Looking forward to a comfortable retirement?
Saving is a great start.

We recommend you save 12% to 15% of your pay each year for retirement, including employer contributions if you're investing in a retirement plan at work.

An IRA can offer tax benefits, either immediately or when you withdraw from it. If you're not covered by an employer retirement plan, you can deduct the entire amount of a traditional IRA contribution on your income tax return. If you are covered by a retirement plan, your income will determine whether your contribution is deductible.

If you participate in a 401(k) at work, consider opening a Roth IRA. A Roth IRA offers tax-free growth now and tax-free withdrawals in retirement—which, down the road, could help you develop a tax-effective strategy for withdrawing from your retirement accounts.

For both traditional and Roth IRAs, the annual contribution limits for the 2020 tax year increase at age 50 to $7,000 (from $6,000 for those younger than 50). For both traditional and Roth 401(k)s, the annual contribution limits for the 2020 tax year increase at age 50 to $26,000 (from $19,500 for those younger than 50).

Piecing together an effective retirement plan can be complicated, involving a series of decisions that require research and information—and you should maintain and update your plan as your circumstances, your investments, and regulations change. A Vanguard personal advisor will develop a customized retirement plan that's based on your goals and financial situation, and then guide and coach you as much as you want, giving you the confidence that you're doing all you can to reach your goals.

As you approach retirement, it's important to have a clear, accurate picture of your complete investment portfolio. If your portfolio is spread out among several investment companies, collecting and keeping track of all that information will become more difficult. If you consolidate your accounts at Vanguard, you'll get simplified reporting, low costs, and the opportunity to save on fees—all from a company you already trust.

In retirement, you'll likely spend less on payroll taxes, income taxes, and your work wardrobe. But you might spend more on hobbies or travel. And if you receive medical insurance through your employer, medical insurance in retirement is one expense you'll have to plan for.

Ideally, you'd head into retirement debt-free … but in the real world that's not always possible. So it may be okay for you to retire before you pay off your mortgage, cars, or credit cards. Just make sure you understand the implications of retiring with debt and have a plan to pay it off.

If your fixed expenses exceed your monthly income, or if you're concerned about outliving the money you've saved for retirement, think about annuitizing part of your retirement savings. An annuity is an insurance contract that provides payments in exchange for an investment. Converting part of your retirement savings to an annuity would provide you with periodic payments during your retirement years. The payments could continue for your lifetime or for an agreed-upon number of years. Deferred variable annuities (which don't begin paying until you reach a certain age) can also offer tax benefits for retirement savers.

Among your considerations should be how to make your savings last for the duration of your retirement, how to make the withdrawals tax-efficiently, and whether you need to take required minimum distributions (RMDs) from your IRA or 401(k).

At age 59½, you can withdraw from your IRA and 401(k) without incurring the 10% federal early withdrawal penalty. By law, you must start taking taxable RMDs from your retirement accounts no later than April 1 of the year after the year you reach RMD age. If you don't, you could owe a penalty of up to 50% of the amount you should have withdrawn.

The age at which you must begin taking RMDs differs depending when you were born:

• If you were age 70½ before January 1, 2020 (born before July 1, 1949), you were required to begin taking RMDs for each year beginning with the year you turned age 70½.
• If you were not age 70½ before January 1, 2020 (born after June 30, 1949), you must begin taking RMDs for each year beginning with the year you reach age 72.

The CARES Act provides a temporary waiver of RMDs for 2020. If you would have had an RMD obligation for 2020, you do not have to take your RMD for 2020 if you don't want to.

If you have already taken a withdrawal in 2020 that would have represented an RMD, you may be eligible to roll the money over within 60 days, subject to IRS rollover rules (including the 60-day rollover deadline and the IRA one rollover-per-365 day rule). Distributions from inherited IRAs are not eligible to be rolled over.

Note: The IRS has extended the 60-day rollover deadline for some distributions, but not all. IRS guidance provides that if the 60-day deadline to complete a rollover ends on or after April 1, 2020, but before July 15, 2020, the rollover deadline is extended until July 15, 2020. If you take an RMD this year and want to roll all or part of the distribution back to an IRA, this extension may provide additional time to complete the rollover. (Please note that this extension does not apply if your 60-day rollover deadline would have ended prior to April 1, 2020.)

For more information about the rollover extension and waivers of the 60-day rollover requirement, go to irs.gov or consult a tax advisor. It's possible the IRS may issue additional clarification in the future regarding rollovers of amounts that would have been RMDs, but for the waiver.

• Medicare is a federal health insurance program. At age 64 and 9 months you have a seven-month initial Medicare sign-up window; if you miss it, you may have to pay higher premiums for life. But if you still have medical insurance provided by an employer, including your spouse's employer, you can postpone enrolling in Medicare until that coverage ends without having to pay higher premiums later. Medicare coverage can begin as early as the first day of the month in which you turn 65.
• Medigap is Medicare supplemental insurance; it's private insurance that covers some of the out-of-pocket copays and deductibles of Medicare. The six-month enrollment window for Medigap begins on the first day of the month in which you turn 65. During this enrollment window, you can't be denied Medigap coverage or charged extra because of poor health. But if you miss the enrollment deadline, you may pay higher premiums for life or even be denied coverage.

Choosing a realistic retirement age isn't necessarily an easy task, but we can offer some practical tips.

The age at which you start collecting Social Security will determine how much you'll collect. You're eligible to receive reduced benefits at age 62. But at age 66–67, you reach Social Security full retirement age (FRA), the age at which you qualify for your full Social Security retirement benefits. And if you wait to claim your benefits beyond your FRA, their value will continue to increase each month you delay until you reach age 70. As shown in the chart below, your FRA depends on the year you were born: