How Do I Start Saving for Retirement?
In a Nutshell
Start saving early by calculating how much you’ll need annually in retirement and multiplying by your expected retirement years to set a target. Choose the right account—401(k) with employer match if available, Roth IRA if you expect higher taxes later, or brokerage with target-date ETFs for simplicity and automatic rebalancing. The sooner you begin, the smaller your regular contributions can be thanks to compounding.
These notes were generated by AI and may contain inaccuracies.
When surveyed, Americans feel they need more than $2 million to retire comfortably. Dividing that amount over a 25-year retirement results in a budget of about $84,000 per year to cover expenses.
A successful retirement does not happen by accident. Saving for retirement requires answering two key questions: what is your timeline (the amount of time until your target retirement date) and what is your target amount (how much money you expect to need once you retire). A simple way to estimate the target amount is to figure out how much money you need each year to cover your expenses, then multiply that by the number of years you expect to be retired.
401(k): These are most often employer-sponsored plans. They offer tax advantages and some even have contribution matching from your employer. The downsides are that investment options can be limited, not all workplaces offer them, and they have contribution limits.
Traditional IRA: Contributions may be tax deductible today, but you'll generally pay taxes when you withdraw the money in retirement.
Roth IRA: You contribute money that's already been taxed, but qualified withdrawals in retirement can be tax-free.
Traditional brokerage account: These offer the most flexibility with no contribution limits and the ability to put money in or take it out whenever you want. The trade-off is these accounts do not enjoy the potential tax advantages that retirement-specific accounts may offer.
If you expect to be in a lower tax bracket in retirement, a traditional IRA might make sense. If you think taxes could be higher later or you're early in your career, a Roth can be powerful. Both types have contribution limits and potential penalties for withdrawing money early.
For investors looking for a simpler way to save for retirement inside a traditional brokerage account, iShares Target Date ETFs can help streamline the process. You can choose an ETF aligned to your own timeline and expected retirement date. You can contribute as regularly as you like and it automatically adjusts its asset mix over time to help keep you on target.
Retirement accounts are not investments themselves. They are just types of accounts in which your investments can grow. How much you contribute and which investments you select are up to you.
Saving for retirement is like planning your dream vacation. First, you need to pick your destination (your version of retirement). Next, you've got to decide on your arrival date (the age you want to retire). Once you've decided where you want to be and when you want to get there, all you need is the route.
If your arrival date is right around the corner, getting there on time might mean putting a lot more money towards your goal. If you start planning early, you can contribute smaller amounts consistently and let time do more of the heavy lifting. The more time you have between now and your retirement date, the lower your contributions will need to be because your retirement account will have longer to compound and grow into your target amount.
iShares offers a range of ETFs that can help on your retirement journey. Each iShares LifePath Target Date ETF is a ready-made investment mix built around a specific retirement year and managed by professionals who regularly update the diversified blend of stocks and bonds as you move closer to retirement. They focus on growth earlier on and gradually become more conservative as your target date approaches.
You start by choosing the ETF closest to the year you plan to retire. From there, the portfolio automatically shifts over time, helping you stay aligned with your goal through a single investment. It's like using a GPS that automatically updates the route as you get closer to your destination.
Investing carries risk. Before you spend your money on anything, you should give it careful consideration. Always do your homework. Visit www.ishares.com to view a prospectus, which includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. Investing involves risk, including possible loss of principal.
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