If you haven’t been saving for retirement, now’s a good time to take the first step.

This post is for you if:

• You haven’t been saving intentionally for retirement, but you’re ready to start.
• You happen to have some retirement savings, like with your workplace for example, but they’re mostly by default and not because you’ve planned it.
• You haven’t thought much about retirement yet.
• You’re relatively early in your working years and have time on your side.
• You have some financial stability. You’re on top of more urgent issues like spending less than you earn, breaking the paycheck to paycheck cycle, paying off your high interest debt, building a one month cushion, and putting together some emergency savings.

Okay, let’s get started!

1. Imagine what kind of life you’d like to live in retirement.

Imagine yourself as a retired person. What do you want your retired life to look like? Thinking through the kind of life you want to have in retirement will help you figure out how much you’ll need to save up, which we’ll cover more of in the next step.

Here are some questions to get you going. If you’re budgeting as a couple, be sure to include your other half in the conversation. 

Questions to ask yourself:  

• Who are you saving for?
• When do you hope to retire?
• Where will you call home? 
• How will you spend your time? 
• What needs might you have? 
• What might be important to you in that stage of life?

While your real-life retirement may not look exactly like your imagined golden years, taking the time to imagine that ideal will give you a starting point for your planning.

2. Think about how much income you’ll need to replace each year.

Now that you’ve taken some time to imagine the kind of life you might live in retirement, you can start thinking about how that will affect your expenses — and therefore the income you’ll need. Just like you have a budget with your current expenses for your current life, you’ll eventually need something similar for your retirement self.

If you see yourself living roughly the same kind of lifestyle as you do now, you can guesstimate that you’ll need to replace 100% of your pre-retirement income. If you see retirement as a time to downsize and lay low, you could guesstimate that you’ll only need 70-90% of your pre-retirement income. If you imagine yourself traveling the world, you may need to plan for 110% or more of your pre-retirement income. Keep in mind that your health care costs may also go up as you get older, and that even things like a gardening hobby or plans to visit your future grandchildren may affect your spending.

3. Make a savings plan.

With a rough sketch of your annual expenses, you can figure out how you’ll need to retire at any given age. Next, you can use that number to make a monthly savings plan. The easiest way to do this is with an online calculator. If the calculator shows that you aren’t on track, don’t freak out. You can work with what you’ve got by adjusting your retirement spending plan, as well as by starting to save. 

Once you know how much you need to save each month, go to Goodbudget and figure out how to work that into your current monthly budget. You might need to adjust some other areas of your life so that you can get on track with your retirement savings. If you can’t fit it all in right now, that’s okay. Do what you can. The most important thing you can do is to get started. 

4. Start saving!

A plan is only as good as the action that follows it, so make sure to follow through. If you have access to a retirement plan like a 401k through your employer, that’s a good place to start. If your employer has a matching policy, be sure to take advantage of it! The additional money your employer adds can significantly increase your entire contribution, which will help you get to your goal faster. You can also look into Roth IRAs and traditional IRAs if you want another place to put your retirement savings. Do your research to figure out what kind of retirement account makes the most sense for you.

Once you’re ready to start saving, it may be possible for you to track those savings in Goodbudget. If your retirement contributions never hit your Goodbudget Accounts because they’re automatically removed from your paycheck, then you won’t have to record them in Goodbudget since they won’t affect your Account balances. If you’re managing your savings yourself, and therefore do see your contributions included in your paycheck, then you will tell Goodbudget about it. Once the funds hit your checking account, put them into an Envelope for safe keeping. Then, when you send that money to your real-life retirement account, you’ll tell Goodbudget about it by recording that as an expense from your Savings Envelope and from your Checking Account. 

5. Watch, wait, and keep saving.

Put your savings on autopilot with scheduled transfers that come out of your checking account as soon as your paycheck arrives. And be sure to tell your retirement account how you want that money invested so it will automatically happen every month. This is a decades-long goal, so there’s no need to check it every day. Once you’ve got things set up, checking in once a quarter or once a year should be enough to make sure that things are still going according to your plan or to make adjustments if necessary.

At Goodbudget, we’re experts on budgeting, not investing. We’re here to help you get started, and we don’t see this post as an authoritative guide. So do your research on things like stocks, bonds, index funds, dollar cost averaging, asset allocation, tax-advantaged accounts, and expense ratios. Look for information from sources you trust, and be aware that a lot of investment advice out there comes from folks who are trying to sell you something.

And like everything in budgeting, focus on saving for retirement with a why. Be clear about what’s most important to you and stay focused on that.