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How to save for retirement: Do these 3 things

Wondering how to invest for retirement? It's not hard. In general: Automate everything you can, and check in once in a while.
13 minute read

1. Put your savings on autopilot

If you're saving in a workplace plan, your contributions will likely be deducted from your paychecks.

You can automate your other retirement savings too. For example, set up automatic bank transfers to an IRA on a monthly or weekly basis. This has the added benefit of taking the money from your account before you have the chance to spend it!

Automatic transfers also ensure that you don't accidentally throw your savings plan off track. Forgetting a few contributions a year can have a huge impact on your retirement balance, because those contributions will miss out on compounding.

For example, if you planned to save $100 a month and missed two contributions every year until retirement, you could wipe almost $33,000 off your final account balance—way more than the $8,000 in missed contributions.

Automating your savings could mean you'll have more money for retirement

This hypothetical illustration assumes an annual 6% return. The illustration doesn't represent any particular investment, nor does it account for inflation. The rate of return is not guaranteed. The final account balance does not reflect any taxes or penalties that may be due upon distribution. Withdrawals from a traditional IRA before age 59½ are subject to a 10% federal penalty tax unless an exception applies.

Step up your contributions

Look for other ways to automate your savings as well. For example, see whether your workplace plan offers "step up" contributions, which automatically increase your savings percentage once a year until you reach your target.

Since your salary will likely grow at the same time your contributions do, chances are that you won't even miss the money!

2. Resist the urge to tinker with your accounts

Because saving for retirement is so critical, you might think you should maintain a tight focus on your accounts and what they're doing.

But saving for retirement is more like a marathon than a sprint—it's going to take a while and it will occasionally be a little monotonous. The best thing you can do is settle into a good saving rhythm.

Here are some saving don'ts:

Don't look for shortcuts.

Once you've spent time determining the best asset mix for you, be careful not to veer off course.

Keep in mind that, at any given time, certain types of investments will do better than others. If you constantly change direction to take advantage, you could find yourself falling farther and farther behind.

Instead, stick with your plan and know that you'll get to the finish line in good time.

Learn more about picking an asset mix that's right for you

Don't pay too much attention to the markets.

Downturns in the market might feel like being caught outside in a storm. But if you flee for cover every time there's a little wind in your face, you'll miss out on the times when the wind is at your back.

Instead, force yourself to invest a consistent amount in the same mix of assets every week or month, no matter what's happening on Wall Street.

That way, you ensure you're buying more of an investment when its price has fallen and less of it when it's up. Buy low, sell high—sound familiar?


Taking money from your account (or moving it to a cash investment) when your balance has dropped and then putting it back when the market has already recovered is a guaranteed way to lose money.

Don't get distracted.

At some point, other uses for your money will probably start to compete for your attention. But keep in mind that as far as financial goals go, experts agree that saving for retirement should be number one.

You might think there's no harm in putting your savings on hold for a little while, but remember that time is what makes your savings so powerful, and you'll never get that time back.

Obviously, it's also not a great idea to take money you've already saved for retirement and use it for something else. If you withdraw the money outright, you may have to pay income tax and penalties.

And even if you take a loan rather than a withdrawal, you'll hurt your retirement in the long run. The money you take as a loan won't be available to grow while it's out of your 401(k) plan. That means less money for you to retire on.

Do the math:

For every $50,000 you borrow from your 401(k), you could lose over $10,000 for your retirement, even if you repay the loan on time.*

*This hypothetical illustration does not represent the return on any particular investment and the rate is not guaranteed. Assumes you repay the loan over 5 years, your 401(k) investments earn an average of 6% annually, the interest rate on your loan is 4%, and you have 20 years from the time you pay off the loan until you retire.

3. Check in on your accounts—occasionally

Of course, you don't want to be completely in the dark about where you are on your retirement journey. At least once or twice a year, take a look at your accounts and ask yourself these questions.

What's my current asset mix and how does it compare with my target?

When you open your retirement account, you'll decide how you want your money invested. In a diversified portfolio, the investments you choose won't have as much impact on your account balance as your overall asset mix will. And that asset mix can change without you lifting a finger!

For example, imagine you determined that 50% stocks/50% bonds was the best asset mix for you. If 4 years go by during which stocks return an average of 8% a year and bonds 2%, you'll find that your new asset mix is more like 56% stocks/44% bonds.

Why does this happen? The values of the stocks you own are rising faster than the values of the bonds, throwing your overall mix out of whack.

Check your portfolio at least once a year, and if your mix is off by at least 5 percentage points, consider rebalancing. There are a couple ways you can do this:

  • Exchange money from one type of asset to another. For example, you could exchange some money from your stock portfolio into your bond portfolio. This will immediately realign you with your target.
  • Use your contributions to buy more of one kind of asset. In the example above, you have too much in stocks and not enough in bonds. So you could direct all of your contributions to your bond investments until you're back in balance.



If you choose a target-date fund for your retirement savings, you won't have to worry about rebalancing back to your target asset mix—it will be done automatically for you.


Am I comfortable with the amount of risk I'm taking?

You'll likely know the answer to this question even before you peek at your accounts. If market movements have made you a nervous wreck, you may want to rethink your asset mix and consider something more conservative.

On the other hand, if you've grown comfortable with the risk inherent with investing, you might think about whether your risk tolerance has become more aggressive.

Are my investments working as hard as they could be?

While choosing investments isn't as critical to your portfolio's performance as your asset mix, keep in mind that investment costs reduce your returns. The less you pay for your funds, the more you keep in your pocket—it's that simple.

When you're saving in an employer plan, you're restricted to choosing from the investments the plan offers. But if you've left a job and have an old 401(k) or 403(b) account sitting around, think about whether rolling it over to an IRA could be a good decision.

With an IRA, you can invest in any mutual fund, ETF, stock, or bond—giving you greater choice and a chance to lower your investment costs.

See why investing costs are so important

See whether a rollover could be right for you

Am I saving enough to reach my goal?

If you're still decades from retirement, this can be a tough question to answer (although there are some guidelines you can follow).

But as you get years of investing under your belt, you can plug some numbers into a calculator and see where you are.

If the answer is "not even close," you'll have some work to do. Strong market performance can't make up for years of paltry contributions (and you can't count on getting a streak of high returns anyway).

See if you'll have enough to retire

Has my goal changed?

Several ingredients go into your retirement recipe—what age you plan to retire, how long you think you'll live, how much you think you'll need to spend, what other sources of income you'll have, whether you plan to leave money to anyone…

Your personal ingredients will probably change over time. Remember to think about the effects of these changes on your retirement goal.

Learn more about retirement accounts at Vanguard

We offer several types of accounts you can use to save for retirement. Figure out which one is right for you.

Explore our retirement accounts

Where does retirement fit into your priorities?

See how to juggle multiple financial goals

Explore professional advice

We offer expert help at the low cost you'd expect from Vanguard.

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We're here to help

Talk with one of our investment specialists

Monday through Friday
8 a.m. to 8 p.m., Eastern time

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in bonds are subject to interest rate, credit, and inflation risk.

When taking withdrawals from an IRA before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.

Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the work force. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target date funds is not guaranteed at any time, including on or after the target date.

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The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.

VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.