The Ultimate Guide to Saving & Planning For Retirement

February 19, 2023
11 min read
Thomas Kopelman

Retirement is one of those things in life where you can’t just wing it. It takes repeated planning and investing to ensure you can retire the way you want.

It is reported that 71% of millennials have started investing for retirement (, while 72% say they are pessimistic about achieving financial security one day (Forbes). The only way to feel more confident is by planning. This guide will help you understand the steps to take to plan for your ideal retirement.

Step 1: Define Your Ideal Retirement

For millennials, this can be a very hard step. You maybe haven’t even figured out what you want your life to look like right now, but that is okay. The only way to get started is by envisioning what you want and realizing that it may change over time, but you need something to plan for.

First and foremost, understand that you need something to retire to, not just from.

Are you going to travel often? Do you want to have a country club membership? Do you want to have another house? You have to get clear on what you think you want! And I know, retirement is a weird thought. Think of this more so as financial independence. We all want to reach a point where we do not have to work for money, even though some might choose to still to.

Step 2: Figure Out How Much You Need to Retire

Financial planners typically assume that you will spend 80% of your yearly pre retirement expenses during retirement.

If you are 40, plan to work till 65, and are spending $100,000 a year, you could estimate that you will need about $80,000 a year. We can’t stop there and use that number due to inflation, even though we aren’t sure what future inflation looks like. Using 2.5% as the estimated inflation number, you will need roughly $150,000 a year in retirement. Some may spend more than that 80%, some less. It depends if your house is paid off, what you want retirement to look like, etc. It is a decent estimate to use though!

In order to determine how much money you will need in retirement, you can then use the 4% rule. The 4% rule states that you can withdraw 4% from a 60/40 portfolio and not run out of money. So you multiply 25 x $150,000 and that tells you that you will need about $3,750,000 to retire.

This is where you ask if you should count on social security. This is a personal choice. The safe route is to not count on it, but in my opinion, it is unlikely no social security exists. You could choose to use 50% of the estimates, you could choose to estimate it will be moved back to later age, etc. I choose to count on it being here but use a more conservative number. You can go online to and use their estimator to figure out what your benefits will look like. But, it is important to think through this. If you need $150,000 a year in retirement and social security will cover $60,000, then the portfolio value you need is way less.

Step 3: Start Saving

The best time to start saving was yesterday. The next best time is today. Let me explain why. If you are 22 years old, make $50,000 a year, and choose to contribute 6% into your 401(k) with a 100% match to 6%, then by the time you are 65 you will have just under $2,000,0000 (assuming an 8% rate of return).

Let’s compare that to someone that decides to mess around till their 30’s. They end up starting at 35 and contributing the exact same amount as above. How much less do you think person 2 will have?

The answer is $1,300,000 less than person 1. Person 2 would end up with only $680,000. Time is by far the most important variable for investing! Get money in as soon as possible.

Step 4: Figure Out What Accounts To Use To Save For Retirement

Based on where you work, you may have different options on how to save for retirement. We will first chat about company sponsored retirement accounts, then we will go into individual retirement accounts and HSA’s.

Employer Sponsored Retirement Accounts/Small Business Retirement Accounts


  • What is a 401(k) – a 401(k) is employer sponsored defined-contribution plan. Meaning that you can only have one if your employer has it. You can make contributions on a pre-tax basis, meaning it reduces your taxable income today, but that money will be taxed at your income tax rate when you pull the money out in retirement. With a 401(k), your employer has the option to match a certain amount of the contributions you put in but not all do it.
  • Contribution Limits – With a 401(k) you can put up to $20,500 a year if you are under the age of 50, but you cannot take this money out until you are 59.5 without a 10% penalty and paying taxes.
  • There is an exception to this called Rule 72t where allows you to take withdrawals before age 59.5 without a 10% penalty.

Roth 401(k)

  • The same rules as a traditional 401(k) except the dollars you are putting in are post-tax instead of pre-tax. So it does not reduce your taxable income today, but this money grows and you will never be taxed on these dollars again.
  • Contribution Limits – You can contribute $19,500 a year (this is just your contributions, your employer’s match adds on top of that) into the Roth 401(k) as well. One thing to note is that even if you do Roth, the employer’s contributions they make on your behalf (the match) will be pre-tax.


