Financial Topics Archives

Feb

2026

When Should You Start Saving for Retirement?

By Melanie Mannarino | Budgeting & Goals, Growing Wealth, invest, Preparing for Retirement | No Comments

If you ask any financial advisor when you should start saving for retirement, their answer would likely be simple: Now, or in your 20s if possible.

It’s not always easy to prioritize investing for retirement. If you’re in your 20s or 30s, you might have student loans or other goals that seem more “immediate,” such as a down payment on a house or your child’s tuition. But starting early is important because it can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

No matter what age you are, putting away money for the future is a good idea. Read on to learn more about when to start saving for retirement and how to do it.

Key Points

• Starting to save for retirement in your 20s is ideal, as it gives your money more time to potentially grow and benefit from compounding. Compounding occurs when any earnings received are added to your principal balance, so future earnings are calculated on this updated, larger amount.

• Assessing personal financial situations and retirement goals is crucial when determining how much to save for retirement, regardless of age.

• Individuals in their 30s, 40s, 50s, or 60s can still successfully start saving for retirement, with different strategies tailored to each age group.

• Regular contributions and taking advantage of employer-sponsored plans are key steps in building a solid retirement savings strategy at any age.

This article is part of SoFi’s Retirement Planning Guide, our coverage of all the steps you need to create a successful retirement plan.

What Is the Ideal Age to Start Saving for Retirement?

Ideally, you should start saving for retirement in your 20s, if possible. By getting started early, you could reap the benefits of compound interest. That’s when money in savings accounts earns interest, that interest is added to the principal amount in the account, and then interest is earned on the new higher amount.

Starting to save for retirement in your 20s can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

That said, if you are older than your 20s, it’s not too late to start saving for retirement. The important thing is to get started, no matter what your age.

The #1 Reason to Start Early: Compound Interest

If you start saving early, you could reap the benefits of compound interest.

CFP^®, Brian Walsh says, “Time can either be your best friend or your worst enemy. If you start saving early, you make it a habit, and you start building now, time becomes your best friend because of compounded growth. If you delay — say 5, 10, 15 years to save — then time becomes your worst enemy because you don’t have enough time to make up for the money that you didn’t save.”

Here’s how compound interest works and why it can be so valuable: The money in a savings account, money market account, or CD (certificate of deposit) earns interest. That interest is added to the balance or principle in the account, and then interest is earned on the new higher amount.

Depending on the type of account you have, interest might accrue daily, weekly, monthly, quarterly, twice a year, or annually. The more frequently interest compounds on your savings, the greater the benefit for you.

Investments — including investments in retirement plans, such as an employee-sponsored 401(k) plan or a traditional or Roth IRA — likewise benefit from compounding returns. Over time, you can see returns on both the principal as well as the returns on your contributions. Essentially, your money can work for you and potentially grow through the years, just through the power of compound returns.

The sooner you start saving and investing, the more time compounding has to do its work.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Saving Early vs Saving Later

To understand the power of compound returns, consider this:

If you start investing $7,000 a year at age 25, by the time you reach age 67, you’d have a total of $2,129,704.66. However, if you waited until age 35 to start investing the same amount, and got the same annual return, you’d have $939,494.76.

Age	Annual Return	Savings
25	8%	$2,129,704.66
35	8%	$939,494.76

As you can see, starting in your 20s means you may save double the amount you would have if you waited until your 30s.

Starting Retirement Savings During Different Life Stages

Retirement is often considered the single biggest expense in many peoples’ lives. Think about it: You may be living for 20 or more years with no active income.

Plus, while your parents or grandparents likely had a pension plan that kicked off right at the age of 65, that may not be the case for many workers in younger generations. Instead, the 401(k) model of retirement that’s more common these days requires employees to do their own saving.

As you get started on your savings journey, do a quick assessment of your current financial situation and goals. Be sure to factor in such considerations as:

• Age you are now

• Age you’d like to retire

• Your income

• Your expenses

• Where you’d like to live after retirement (location and type of home)

• The kind of lifestyle you envision in retirement (hobbies, travel, etc.)

To see where you’re heading with your savings you could use a retirement savings calculator. But here are more basics on how to get started on your retirement savings strategy, at any age.

Starting in Your 20s

Starting to save for retirement in your 20s is something you’ll later be thanking yourself for.

As discussed, the earlier you start investing, the better off you’re likely to be. No matter how much or little you start with, having a longer time horizon till retirement means you’ll be able to handle the typical ups and downs of the markets.

Plus, the sooner you start saving, the more time you’ll be able to benefit from compound returns, as noted.

Start by setting a goal: At what age would you like to retire? Based on current life expectancy, how many years do you expect to be retired? What do you imagine your retirement lifestyle will look like, and what might that cost?

Then, create a budget, if you haven’t already. Document your income, expenses, and debt. Once you do that, determine how much you can save for retirement, and start saving that amount right now.

