Maximizing Your Retirement Savings: Where Are You Going Wrong?

retired couple enjoying coffee at a cafe

No matter who you are or what type of job you hold, there is one thing every working-class American dreams of—retirement. For many, retirement is the goal of a lifelong career. After working hard in your field for a countless number of years, being able to retire finally allows you to spend the rest of your days relaxing and reflecting on the hard work that got you to this place. However, many Americans have a difficult time saving enough to be able to retire due to naivete and poor money spending habits. Here are some tips on how you can get started saving for retirement.

Drawing the Path to Retirement

Retirement is a goal, and as far as any goal goes, proper planning is needed to achieve the desired outcome. Planning for your retirement is no different. Before you start allocating funds for your retirement, you need to create a blueprint that will guide you. A good place to start is to consider the type of life you want to live in your retirement. Think of the hobbies you would like to pursue, where you would like to live, and how you would like to spend most of your days.

The typical rule of thumb is that you should replace 70% of your annual pre-retirement income through savings and retirement funds. That is, living off 70% of your annual salary will allow you to comfortably live the same lifestyle that you lived before retirement. Therefore, many experts recommend investing 10-20% of your annual income into retirement savings each month or every year. After figuring out how much you should be investing, it is time to figure out how you are going to invest.

Where You Should Be Investing Your Money

The most efficient way to save money for retirement is through investing in a retirement savings account. While there are plenty of options, Individual Retirement Account (IRA) and 401(k) accounts are the most practical way to save. Many companies offer 401(k)s to their employees, allowing them to easily contribute a small amount from each paycheck to a retirement savings account. However, a 401(k) may not be offered by your company or may not be enough to accumulate the savings you desire. Therefore, investing in an IRA is a great tactic for achieving your savings goal.

Compared to other investment accounts, the greatest benefit of an IRA is that you can avoid taxes on the money you put in or the money you withdraw, depending on whether you go with a traditional or Roth IRA. While other investment accounts can satisfy your retirement savings goals, take advantage of IRA and 401(k) accounts if your company offers them. They provide both the easiest and most affordable options for investing money for your retirement.

Where You May Be Going Wrong

While saving up enough for retirement may seem like a goal that all reach, many struggle to save enough money to be able to retire by the age they want—if they are able to retire at all. In fact, the Economic Policy Institute reports that nearly half of American families do not have any money saved up. However, this is not that surprising, as nearly half of Americans live paycheck to paycheck.

If you struggle with saving money each paycheck or each month, one of the best rules to follow is the 50-15-5 rule. That is, try reducing your monthly expenses to 50% of your income, invest 15% of your income into a retirement account, and put another 5% in an emergency savings fund. While only spending 50% of your monthly income may seem like an impossible task, many people spend more than they need to without even realizing it. If you have trouble saving money, check out our guide for saving up to half on your monthly expenses.


The word “retirement” is thrown around so often that we often forget that not everyone gets to retire at the age they want to, or possibly not at all. Retirement should be treated as a career goal and something that needs consideration and effort to achieve. Therefore, if you hope to achieve retirement and you are not currently contributing towards your savings, it is crucial that you develop a plan and begin investing immediately. Even if you are not able to invest 10-20% of your annual income, any amount will help you out later in your life. Being able to retire is no easy task.  But every individual can if they choose to save and invest strategically.

About the Author

Josh Miles is a St. Petersburg/Tampa based writer who studied Business Management and Marketing at the University of South Florida. He believes that time spent with good friends and a connection with nature are keys to a healthy and happy life. In his free time, you will find him exercising, listening to music, or playing video games with friends.
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