  • Basically the exact same thing as a 401(k), the only difference is that a 403(b) is used at nonprofits or tax-exempt organizations. There are both pre-tax and Roth 403(b)’s depending on the organization.
  • Contribution Limits – You can contribute $19,500 a year plus the employer's contributions.


  • A deferred-compensation retirement plan offered to people who work for state and local governments. With this type of plan, you contribute pre-tax dollars from your paycheck, and that money won’t be taxed until you withdraw the money, usually for retirement.
  • Contribution Limits – If you have one, you can contribute $19,500 if you are under 50. The one difference here is that you can withdraw funds before 59.5 without a penalty unlike the other accounts above.

Options When You're Self-Employed

Solo 401(k)

  • A retirement plan for those who own their own individual business and have no workers. That is the only way to qualify for it. Solo 401(k)’s are a pre-tax account which means it reduces your taxable income today, then you don’t pay taxes on it until you withdraw money in retirement. However, there are also ROTH options for solo 401(k)’s (as a reminder, ROTH means using post-tax dollars instead of pre-tax).
  • Contribution Limits – You are able to contribute up to $58,000 a year into your solo 401(k) if you are under the age of 50

Simple IRA

  • For people who work at a small business with less than a 100 employees. This account is very similar to a 401(k) again where the contributions reduce your taxable income today, but then you pay taxes when you pull out money in retirement. You also cannot withdraw funds before age 59.5 without a penalty.
  • Contribution Limits – You can contribute up to $13,500 into your Simple IRA if you are under the age of 50.

Simplified Employee Pension IRA (SEP IRA)

  • An IRA (individual retirement account) for small business owners who have multiple employees and self employed individuals. This is another pre-tax account, so it reduces your taxable income today and then you won’t pay taxes until you withdraw the funds at 59.5. Only the employer can contribute to your SEP IRA.
  • Contribution Limits – Those who are eligible can contribute up to 25% of their compensation or $58,000, whichever is less of the two.

Investment Account Options Outside of Work

Individual Retirement Account (IRA)

  • An IRA is a pre-tax retirement account only available for those who have earned income. An IRA has the same tax benefits as a 401(k) where your contributions reduce your taxable income today and then you won’t be taxed until you withdraw the funds in retirement after age 59.5
  • There is an exception to this with a spousal IRA. This is where a spouse can contribute to an IRA for their non-working spouse (or one with little income). The working spouse’s income has to be equal to or more than the total contributions between both IRA’s.
  • Contribution Limits – You can contribute up to $6,000 a year into your IRA if you are under the age of 50. But you can only contribute up to how much you make. If you make $4,000 a year you can only put $4,000 into your IRA.
  • Income Limits – You can only deduct your contributions if you make under a certain income level (based on your adjusted gross income). This is if you are covered by a retirement plan at work.
  • Single – Can deduct if you make $66,000. Can partially deduct if you make between $66,000-$76,000. Can’t deduct at all if you make above $76,000 AGI.
  • Married filing jointly – Can deduct if you make $105,000. Can partially deduct if you make between $105,000-$125,000. Can’t deduct at all if you make above $125,000 AGI.

Roth IRA

  • A post-tax individual retirement account only available to those with earned income. With a Roth IRA you are contributing with post-tax dollars so these dollars will never be taxed again.
  • The spousal rule applies here just like the traditional IRA.  
  • Contribution Limits – You can set aside $6,000 a year into your Roth just like your IRA, if you are under the age of 50.
  • A Roth IRA has other rules that allows you to take out your contributions at any point without a penalty, but that does not include the growth, only your contributions.
  • Income Limits – The income limits are based on your Modified Adjusted Gross Income (MAGI)
  • Single – You can contribute the entire $6,000 if your MAGI is less than $125,000. The contribution begins to phase out when your MAGI is between $125,000 and $139,999. And you are no longer able to directly contribute if your MAGI is above $140,000.
  • Married Filing Jointly – You can contribute the entire $6,000 if your MAGI is less than $198,000. The contribution begins to phase out when your MAGI is between $198,000 and $207,999. And you are no longer able to directly contribute if your MAGI is above $208,000.
  • Note: if you are above the income limit, you can do a backdoor Roth IRA to get Roth contributions. This is where you put your post tax dollars into a non deductible IRA, then move it over to a Roth IRA. Stay tuned in the next few weeks for a guide on ways to get more tax-free money when you are above the Roth limit.

