Saving for Today, Planning for Tomorrow
June 2, 2025
When it comes to securing your financial future, most people already understand the importance of saving. The real challenge isn't recognizing the need—it's knowing how to do it right and staying committed over the long haul. Whether retirement is decades away or just around the corner, laying a strong foundation now can help ensure that your later years are defined by financial freedom rather than financial worry.
To stay on course, it helps to focus on three core pillars: how much you save, where you save it, and how you invest those savings. Each plays a crucial role, but the first—your savings rate—is the engine that drives everything else.
1. How Much You Save—and How Soon You Start
The earlier you begin saving for retirement, the more time your money has to grow through the power of compounding. Financial experts often recommend aiming to save at least 15% of your pre-tax income annually for retirement. This figure includes any employer contributions you may receive through workplace savings plans.
Consider this example: Jamie earns $60,000 annually, and her employer matches 100% of her contributions up to 5% of her salary. If Jamie puts in 10% of her pay, which is $6,000, her employer adds $3,000. This means her total retirement savings for the year is $9,000. This 15% savings rate helps her get closer to her retirement goals. She does not have to bear the full burden alone.
Even if 15% feels hard to reach now, start with any amount you can. Gradually increase your contribution over time. The most important step is to begin—and then build momentum.
2. Where You Save: Choosing the Right Retirement Accounts
Not all retirement accounts are created equal. Choosing the right savings vehicles can greatly affect how much you save and how much tax you will owe later.
Workplace Retirement Plans
Most people will begin their savings journey through an employer-sponsored plan like a 401(k), 403(b), or 457(b). These plans often offer tax advantages and, in many cases, an employer match—which is essentially free money.
You generally have two options for these plans: a traditional account or a Roth account.
● Traditional 401(k): Contributions are made pre-tax, which lowers your taxable income today. However, you’ll pay income taxes on your withdrawals in retirement.
● Roth 401(k): Contributions are made with after-tax dollars, but qualified withdrawals during retirement are tax-free.
If you expect to be in a higher tax bracket in retirement, a Roth option could provide a long-term benefit. If you believe your tax rate will drop later, then traditional contributions might make more sense now.
In 2025, you can put in up to $23,500 into a 401(k) plan. If you are 50 or older, you can add another $7,500 as a catch-up contribution. Some plans allow combined employee and employer contributions up to $70,000, depending on compensation levels and plan design.
Individual Retirement Accounts (IRAs)
If you want to save more than your workplace plan, or if you don’t have one, IRAs are a great option. In 2025, the yearly limit for traditional and Roth IRAs is $7,000. People aged 50 and older can add an extra $1,000.
As with 401(k)s, the tax treatment of IRAs differs:
● Traditional IRA: Contributions may be tax-deductible (depending on income and other factors), but withdrawals in retirement are taxed.
●
● Roth IRA: Contributions are made with after-tax dollars and qualified withdrawals are tax-free.
A key strategy for many savers is to mix traditional and Roth accounts. This gives you more options when you withdraw money and manage your taxes.
3. How You Invest: Aligning Your Portfolio with Your Goals
Once you’re saving consistently and using the right types of accounts, the next decision is how to invest those savings. Your asset allocation is the mix of stocks, bonds, and other investments. It should match your time horizon, risk tolerance, and financial goals.
Historically, stocks have outperformed bonds and cash over the long term. For retirement savers with many years to go, a portfolio with a higher percentage of equities can offer the growth needed to outpace inflation. However, higher growth potential comes with greater volatility.
For those closer to retirement, dialing back equity exposure and increasing allocations to bonds or stable value funds can reduce risk and help preserve capital. A widely accepted rule of thumb is to subtract your age from 110 or 120 to determine a general starting point for your stock allocation. For example, a 40-year-old might aim for 70–80% in stocks.
Rebalancing your portfolio regularly ensures your asset mix stays aligned with your original strategy as market conditions shift over time.
Expanding Your Toolbox: Alternative Ways to Save
Retirement planning isn’t limited to traditional accounts. Here are a few additional options to consider:
Health Savings Accounts (HSAs)
If you’re enrolled in a high-deductible health plan (HDHP), you can contribute to a Health Savings Account (HSA). HSAs offer a unique triple tax advantage:
1. Contributions are tax-deductible.
2. Earnings grow tax-free.
3. Withdrawals for qualified medical expenses are tax-free.
In 2025, individuals can contribute up to $4,300 and families up to $8,550. Those age 55 or older can contribute an additional $1,000. What makes HSAs especially powerful is that, unlike flexible spending accounts (FSAs), the funds roll over year to year and can be invested for long-term growth. For many, an HSA can serve as a supplemental retirement account focused on future healthcare expenses—which, according to Fidelity, may total around $165,000 after taxes for a 65-year-old retiree.
Spousal IRAs
If one spouse is not earning income, a spousal IRA can help build retirement savings for both partners. As long as the couple files a joint federal tax return, the non-working spouse can contribute up to the IRA limit. This strategy ensures both partners have savings in their own name, even if one is out of the workforce temporarily or permanently.
Retirement Plans for the Self-Employed
Entrepreneurs and small business owners have access to special retirement accounts such as:
● Solo 401(k): Allows high contribution limits and includes both employee and employer components.
● SEP IRA: Simple to administer and allows contributions up to 25% of compensation.
● SIMPLE IRA: Great for small businesses with fewer than 100 employees; allows both employee and employer contributions.
Each of these accounts has specific rules and benefits, so consulting a financial advisor can help ensure you choose the best fit for your business.
Staying on Course: The Long-Term View
Saving for retirement is more like running a marathon than a sprint. Life throws curveballs—unexpected expenses, career changes, health events—and staying committed requires patience, persistence, and flexibility.
Here are a few best practices to keep your retirement strategy on track:
● Automate your savings. Set up automatic contributions so you save without having to think about it.
● Increase contributions gradually. Consider boosting your savings rate by 1–2% annually or whenever you receive a raise.
● Monitor your accounts. Review statements periodically to ensure your investments are performing as expected and that your asset allocation remains appropriate.
● Don’t stop saving. Even if the markets are volatile or life gets busy, continuing to save consistently will pay off in the long run.
Final Thoughts: Focus on the Three A’s
When it comes to preparing for retirement, success often boils down to three key decisions:
● Amount: How much you save, and how consistently.
● Account: Where you save—leveraging tax advantages to your benefit.
● Asset Mix: How your money is invested to balance growth with risk.
By focusing on these three areas and revisiting your strategy regularly, you’ll be better equipped to face the future with confidence—and enjoy the retirement you’ve worked so hard to earn.
Sources:
https://www.fidelity.com/viewpoints/retirement/successful-saving
Disclosure:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.
