Saving enough to live for decades without a paycheck can feel daunting, but small amounts grow a lot over time. Start young, put away 10% or more of your income each year, and let time do much of the work. There's no single best way to save, but a reliable order is: contribute to your workplace plan up to the employer match, add an IRA, then go back and keep filling the workplace plan toward its limit.

The first step is knowing your target and which accounts will get you there.

How much should you save?

One common method is to assume you'll need to replace about 80% of your pre-retirement income each year, whether from Social Security, a pension, savings, rental income, or a mix. Assume a conservative 4% to 5% annual return on your retirement accounts, estimate how many years of income you'll need, and work backward. Conservative figures leave a cushion for a long retirement and for emergencies.

A simpler rule of thumb: multiply your pre-retirement income by 10 to 12. If you earn $65,000, a target of around $780,000 is a reasonable starting goal. Keep in mind that this shortcut doesn't account for large one-time expenses or inflation.

How much do you need to save?

Our retirement calculator takes your current savings, target retirement year, and age, and estimates how much you still need to put away.

Using retirement accounts to reach your goal

Employer-sponsored accounts are usually the first building block. Many come with matching contributions, and plans like the 401(k) and 403(b) have high contribution limits, so you can save a lot in a tax-advantaged account. Traditional contributions come out of your paycheck before taxes, which also lowers your taxable income for the year. Many advisors suggest directing at least 10% of your salary into a retirement account.

A note on contribution limits: The IRS adjusts most retirement account limits for inflation, usually announcing the next year's figures each fall. Rather than quote numbers that go out of date, this guide explains how each limit works. You can find the current figures on the IRS's annual limits page.

Saving with a 401(k) (for-profit employers)

Many for-profit companies offer a 401(k). Enrolling is usually easy, and your employer may match a percentage of what you contribute, though you may need to stay through a vesting period to keep the match. Contributions are deducted from your paycheck automatically and grow tax-deferred. Withdrawals in retirement are taxed as ordinary income, and taking money out before age 59½ usually triggers a 10% penalty unless you qualify for an exception. Many plans also offer a Roth option: you contribute after-tax money now, and qualified withdrawals in retirement are tax-free.

The main draw is the high limit. Every year, the IRS sets:

• An employee deferral limit: the most you can contribute from your own pay.
• A catch-up contribution for workers 50 and older, allowing you to save extra on top of the standard limit.
• A larger "super catch-up" for workers ages 60 through 63, created by the SECURE 2.0 Act.

One more rule to know: if your wages from the employer exceeded a set income threshold the year before, your catch-up contributions must go in as Roth (after-tax) contributions rather than pre-tax.

For more on how these work, see our guide to catch-up contributions.

Saving with a 403(b) or 457 plan (nonprofit and government employers)

Public-sector and nonprofit workers are usually offered a 403(b) or a 457 plan:

• 403(b): for employees of 501(c)(3) nonprofits and public schools
• 457(b): for state and local government employees and some tax-exempt organizations
• 457(f): a supplemental plan for executives at nonprofits

A 403(b) works much like a 401(k): pre-tax contributions, income tax on withdrawals, and often a Roth option. It shares the 401(k)'s employee limit, age-50 catch-up, and age-60-to-63 super catch-up. If you've worked for certain employers, such as schools, hospitals, or churches, for 15 or more years, your plan may also allow an extra service-based catch-up of up to $3,000 a year, capped at $15,000 over your lifetime.

There's also a cap on combined contributions: what you and your employer put into a 403(b) together can't exceed an annual total set by the IRS, which is much higher than the employee limit alone.

A 457(b) is similar to a 403(b) and covers government workers such as police officers, municipal staff, and public hospital employees, along with some church and charity employees. It has the same standard employee limit as a 401(k), and governmental 457(b) plans allow the age-50 catch-up. It also offers a special three-year catch-up: in the three years before your plan's normal retirement age, you may be able to contribute up to twice the standard limit to make up for years you under-contributed. In any given year, you use either the age-based catch-up or the three-year catch-up, whichever is larger, but not both. Many government employers don't offer a match.

A 457(f) is a supplemental plan for highly compensated executives at nonprofits. It lets the employer contribute above the 457(b) limit and typically comes with a vesting period you must stay employed through to keep the money.

