how much do you need to retire 
your magic number which is the amount you need to retire comfortably is highly personalized but there are rules of thumb that can give you an idea of how much to save your post retirement expenses largely determine that magic number it s a good idea to create a retirement budget calculating estimated costs for housing health insurance food clothing and transportation and since you ll have more free time on your hands you may also want to factor in the cost of entertainment hobbies and travel it may be hard to come up with concrete figures but a reasonable estimate will be helpful steps to retirement planningregardless of where you are in life there are several key steps that apply to almost everyone during their retirement planning the following are some of the most common retirement planstax advantaged retirement savings plans have become the keystone of long term savings for americans you should have access to one or more of these plans depending on how you earn a living each has its own rules and regulations most large companies offer their employees 401 k plans nonprofit employers have similar 403 b plans an up front benefit of these qualified retirement plans is that your employer has the option to match what you invest up to a certain amount for example if you contribute 3 of your annual income to your plan account your employer may match that amount depositing the sum into your retirement account along with your contribution you can contribute more than the amount that will earn the employer match some experts recommend contributing upwards of 10 the maximum is revised yearly by the irs participants can contribute up to 23 000 in 2024 to a 401 k or 403 b some of which may be added to with an employer match people over age 50 can contribute an extra 7 500 per year as a catch up contribution in 2024 2these accounts can earn a much higher rate of return than a savings account although the investments are not free of risk the funds in the account if it is a traditional account rather than a roth account are not taxed until you withdraw them since your contributions are taken off your gross income you will get an immediate income tax break those who are on the cusp of a higher tax bracket might consider contributing enough to lower their tax liability 3the traditional individual retirement account ira is similar to a 401 k plan but it can be obtained at virtually any bank or brokerage it is primarily for self employed people and others who have no access to a 401 k but anyone with earned income can invest in an ira the money you save in an ira is deducted from your income for the year lowering your taxable income and therefore your tax liability the tax benefit to this kind of account is upfront so when it comes time to take distributions from the account you are subject to your standard tax rate at that time keep in mind though that the money grows on a tax deferred basis there are no capital gains or dividend taxes that are assessed on the balance of your account until you begin making withdrawals 4the irs sets limits on how much you can contribute to a traditional ira each year the limit for 2024 is 7 000 people who are 50 and older can invest an additional 1 000 for a total of 8 000 in 2024 2distributions must be taken at age 72 and can be taken as early as 59 you will owe taxes on the withdrawal at your regular income tax rate for that year 5a roth ira is funded with post tax dollars this is a great variation on the ira with a little more pain upfront for a lot of gain down the road the roth ira eliminates the immediate tax deduction of the traditional ira the money you pay into it is taxed in that year however you should owe no taxes when you start withdrawing money either on the amount you put in or the investment gains it accrued starting a roth ira early can pay off big time in the long run even if you don t have a lot of money to invest at first remember the longer the money sits in a retirement account the more tax free interest is earned the 2024 contribution limit for either ira roth or traditional is 7 000 a year or 8 000 if you are over age 50 a roth has other restrictions related to income for instance note that the income limits are higher for married couples filing jointly 2as with a 401 k a roth ira has some penalties associated with taking money out before you hit retirement age but there are a few notable exceptions that may be useful in an emergency first you can always withdraw the money you invested but not the gains it earned without paying a penalty 6the simple ira is a retirement account available to employees of small businesses it s an alternative to the 401 k which is expensive for an employer to manage it works the same way a 401 k does allowing employees to save money automatically through payroll deductions with the option of an employer match this amount is capped at 3 of an employee s annual salary the annual contribution limit for a simple ira is 16 000 in 2024 catch up contributions of 3 500 allow employees 50 or older to bump that limit up to 19 500 in 2024 2once you set up a retirement account the question becomes where to invest the money you will be offered a choice usually among mutual funds and exchange traded funds etfs many also offer target date funds which automatically alter your selections over time allocating more money towards conservative choices as you approach retirement age stages of retirement planningbelow are some guidelines for successful retirement planning at different stages of your life those embarking on adult life may not have a lot of money