Retirement Goals: How To Set Them (Plus Savings Strategy)

Updated February 3, 2023

Illustration of a scale with money weighed against time as represented by a clock.

Taking time to ensure a secure and financially stable retirement is essential to enjoying a post-professional life. Setting clear and measurable retirement goals is integral to effective planning. If you're looking to start planning for your retirement, it's important to understand what goal-setting entails and how it can help you.

In this article, we define retirement goals, provide step-by-step instructions on how to set goals for your retirement, offer tips to guide you and answer some frequently asked questions about the topic.

Key takeaways:

Retirement goals are milestones that guide you toward retirement.
Retirement goal planning is a multifaceted process that comprises your earning potential, savings and investment vehicles.
The ideal amount to save for retirement depends on your age and goals.

What are retirement goals?

Retirement goals—sometimes referred to as the process of retirement planning—are self-determined milestones on your journey to retirement. Most people consider retirement goal planning to be a lifelong process, with many of its benefits remaining unrealized until after retirement. There are several steps that comprise retirement goal planning, such as:

Determining your sources of income
Creating a retirement savings program
Estimating potential retirement expenses
Managing risk
Managing current and future assets

A successful retirement plan consists of at least the following key components:

Anticipated lifestyle
Expected retirement income, including but not limited to savings, pension and social security benefits
Fees for financial advisement, should you choose to hire an adviser
Risk tolerance if you choose to incorporate investing into your goals
Strategy for handling long-term care expenses, such as medical bills and fees associated with assisted living

How to set retirement goals

The following are steps to take when establishing retirement goals and a retirement plan:

1. Start simple

Some of the best plans are also the most simple. When it comes to retirement goal planning, simplicity means taking advantage of any retirement benefits your employer offers, such as a 401(k). If your employer doesn't offer a retirement plan, consider opening a Roth IRA. To ensure you remain on schedule to meet your retirement goals, set up automatic payments for whichever plan you choose.

2. Determine how much you can put toward retirement

Many financial experts advise that individuals put at least 15% of their income toward retirement on an annual basis. To meet this rate, track your spending for a month and identify areas in which you have extra cash available.

Put this money toward your retirement account. If you aren't able to put 15% of your annual gross income toward retirement, determine an alternative maximum amount and create a plan that allows you to climb to 15% every year. Begin, for example, with 5% and gradually increase the rate until you reach 15%.

3. Understand how much time you have to save for retirement

Your time horizon, or how long you have until your anticipated point of retirement, is an important factor associated with your retirement goals. If you have a longer time horizon, you can make riskier investments that could potentially bring in more money over the long term. If you're starting your retirement at a later age, consider less risky investments that allow you to save money in a more predictable way.

4. Get a clear understanding of your retirement spending needs

Being honest about your anticipated post-retirement spending habits can help you plan better for retirement. For example, if you want to travel when you retire, you'd likely set a goal for a traveling fund that's separate from your basic retirement fund. Other things to consider are:

Anticipated health expenses
Living expenses, such as bills and food
Remaining balance on your mortgage
Regular activities you want to engage in while retired

5. Invest for the long term

Many people turn to investments to help support them when they retire. When investing for retirement, you're better off investing for the long term rather than the short term. This is especially true if you choose to invest in the stock market. If you're unsure of where to invest, consider hiring a financial planner who can assist you in making these decisions.

6. Know when to adjust your retirement strategy

If you're establishing retirement goals at a young age, you may consider taking a riskier, more aggressive approach to help grow your savings and investments. As you get older, you may find occasion to use the money you've invested, so it makes sense to re-evaluate your approach and avoid risk. For example, you could choose to invest your savings in certificates of deposits, which present little to no risk and provide higher interest rates than many traditional savings accounts.

Age	Savings
30	Around half of your annual earnings
40	At least 1.5 times your annual earnings
50	At least three times your annual earnings
60	At least six times your annual earnings