunting (and not very fun) to set money aside now, but consider what you might do in an emergency without that stash, such as taking a cash advance on a credit card, which typically has very high interest rates that will hurt you in the long run.

Figure Out a Retirement Budget

Once you have sorted what you need for accessible savings, figure out what you can contribute to a retirement account.

“Your 30s are a good time to start investing, especially if you are in an industry where you are not offered a 401(k),” says John Davis, education ambassador at ScoreSense, a credit-reporting monitor based in Dallas, Texas. A simple method to estimate how long it would take to double your investment is the rule of 72, he says. If a retirement portfolio generated an annual return of 8%, dividing 72 by eight means it would double in about nine years.

“This demonstrates how delaying retirement saving for about a decade could cost you the chance to double your money over that time,” Davis says.

Try not to be intimidated about investing if you are on a tight budget, Latham says: “It is great if you can save 20% of your salary for retirement, but putting aside $50 or even $25 a week is a good start.”

Most importantly, he says, “Make savings a ‘bill’ to be paid every week or month. Automate it at your financial institution, whether it comes directly out of your paycheck or as a regular transfer from checking to savings accounts.”

Continue reading about how to plan for retirement and what steps to take in the September/October 2021 of our digital magazine. 

About the Author

Virginia Pelley is a freelance writer and editor based in Tampa, Florida.

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