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The phrase “retirement planning” can come across as intimidating, especially if your idea of savings is a separate bank account to your checking. Even if your retirement may feel like a million years away, it’s important to start looking into a solid retirement savings plan early on. In fact, most experts suggest that the younger you are, the more aggressively you should be investing your hard-earned cash. This makes sense, as the earlier you start, the more time your nest egg has to grow. Now, don’t panic if you’re already in your 30s or 40s and you haven’t started yet. While earlier is always better, it’s also never too late to start.

Start by determining how much money you’ll actually need annually in retirement

Everyone’s situation is different, and so it’s important to carefully consider your personal needs and what you see yourself doing in retirement. If you plan to downsize, slow down, and enjoy time with friends and family, you likely won’t need as much per year as someone who plans to travel the world. Remember: there is no right or wrong answer here.

But, the general rule is this: you’ll want to save a certain amount of your salary per year from now until you retire in order to save enough to sustain your pre-retirement income. In other words, when you’re in your 30s, you need to save “1 times” your salary. When you’re in your 40s that number will jump up to “3 times,” and so forth.

Don’t forget about other savings goals

This is especially true if you listen carefully to the advice of your sage elders and begin saving for retirement early on. Let’s face it: retirement isn’t the only thing on your mind. You’re likely saving for a home, a car, or you simply want to pay off student loan or credit card debt. And, let’s not forget about your emergency fund!

Try not to feel overwhelmed. A little bit each month in each direction goes a long way. If you’re saving your money smartly, you can save and pay off several things at once. It’s all about where you put your money. 

Consider the options

There is no one size fits all retirement savings plan out there, but the best plans will usually provide tax benefits and matching contributions from your employer. 401(k) plans with matching dollars are quite common, so if you’re going to start anywhere, you should start there.

If your employer doesn’t offer this kind of retirement plan, then you should open your own retirement savings account. There are several different types to choose from, most fall under the category of an IRA, or individual retirement account. These different types include Roth IRA, traditional IRA, simple IRA, and SEP IRA.

Begin investing

Once you’ve started placing your money into a 401(k) and an IRA, it’s time to start investing. In both cases, you’ll have the choice of where your money goes and what you invest in. As mentioned, as a general rule, it’s advised to be more aggressive with your investments in your younger years. You can slow down once you get closer to retirement age.

The most important takeaway? Start today.

And please remember – opening a retirement savings account and funding it are not enough! Your retirement plan requires that money is set aside, but you must invest it. Money placed in a 401(k) may be automatically placed in cash. If you were about to do this or already are guilty, don’t worry. This is something we often see due to misunderstanding. You may need to transfer this again to an actual investment, like the SP500. It is that simple! (yet complicated).