free to invest but they do have time to let investments mature which is a critical piece of retirement savings this is the principle of compounding compound interest allows interest to earn interest and the more time you have the more interest you will earn if you can only put aside 50 a month it will be worth three times more if you invest it at age 25 than if you wait to start investing until age 45 thanks to the joys of compounding you might be able to invest more money in the future but you ll never be able to make up for that lost time some federal agencies and uniformed services offer thrift savings plans 7early midlife tends to bring financial strains including mortgages student loans insurance premiums and credit card debt still it s critical to continue saving at this stage of retirement planning the combination of earning more money and the time you still have to invest and earn interest makes these years some of the best for aggressive savings 8people at this stage of retirement planning should continue to take advantage of any 401 k matching programs that their employers offer they should also try to max out contributions to a 401 k or roth ira you can have both at the same time for those ineligible for a roth ira consider a traditional ira as with your 401 k this is funded with pretax dollars and the assets within it grow tax deferred some employer sponsored plans offer a roth option to set aside after tax retirement contributions you are limited to the same annual limit but there are no income limitations as with a roth ira 9finally don t neglect life insurance and disability insurance you want to ensure that your family can survive financially without pulling from retirement savings should something happen to you as you approach retirement your investment accounts should become more conservative treasury bills t bills are one of the most conservative investments although their returns are also low compared to other investments people in this age group have a few advantages these often include higher wages as well as more disposable income than younger savers 10it s never too late to set up and contribute to a 401 k or an ira one benefit of this retirement planning stage is catch up contributions from age 50 on you can contribute an additional 1 000 a year to your traditional or roth ira and an additional 7 500 a year to your 401 k in 2024 2those who have maxed out their tax incentivized retirement savings options can consider other forms of investment to supplement your retirement savings certificates of deposit cds blue chip stocks or real estate investments like a vacation home that you rent out can be reasonably safe ways to add to your nest egg you can also begin to get a sense of what your social security benefits will be and at what age it makes sense to start taking them eligibility for early benefits starts at age 62 but the retirement age for full benefits is 66 11this is the time to look into long term care insurance which will help cover the costs of a nursing home or home care should you need it in your advanced years if you don t properly plan for health related expenses especially unexpected ones they can decimate your savings the social security administration ssa offers an online calculator to estimate your eventual monthly payment other aspects of retirement planningretirement planning includes a lot more than simply how much you will save and how much you need it takes into account your complete financial picture for most americans the single biggest asset they own is their home how does that fit into your retirement plan a home was considered an asset in the past but since the housing market crash planners see it as less of an asset than they once did with the popularity of home equity loans and home equity lines of credit helocs many homeowners are entering retirement in mortgage debt instead of well above water once you retire there s also the question of whether you should sell your home and downsize if you still live in the home where you raised a family it might be bigger and costlier than you need or want your retirement plan should include an unbiased look at your home and what to do with it your estate plan addresses what happens to your assets after you die it should include a will that lays out your plans but even before that you should set up a trust or use some other strategy to keep as much of it as possible shielded from estate taxes as of 2024 the first 13 61 million of an estate is exempt from estate taxes up from 12 92 million for 2023 but many people are finding ways to leave their money to their children in a way that doesn t pay them in a lump sum 12there may also be changes coming down the pipeline in congress regarding estate taxes as the estate tax amount is scheduled to drop to 5 million in 2026 13once you reach retirement age and begin taking distributions taxes become a bigger problem most of your retirement accounts are taxed as ordinary income tax that s one good argument for considering a roth ira or a roth 401 k as both allow you to pay taxes upfront rather than upon withdrawal 1415if you believe you will have a higher taxable income later in life it may make sense to do a roth conversion an accountant or financial planner can help you work through such tax considerations medical expenses tend to increase with age you will have government sponsored medicare coverage at a modest cost to you but many supplement its coverage with a medicare advantage or medigap policy your choices are many and complex it s a good idea to start checking out your options well in advance of retiring 