Basics of Saving for Retirement

by | Apr 6, 2025 | Finance

Basics of Saving for Retirement

Why Starting Early Matters

Planning for retirement might seem like something for “future you”—but starting early is one of the smartest financial moves you can make. In this article from our Financial Literacy Series, we’ll break down the retirement basics and show how even small early steps can create a major impact over time.

Why Saving for Retirement Matters

  • You can’t work forever. Saving now prepares you for a time when you no longer earn a paycheck.

  • Social Security won’t be enough. Most Americans need additional savings to maintain their lifestyle.

  • Healthcare costs rise with age. Savings cushion you against unexpected medical bills.

  • Financial independence = freedom. Saving today buys you choices tomorrow.

How Compounding Works (Your Best Friend)

When you invest or save, you earn returns on your contributions and on the returns you’ve already earned—this is compound interest, and it’s why starting early matters so much.

Example:

  • Starting at age 22, investing $200/month at a 7% annual return → about $525,000 by age 65

  • Starting at age 32, investing the same amount → about $245,000 by 65

Waiting even a few years can cost you hundreds of thousands of dollars!

Key Retirement Accounts to Know

  • 401(k)
    ➤ Offered by employers, pre-tax contributions, lowers taxable income, often includes employer match (free money).

  • Traditional IRA
    ➤ Opened individually, potential tax deductions depending on income.

  • Roth IRA
    ➤ Funded with after-tax dollars, grows tax-free, and qualified withdrawals are tax-free.

  • 403(b) and 457(b) Plans
    ➤ Designed for nonprofit and government employees, similar to 401(k) structures.

Alternative Retirement Strategies: IULs and Annuities

  • Indexed Universal Life Insurance (IUL)
    ➤ Permanent life insurance that builds cash value linked to stock market indices (without direct market risk).
    ➤ Offers tax-free growth and flexible borrowing options for retirement, education, or emergencies.
    ➤ Adjustable premiums and death benefits.

  • Annuities
    ➤ Insurance products providing guaranteed income in retirement.
    ➤ Options include fixed (steady payments), variable (investment-linked), or indexed (market-linked with downside protection).
    ➤ Useful for those concerned about outliving their savings.

Key Tip: IULs and annuities should be complementary to traditional retirement savings—not replacements.

Consulting a licensed financial professional can help you determine if these fit your long-term plan.

How to Get Started (Even on a Tight Budget)

  1. Contribute to your employer’s 401(k)—especially to get the full match if available.

  2. Open an IRA (Traditional or Roth) if no workplace plan exists.

  3. Set up automatic contributions—even $25 or $50/month makes a difference.

  4. Increase contributions over time—use raises and bonuses to boost savings.

  5. Invest for growth—retirement is long-term, so you can afford some market risk early.

Tips to Maximize Retirement Savings

  • Start with what you can—any amount is better than nothing.

  • Understand vesting schedules for employer matches.

  • Avoid early withdrawals—penalties can greatly reduce your savings.

  • Review and update your beneficiaries on all retirement accounts.

  • Continue to educate yourself about investing fundamentals.

Helpful Resources

Final Thought

Saving for retirement isn’t about sacrifice—it’s about building a future you’ll be proud of.
The sooner you start, the stronger and easier your financial journey will be.

Stay tuned for our next topics in the Financial Literacy Series:

  • Understanding Insurance: Protecting What Matters

  • Smart Borrowing: Managing Student and Personal Loans

Dr. Bertrand Fote, MD, MBA, FACEP, CF²
Emergency Medicine Physician | Financial Educator | Advocate for Economic Empowerment

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