💡 Learn more: Savings for Retirement in Your 20s

Starting in Your 30s

If your 20s have come and gone and you haven’t started investing in your retirement, your 30s is the next-best time to start. While there may be other expenses competing for your budget right now — saving for a house, planning for kids or their college educations — the truth remains that the sooner you start retirement savings, the more time they’ll have to grow.

If you’re employed full-time, one easy way to start is to open an employer-sponsored retirement savings plan, like a 401(k). In 2025, you can contribute up to $23,500 in a 401(k), and in 2026, you can contribute up to $24,500.

One benefit to note is that your savings will come out of your paycheck each month before you get taxed on that money. Not only does this automate retirement savings, but it means after a while you won’t even miss that part of your paycheck that you never really “had” to begin with. (And yes, Future You will thank you.)

Learn more: Savings for Retirement in Your 30s

Starting in Your 40s

When it comes to how much you should have saved for retirement by 40, one general guideline is to have the equivalent of your two to three times your annual salary saved in retirement money.

Once you have high-interest debt (like debt from credit cards) paid off, and have a good chunk of emergency savings set aside, take a good look at your monthly budget and figure out how to reallocate some money to start building a retirement savings fund.

Not only will regular contributions get you on a good path to savings, but one-off sources of money (from a bonus, an inheritance, or the sale of a car or other big-ticket item) are another way to help catch up on retirement savings faster.

Starting in Your 50s

In your 50s, a good ballpark goal is to have six times your annual salary in your retirement savings by the end of the decade. But don’t panic if you’re not there yet — there are a few ways you can catch up.

Specifically, the government allows individuals aged 50 and older to make “catch-up contributions” to 401(k), traditional IRA, and Roth IRA plans. That’s an additional $7,500 in 401(k) savings, and an additional $1,000 in IRA savings for 2025, and an extra $8,000 in 401(k) savings, and an extra $1,100 in IRA savings for 2026. (Note that in 2025 and 2026, those aged 60 to 63 may contribute up to an additional $11,250 to a 401(k), instead of $7,500 or $8,000.)

Also, under a new law that went into effect on January 1, 2026 (as part of SECURE 2.0), individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth account. With Roth accounts, individuals pay taxes on contributions upfront, but can make qualified withdrawals tax-free in retirement.

The opportunity is there, but only you can manage your budget to make it happen. Once you’ve earmarked regular contributions to a retirement savings account, make sure to review your asset allocation on your own or with a professional. A general rule of thumb is, the closer you get to retirement age, the larger the ratio of less risky investments (like bonds or bond funds) to more volatile ones (like stocks, mutual funds, and ETFs) you should have.

Starting in Your 60s

It’s never too late to start investing, especially if you’re still working and can contribute to an employer-sponsored retirement plan that may have matching contributions. If you’re contributing to a 401(k), or a Roth or traditional IRA, don’t forget about catch-up contributions (see the information above).

In general, when you’re this close to retirement it makes sense for your investments to be largely made up of bonds, cash, or cash equivalents. Having more fixed-income securities in your portfolio helps lower the odds of suffering losses as you get closer to your target retirement date.

💡 Learn more: Savings for Retirement in Your 60s

The Takeaway

Investing in retirement and wealth accounts is a great way to jump-start saving and investing for your golden years, whether you invest $10,000 or just $100 to get started.

The first step is to open an account or use the one that’s already open. You could also increase your contribution. If you’re opening an account, you may want to consider one without fees, to help maximize your bottom line.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

Easily manage your retirement savings with a SoFi IRA.

FAQ

Is 20 years enough to save for retirement?

It’s never too late to start investing for retirement. If you’re just starting in your 40s, consider contributing to an employer-sponsored plan if you can, so that you can take advantage of any employer matching contributions. In addition to regular bi-weekly or monthly contributions, make every effort to deposit any “windfall” lump sums (like a bonus, inheritance, or proceeds from the sale of a car or house) into a retirement savings vehicle in an effort to catch up faster.

Is 25 too late to start saving for retirement?

It’s not too late to start saving for retirement at 25. Take a look at your budget and determine the max you can contribute on a regular basis — whether through an employer-sponsored plan, an IRA, or a combination of them. Then start making contributions, and consider them as non-negotiable as rent, mortgage, or a utility bill.

Is 30 too old to start investing?

No age is too old to start investing for retirement, because the best time to start is today. The sooner you start investing, the more advantage you can take of compound returns, and potentially employer matching contributions if you open an employer-sponsored retirement plan.

Should I prioritize paying off debt over saving for retirement?

Whether you should prioritize paying off debt over saving for retirement depends on your personal situation and the type of debt you have. If your debt is the high-interest kind, such as credit card debt, for instance, it could make sense to pay off that debt first because the high interest is costing you extra money. The less you owe, the more you’ll be able to put into retirement savings.

