Starting a Retirement Fund: A 3-Step Guide

We’ve all heard the stats. Many Americans are missing retirement savings targets, and more than 100 million working adults don’t even have retirement assets. And while workers all pay Social Security taxes, there’s no guarantee that the benefits will still be there once its time to retire. The 2023 Social Security annual report found that the fund will be able to pay 100% of total scheduled benefits until 2033. From there, the fund's reserves will become depleted and will only be able to pay 77% of scheduled benefits, making it even more imperative to start saving for retirement sooner than later.

What Is a Retirement Fund?

It’s often said that the most important part of saving for retirement is simply to start saving. The best way to do that is by opening a retirement fund -- a long-term investment account that allows you to save for retirement. By setting aside portions of your current income towards the future, you can take advantage of certain tax benefits and compounding interest. The amount you can save today will grow exponentially by the time you retire.

3 Steps to Starting a Retirement Fund

The bottom line is that many Americans don't plan for retirement effectively. People are living longer, spending more time retired, contributions to company pension plans have decreased, and future Social Security benefits are uncertain. With some preparation today, you can maximize your retirement income for tomorrow. Here’s how to start a retirement fund that works for you:

1. Identify Your Needs

It’s estimated that retirees will need to save $1.8 million to finance the nearly one-third of their lives spent in retirement. By maximizing your retirement savings from the start, you can grow your savings faster — and with less overall investment — to help you reach your goals. As you’re starting your retirement fund, evaluate your potential future retirement income needs. For example, will you live in your current home or will you downsize? Will you travel? Will you have a summer or winter home? Will your family depend on you for financial assistance? Once you've identified your needs, you can outline how you’ll achieve them. 

2. Evaluate Your Current (and Future) Situation

 Your retirement funding will depend on your sources of income and your expenses now and in the future.

• Do you have an employer-provided retirement plan you can contribute to? Pension plans or 401(k) contributions may make up the bulk of your retirement funding, but more than a third of private sector workers don’t have employer-sponsored plans.
• Can you see yourself working a part-time job during retirement? If so, you could earn some supplemental cash and keep boredom at bay.
• Are you counting on Social Security income? Though the future of Social Security is uncertain, it’s expected to be paid in full through 2033.
• What will your ongoing expenses be like? People are living longer, but they’re also paying more for healthcare. Consider these and long-term care costs as you’re planning for retirement.
• Will you have any outstanding loans you’ll need to pay during your retirement years? Be sure to account for a mortgage, car or other payments you’re liable for. 

3. Consider Your Retirement Fund Options

You can start your retirement funding using a variety of investment vehicles that you can open on your own. In fact, several options, such as opening an IRA, can help you defer or avoid federal income tax on earnings.1 You can also choose from stocks, bonds, money markets, CDs, mutual funds or annuities.

What type of investment portfolio is right for you? It depends on how many years away from retirement you are, your financial objectives and the risk you’re willing to take to achieve your goals. Even small, regular savings can add up over time. The earlier you start saving for retirement, the longer you can take advantage of compound interest and tax-deferred growth on your money.

Start Your Retirement Fund Today

Retirement can seem like a far-off dream. But whether you plan to retire in 10, 15 or 30 years, taking charge today can mean financial security tomorrow. Connect with your local Farm Bureau agent today to learn more.