Stressed About Retirement? Here's How to Ease Your Mind

If you're worried about your savings, follow these simple tips to get on the right path.

Happy senior couple

Updated on May 12, 2022.

Are you worried about saving enough money for retirement? This concern topped all other financial stressors in a 2020 Charles Schwab survey of 1,000 workers. In a post-pandemic world, having sufficient retirement savings was more concerning to survey participants than even stock market volatility and job security.  

Of course, worrying doesn’t help and prolonged stress can contribute to depression and anxiety. Here are a few tips for how to begin planning for your retirement or to help get your savings back on track.

Before you get started

There are a few factors that can impact future savings. Before you start putting money away, make sure you address these.

Emergencies and unplanned costs: Less than half of Americans (44 percent) have enough money in savings to cover an unexpected $1,000 expense, like car repairs or an emergency room visit. Before saving for retirement, it’s important to accumulate a financial cushion for emergencies.

How much should you set aside? Financial services company Vanguard suggests building a reserve of three to six months, enough to cover essential living expenses like rent, food, utilities, and car payments. Consider a larger cushion if your job is not secure or your income is erratic.

Money market funds are a good investment for your emergency fund. They’re safe and you can easily access your money when you need it.

Credit card debt: Credit cards have advantages if you pay them off every month: They’re convenient, they offer travel insurance and other benefits, and many offer cash-back rewards.

Paying credit card interest, however, can prevent you from saving for retirement. If you have credit card debt, pay as much as you can each month, starting with the card with the highest interest rate until you’ve paid it off. Then move on to the card with the next highest rate, and so on.

Consider transferring your balances to a card with a lower interest rate or a low introductory rate. Once you’re debt-free, invest the money you were paying in interest into a retirement account.

Investing know-how: Don’t let lack of knowledge about investing keep you from saving for retirement. Take advantage of online resources to learn about types of retirement accounts and investment vehicles, how much you should save, tax strategies, and whether working with a financial professional is right for you.

Try the Motley Fool website, the U.S. Securities and Exchange Commission’s investing site, or online brokers. Many offer consumer education centers and interactive calculators. There are also a growing number of apps that are popular options for self-investing, such as Betterment and Invstr.

Start with the basics

Once you've explored those initial financial issues, it's time to save for retirement. Begin with these essentials.

Create a budget. This will help you track where your money goes each month. recommends spending no more than 50 percent of your take-home pay on essentials, like mortgage, utilities, and groceries, and up to 30 percent on discretionary items, such as dining out. The remaining 20 percent should go into savings. You can create a budget in a spreadsheet or use an online budgeting app like Mint.

Note that the 50/30/20 plan isn't a hard and fast rule and may not work for all investors, but is one of many popular budgeting strategies.

Determine how much you’ll need in retirement. An online retirement calculator, such as the one from AARP, will help you estimate how much you need to save.

Take advantage of company retirement plans. Does your company offer a 401(k) plan? If so, contribute, even if it’s only a few dollars per paycheck. Starting at a young age really makes a difference.

A 2017 Schwab study found that, given a 6 percent yearly rate of return, if you invest $100 per month from ages 40 to 65, you’ll save $69,787. If you start at age 18, on the other hand, and invest until you retire at 65, you’ll save a whopping $306,787.

Does your employer also offer matching retirement contributions?

If so, consider this: If you earn $50,000 per year and your company matches up to 3 percent of your income, you can save $1,500 annually toward retirement and your company will also contribute $1,500 each year. Matching contributions are essentially free money.

Of course, if you can invest more than what you need to earn matching dollars, do so. Though there are some restrictions, most employees in 2022 can contribute up to $20,500 to a 401(k) account; that’s $27,000 if you’re over the age of 50.

Open a traditional or Roth Individual Retirement Account (IRA). Even if you contribute to a 401(k) plan (or if your employer doesn’t offer one), you can likely also contribute $6,000 annually to an IRA ($7,000 if you’re over 50).

Compound your savings. Compounding involves earning even more money on your interest. Here’s how it works:

Say you invest $10,000 at 8 percent annual compounded interest. At the end of the first year, you’ve earned $800 in interest. The second year, you‘ll earn 8 percent on your new total of $10,800. After 30 years, your $10,000 investment will grow to $100,000. The more frequently the interest compounds (perhaps every six months or every quarter), the more you will earn.

Postpone Social Security withdrawals as long as possible. You accrue Social Security benefits based on how much you earned while working. The longer you wait to start withdrawing, the more you’ll take home.

For example, if your monthly benefit is $1,000, you’ll take home $700 every month for the rest of your life if you start withdrawing at the minimum age of 62. If you don’t start withdrawing until you’re 70, however, you’ll take home $1,240 per month.

If you’re worried about how long you’ll live, consider this: A 65-year-old has a one-in-three chance of living until at least 90. Visit the Social Security Administration to determine your full retirement age.

Plan for medical expenses. Health care in retirement costs more than most people expect, even with Medicare. In fact, according to Fidelity Investments, a typical retired couple aged 65 in 2021 should have $300,000 saved, after taxes, for healthcare expenses.

Here’s a tip for paying for medical expenses in retirement: Contribute pre-tax dollars to a company-sponsored Health Savings Account (HSA). You can withdraw accumulated savings tax-free for qualified medical expenses.

Remember, even small steps can make a big difference, especially over time. Establish your emergency fund, pay off your credit cards, and then start contributing something—no matter how small—to a retirement account.

Article sources open article sources

Charles Schwab. 2020 401k Participant Survey. August 2020.
Bankrate. Survey: Less than half of Americans have savings to cover a $1,000 surprise expense. Jan. 19, 2022.
Khan S, Khan RA (2017) Chronic Stress Leads to Anxiety and Depression. Ann Psychiatry Ment Health 5(1): 1091.
Social Security Administration. When to Start Receiving Retirement Benefits. 2022.

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