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Saving with a solo 401(k), IRA, or SEP-IRA (self-employed)

If you work for yourself, you have a few strong options.

A solo 401(k) is a 401(k) for a one-person business (a spouse on payroll can join too). You get tax-deferred contributions, a high limit, and the freedom to choose your own brokerage. Because you're both employer and employee, you can make a salary deferral as the employee and then add a profit-sharing contribution as the employer, generally up to 25% of your compensation. Total contributions per person are capped at an annual IRS limit, with catch-up contributions allowed on top for those 50 and older. A couple who both earn income from the business can each contribute, potentially saving well into six figures combined, depending on their earnings. A Roth solo 401(k) is also available.

A Roth IRA is a popular tool for the self-employed and anyone else with earned income: you contribute after-tax money, and qualified withdrawals are tax-free. It's easy to open and makes a good starter account, though the annual limit is much lower than a 401(k)'s, with a modest catch-up for those 50 and older. Your ability to contribute directly phases out at higher incomes. A traditional IRA shares the same contribution limit.

A SEP-IRA suits freelancers and small businesses. It's simpler to run than a 401(k) and generally requires no annual IRS filing. You can contribute up to 25% of compensation, subject to an annual dollar cap and a cap on how much compensation counts. There's no catch-up contribution. You don't have to contribute every year, but in any year you do, you must contribute the same percentage of pay for every eligible employee as you do for yourself. Thanks to SECURE 2.0, Roth SEP-IRA contributions are now allowed as well.

What to do with a retirement account when you leave a job

Whether you quit or were let go, you have options for your balance:

• Leave it. You can usually keep a 401(k) or 403(b) with a former employer if you like its investments and fees. The risk is that you forget about it, and fees may rise once you're no longer on the group plan.
• Roll it into an IRA. This typically opens up more investment choices and lower costs, and lets you consolidate old accounts. A rollover from an employer plan never counts against the annual IRA contribution limit, no matter how large. Use a direct (trustee-to-trustee) transfer if you can. If the money is paid to you instead, you have 60 days from the day you receive it to deposit it into a retirement account, or it becomes a taxable distribution. That 60-day window has nothing to do with when you left the job. Roll into an account with the same tax treatment (pre-tax to traditional, Roth to Roth) to avoid a surprise tax bill.
• Roll it into your new employer's plan. If the new plan accepts roll-ins and is at least as good as your old one, this keeps everything in one place.

How to invest with retirement in mind

Start early

Every year of compounding counts. At a 5% annual return, $10,000 invested at age 20 grows to nearly $90,000 by 65. The same $10,000 invested at 40 is worth about $34,000 at 65. Starting early also gives you more time to recover from market downturns.

Pay down high-interest debt

Debt drains money you could be investing. Paying off high-interest balances is effectively a guaranteed return, and it belongs on your short-term to-do list alongside building an emergency fund.

Diversify

Use your employer plan for steady, matched contributions, then spread other savings across account types and risk levels appropriate for your age. A fiduciary financial advisor can tailor the mix to your goals and risk tolerance. A target-date fund is a simple option that gradually shifts toward safer holdings as you approach retirement.

Common retirement investments

Retirement accounts

401(k)s, 403(b)s, and IRAs are the backbone of most people's savings: often employer-sponsored, sometimes matched, and tax-advantaged. A pension is different. It's a defined-benefit plan in which the employer carries the investment risk and guarantees you a set income. Pensions have become less common because that guarantee is expensive; a 401(k) shifts the risk, and the outcome, to you.

Real estate

A rental property or a REIT (real estate investment trust) can diversify your portfolio. A REIT trades like a stock and owns income-producing property such as shopping centers or medical buildings. REITs are often used as a hedge against inflation, though they carry the usual real estate risks. Your home can play a role too: pay it off, then sell and downsize, or keep it as a rental after moving somewhere less expensive.

Small business

If you believe in a small business that's open to investors, you can take an equity stake (you own a share and profit if it grows) or make a debt investment (a loan repaid with interest). Both carry a real risk of loss.

Working with a financial advisor

Retirement planning is complex and personal. An advisor can help you set short-term goals (like paying off debt) and long-term ones (like a savings target), map out milestones, decide where to invest, and often advise on taxes. They can also help you stay the course through market drops and inflation spikes. Look for a fiduciary, who is legally required to act in your best financial interest.

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