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Smart Ways to Save for Retirement

Smart Ways to Save for Retirement

By Matt Diehl • August 18, 2016

The average American spends 20 years in retirement, so in essence you need 20 years (or more) of income saved to live comfortably in your latter years. However, less than 50% of Americans have calculated how much they need for retirement1 and 38% don't actively save for retirement at all2.

Do you know what your goals and plans are?

Saving for retirement is a process and good choices today can produce excellent results for your future. Whether you are starting from scratch or need to refine your current strategy, here are some smart ways to save for retirement:

Start saving early

Many financial experts recommend saving early for good reason - interest is a retirement fund’s best friend. Even if you only contribute a small amount to start, the most important thing is that you started. The sooner you start building retirement savings, the sooner interest can start growing on your money.

Compound interest is a common type of interest for retirement savings and allows you to build interest on top of interest. Here is an example provided by to help explain:

If you have $100 and it earns 5% interest each year, you'll have $105 at the end of the first year. At the end of the second year, you'll have $110.25. Not only did you earn $5 on the initial $100 deposit, you also earned $0.25 on the $5 in interest. While 25 cents may not sound like much at first, it adds up over time. Even if you never add another dime to that account, in 10 years you'll have more than $162 thanks to the power of compound interest, and in 25 years you'll have almost $340.

Stick to a budget

For some people, finding extra money to save could be difficult. Changing how you manage your money may be challenging at first but it can be accomplished. If you have a hard time putting money away each month, a reverse budget could be the answer.

Reverse budgeting consists of paying into your savings first and using the remaining money for your expenses. For example, when you get paid you would deposit money into your retirement account before you do anything else. This ensures that your retirement goals are met with no interference.

There are many budgeting styles to choose from. To learn more, please read our OneMain blog, Find a Budgeting Style that Works for You.

Take advantage of employer retirement plans

If your employer offers any type of retirement plan, it could be in your best interest to explore your options. Many companies have an employee on staff who can talk you through your retirement options. They can help you understand the plans that are available to you and make suggestions based on your retirement goals.

For your reference, the Internal Revenue Service (IRS) offers thorough definitions of the major types of retirement plans that may be helpful during your research. Here is a list of common retirement plans offered by employers:

  • Individual Retirement Arrangements (IRAs)
  • Roth IRAs
  • Payroll Deduction IRAs
  • 401(k)
  • 403(b)

Consult a financial planner

If you feel you need professional advice when saving for retirement, you’re not alone. A recent CFP Board report3 stated that “consumer use of financial advisors has increased significantly in the last five years from 28 percent in 2010 to 40 percent in 2015.” Also, a majority of the report’s respondents claimed they hired financial planners “especially for long-term goals such as retirement.”

Financial planners can help you identify your retirement goals and advise strategies based on your objectives. Although their services cost money, the expertise they provide could be the leadership some people need to save properly and retire comfortably.

If you need help choosing a financial planner, please read our OneMain blog, What to Look for in a Financial Advisor.

Don't touch your savings

In order to keep your balance growing, it is important to keep your retirement savings untouched. Withdrawing funds will interrupt your savings goals and you may be charged penalties as well. For example, if you withdraw money from a 401k account before the age of 59.5, you could owe a 10% penalty fee and may have to claim the withdrawal on your income taxes4.

One way to avoid touching your retirement savings is to build an emergency fund. This is a separate savings account that can be built up to cover a loss of income, sudden expenses or medical costs. The amount you save is up to you but remember that putting a little aside every so often can add up over time and prevent early withdrawals from your retirement account.

Use your best judgment

Whether you save on your own or use a financial planner, it’s crucial to build a long-term strategy and make consistent contributions to reach your retirement savings target. The first step is to understand who will eventually benefit from your efforts - yourself! After you see the big picture, a committed retirement savings plan should help make your golden years a brighter shade of gold.


The information in this article is provided for general education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. It is not intended to be and does not constitute financial, legal or any other advice specific to you the user or anyone else. The companies and individuals (other than OneMain Financial’s sponsored partners) referred to in this message are not sponsors of, do not endorse, and are not otherwise affiliated with OneMain Financial.