We all fantasize about the day we’ll be able to hang up our hats and retire, affording us plenty of time to do what we love. That may mean traveling, spending time with family, or even catching up on a neglected reading list. But whatever you imagine for when you retire, making it a reality requires long-term planning.

Retirement planning requires developing specific ideas for your retirement lifestyle and then determining how much that lifestyle will cost. What’s more, since you probably won’t be earning a paycheck, you need to know where the income to pay for your lifestyle will come from.

The amount each person needs to have saved for retirement is different, and depends on factors like their health and where they live. Some experts suggest having a nest egg of over $1 million if you expect it to generate enough money to live on. Others recommend having the equivalent of 10 to 12 times your current annual income in savings.

When to start saving for retirement—and how to boost savings over time

Even if retirement is decades away, it’s important to start saving for it early. If you’re in your 20s, you may not know what your retirement goals are yet, but you can still start putting money aside for future goals.

Younger workers may not have as much available to save as those who’ve been in the workforce for a long time. But they do have time on their side, allowing the opportunity for savings to grow longer. Slightly older workers may be further along in their careers, allowing them to put more into savings each month.

How much you should be saving for retirement can depend on your age and where you are in your career. And while there’s no one way to do it, thinking about how to plan for retirement by decade can be helpful in moving toward long term goals. For example:

If you’re in your 20s: Aim to put at least a modest amount of your paycheck into savings every week or every month. Don’t worry if you can’t put away the often-suggested 20 percent. Even a few dollars a week may grow over time when invested in an IRA or high-yield savings account, for example. In the meantime, work on paying down student loans and other debts.

If you’re in your 30s: You’re likely to be a bit more established in your career and may have a little more income to put away regularly. As your income increases, make sure your savings increase proportionately. Consider having a portion of your paycheck automatically deposited into your savings account each month, so you don’t have to think about it.

You may also now have some assets that will become part of your retirement strategy later on, such as a house, or shares in the company you work for.

If you’re in your 40s: Hopefully by now you’re well-established in your careers and are starting to see your savings grow significantly as you move into your peak earning years. This is also the time to make sure you’re keeping track of your debts. If you pay off debts in your 40s, such as student loans and credit card debts, you can spend the later part of your career saving as much as possible.

This may be a good time to put any extra income, such as bonuses, toward paying down debt. By your 40s, experts recommend having six to 10 times your current salary put away in savings.

If you’re in your 50s: Retirement planning may become your primary financial focus, and you may start to have an idea of what your yearly retirement income needs will be.. This shift may mean making final mortgage payments and taking advantage of higher contribution limits to retirement accounts, such as 401(k)s and IRAs. By your 50s, experts recommend saving approximately 25 times your yearly retirement income needs.

If you’re in your 60s: Compare your projected living costs and your expected retirement income and see if it all adds up. If it doesn’t, you may need to adjust your expectations for retirement, save more, or maybe even plan to keep working a little longer. Many people continue working well into their 60s, allowing them to grow their savings and keep their employer-sponsored health insurance until they’re eligible for Medicare.

Understanding the cost of retirement

Having a great saving strategy is only the first step in planning for retirement. The second step is figuring out how much you’ll need to live on when you’re no longer working. Even if retirement is a long way off, try envisioning what you’d like your retirement to look like.

Will you want to travel or spend more time with family? Will you spend winters in a warmer climate? Do you want to downsize? Or maybe you want to buy a second home.

Once you understand what your goals are, do some research and figure out what your particular vision might cost per year. Conventional wisdom suggests that you’ll likely need somewhere between 80% and 100% of your pre-retirement income. Where you fall on that spectrum will depend on your goals and personal situation. Some expenses to consider include:

  • Rent or mortgage payments: Even if you’ve paid off your mortgage, don’t forget to factor in the expense of property taxes and homeowner’s insurance. If you plan on having a second home, factor in the expense of upkeep on two properties. A good rule of thumb is to estimate between 1 percent and 3 percent of a home’s value for upkeep annually.
  • Healthcare costs: Once you’re eligible for Medicare at age 65, many of your healthcare needs should be covered at a reduced cost. However, Medicare doesn’t cover everything, such as long-term care, which includes nursing homes and in-home care. These types of care can cost up to $100,000 annually. Regardless of whether you end up needing long-term care, you should expect to have more significant medical expenses as you age By one estimate, some couples may need as much as $363,000, as of 2019. Travel costs: With all of your new free time, you may want to travel abroad or spend more time visiting family. If you only plan to visit family a few times per year, the cost of plane tickets and dining out should suffice. For more extensive travel, you’ll need to budget for accommodations, food, and any extra activities such as private tours. For those interested in all-inclusive experiences, a five-night vacation in the Caribbean for example, can run about $1,000 per couple.
  • Non-essentials: Factor in money you’ll spend on discretionary expenses. Discretionary expenses are things that you can technically do without, such as dining out, pursuing hobbies, and entertainment.

Sources of retirement income

Once you have a sense of how much money you’ll need to live once you retire, determine where the income to pay for those expenses will come from. For many people, potential income sources include:

  • Social Security: How much you’ll get from Social Security each month depends on a variety of factors, including how many years you’ve worked and when you begin taking Social Security payments. Visit the Social Security Administration’s website to figure out how much you can expect to receive.
  • Passive income: Steady sources of income that don’t come from employment, such as money from rental properties, investment strategies, or royalties from a book or some other creative project.
  • Retirement accounts and other savings: Many people rely on the money they’ve saved and invested in brokerage accounts and retirement accounts. Your employer may offer the opportunity for tax-advantaged savings through a 401(k). Or you can begin investing yourself with options such as a traditional or Roth individual retirement account (IRA). The tax-advantaged status of these retirement savings plans can also help boost long-term returns on your savings.

Turning your retirement plan into a reality

Once you have long-term retirement goals and an understanding of potential income sources, it’s time to put your savings plan into action. Look at how much savings you’ll need in order to retire, and figure out how you’ll get there.

Online tools like Stash’s Retirement Calculator can help you keep track of how much you’ll need to retire. Enter information, including your age, salary, how much you’re saving, and your estimated retirement age to see how close you are to achieving your retirement goals. Revisit your savings goals as your circumstances change, and adjust your plan as needed. For example, you may need to:

  • Make sure that your retirement goals are realistic. Depending on how much you’re able to save, you may need to plan for a more modest retirement or consider ways to make supplemental income to make your plan a reality.
  • Tighten your belt and put more of your earnings into savings, if you can afford to. You may be able to avoid those extra years of work—especially if you can put that savings away early—giving it time to grow.
  • Consider working longer, if putting away money each month is a struggle. That may also include developing a side-hustle or starting your own part-time business. Extra years of income can help you save more while continuing to earn a regular income rather than retiring early.

Whatever you decide, to learn more about building your future and saving for retirement, visit Stash Retire.

Welcome to your new financial home.

Start today with any dollar amount.

Get the App

Hooked on Stash? Tell your friends!

Get $5 for every friend you refer to Stash.

Refer friends

Hooked on Stash? Tell your friends!

Get $5 for every friend you refer to Stash.

Refer friends