Health Savings Account (HSA)

  • An HSA is meant to be used for health care costs, but it can be used to build funds for retirement or retirement health care costs. In order to be eligible for an HSA, you have to have a high-deductible health insurance plan that allows it.
  • Contribution Limits – For individuals under age 55, you can contribute up to $3,600 a year and for families you can do $7,200.
  • The contributions you put into an HSA are triple tax advantaged, meaning it reduces your taxable income today, can get invested and grow tax deferred, then be used tax free on health care costs. It is a very powerful account.

Taxable Investment Account

  • Otherwise known as a taxable investment account, these accounts offer the most flexibility.
  • You do not have the tax deductions, deferred growth, etc. like most of the accounts above. However, you can use these funds whenever you want.
  • You just have to pay taxes based on how long you hold the investment for. If you sell within 1 year, you are taxed based on your ordinary income tax rates which are (10%, 12%, 22%, 24%. 32%, 35%, or 37%).
  • If you hold for longer than a year, then you are taxed at long-term capital gains tax rates which are either 0%, 15%, or 20% depending on your income.

Step 5: Come Up With Your Investment Allocation

Most people think the hardest part about preparing for retirement is choosing the investment mix, but this is wrong. People like to make investing more difficult than it needs to be, often making themselves their own worst enemies. All you need to do is pick your proper investment allocation. What percent do you want to US companies, international companies, bonds, small caps, emerging markets, etc.? Figure this out and then pick a few lost cost, diversified ETF’s to accomplish it. You really do not have to make this more complicated than it needs to be. But seriously, look out for fees! They can eat away at your returns.

Step 6: Look at the Tax Allocation Of Your Accounts

Not all dollars are created equal when it comes to retirement. Roth dollars are post tax so you know exactly how much you have to take out. With tax deferred accounts, you will have to estimate your tax rate and how much that will equal for you. To pull out $150,000, you will need way more than that if it is coming from a tax deferred account. Then there are taxable accounts. These are accounts that are fully liquid, can be used at any time, and are taxed based on short term and long term capital gains. You definitely want a mix of the three.

To keep it simple, the higher marginal tax rate you have today, the more you want to defer tax and vise versa. The name of the game with tax planning is to minimize the taxes over your lifetime!

Step 7: Revisit Your Goals, Investments, Inflation, etc.

Oftentimes people finally get a financial plan in place, then do not revisit or make any changes for a long time. That’s not how it works. You have to revisit your plan often. Have your goals changed? Has the market gone down for a period of time? Has inflation been way above what you expected? Did something come up that stopped you from investing as much this year? Has your yearly expenses gone up quite a bit? All of these would change your retirement plan. This is why you have to continually come back to it and make adjustments to stay on track.

We hope this helps you understand how to start planning for retirement!

Moral of the story is to just get started now and understand you will hit some roadblocks and your goals will change.

That is totally okay! It’s how life goes.

Start with a plan, but keep on planning.

The financial education we should've gotten in school.

A 12-chapter video class that breaks down everything you need to know about managing money in today's world - includes:

• 40+ videos
• 3 hours of content
• Checklists & templates
• Recommended apps & tools
• And more

Click to View the Class
related posts
allstreet sign logo

📱 (815) 978-2703


📍Kansas City, MO
lis, IN

🖥 Virtually serving clients nationwide

The firm is a registered investment adviser with the state of Missouri, Indiana, Florida, California, Illinois, and notice-filed in Texas and may only transact business with residents of those states, or residents of other states where otherwise legally permitted subject to exemption or exclusion from registration requirements. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training.

© 2020-24. Piertree. All Rights Reserved. Crafted by Converting Attention