And consider this: You may be able to pay off your debt and save simultaneously. For instance, if your employer offers a 401(k) with a match, enroll in the plan and contribute enough so that the employer match kicks in. Otherwise, you are essentially forfeiting free money. At the same time, put a dedicated amount each week or month to repaying your debt so that you continue to chip away at it. That way you will be reducing your debt and working toward saving for your retirement.

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Feb

2026

Investing for Retirement: Popular Options to Consider

By Dan Miller | invest, Investing, Preparing for Retirement | Comments Off

Saving steadily for retirement is important, but how you invest that money also matters. These days, you can choose from DIY investing options like a portfolio of stocks and bonds or other securities you select yourself. You can invest in mutual funds or exchange-traded funds (ETFs). There are also types of pre-set retirement funds and automated platforms like robo advisors that use technology to help manage a portfolio.

It’s wise to understand how the different strategies work to help decide which ones are best suited to your financial goals and personality. Below, you’ll learn about some popular retirement investment options.

This article is part of SoFi’s Retirement Planning Guide, our coverage of all the steps you need to create a successful retirement plan.

Key Points

• Opening a retirement savings earlier than later allows for the possibility of compounding returns and recovery from market volatility.

• In general, younger investors might choose more aggressive high-risk, potentially high-reward investments like stocks, while those nearing retirement are likely to opt for more conservative options.

• Investment options include DIY investing, in which the investor is in control of their portfolio; index funds that track a specific market index; automated investments; and working with a financial advisor.

• Employer-sponsored plans like 401(k)s and IRAs provide savings automatically deducted from paychecks, certain tax benefits, and potential employer matches.

• Regularly reviewing your portfolio and rebalancing when necessary may help manage risk and align with retirement goals.

The Importance of Investing for Retirement

Retirement may be a long way off or a short way down the road, depending on your age and stage of life. Either way, developing an investment strategy that can help your savings grow is essential. For many people, retirement might last 20 or 30 years — or even longer. A solid long-term investment strategy can help you build the amount you need for the years where you’re no longer in the workforce.

Benefits of Starting Retirement Investing Early

The earlier you start saving for retirement, the more time your money has to grow. One reason for this is the potential for compounding returns. Compounding means that if your money sees a return from investments, and that profit is reinvested, you’re earning money not only on your original investment, but also on your returns. In other words, over time, both your savings and your earnings could see gains.

In addition, the longer your time horizon, the more time you may have to recover from market volatility. If you have a time horizon of 30 or 40 years before you retire, you might be able to afford to weather some short-term losses, knowing that your investment returns could balance themselves out over time.

Understanding Retirement Accounts

The type of retirement accounts you have is important. Different types of accounts have different contribution limits and tax implications. Since both the amount you can save and how it will be taxed can have an impact on your nest egg, be sure to spend time strategizing about which types of accounts make the most sense for you.

For instance, you may have a workplace retirement account like a 401(k) or 403(b). In addition, you might decide to set up an Individual Retirement Account (IRA), like a traditional IRA or a Roth IRA that you manage yourself, to save even more for retirement.

Choosing Between Roth and Traditional IRAs

There are many types of IRAs, but two of the main options to choose from are a traditional and Roth IRA. Both can be helpful for saving for retirement, and you can contribute the same amount to each — up to $7,000 annually in 2025, with a catch-up contribution of $1,000 a year if you are age 50 or older, and up to $7,500 annually in 2026, with a catch-up contribution of $1,100 a year if you are 50 or older.

However, there are some key differences between a Roth and traditional IRA, especially when it comes to taxes. With a traditional IRA you contribute pre-tax dollars, and you get an upfront deduction on your taxes. But you’ll pay taxes on the money when you withdraw it in retirement.

A Roth IRA allows you to contribute after-tax dollars. In other words, you pay the taxes on the money upfront, and you’ll withdraw your savings tax-free in retirement.

Another difference between the two types of IRAs: With a traditional IRA you will need to take required minimum distributions (RMDs) starting at age 73 (assuming you turned 72 after December 31, 2022). A Roth IRA does not have RMDs.

If you’d like to open an IRA, think about which type makes the most sense for you. If you expect to be in a lower tax bracket in retirement, a traditional IRA might be a good choice. But if you think you’ll be in a higher tax bracket, a Roth IRA may be a better option.

Understanding Employer-Sponsored Accounts

Retirement accounts such as 401(k)s, 403(b)s, and 457 plans are examples of employer-sponsored plans.

401(k)s are one of the most common types of employer-sponsored plans. An employee signs up for the plan at work and their contributions are automatically deducted from their paychecks. Employees choose how to invest their 401(k) funds, and employers may match the employees’ contribution up to a certain amount, depending on the plan.

Your employer may offer a Roth 401(k) in addition to a traditional 401(k). With a traditional 401(k), contributions are taken from your paycheck before taxes, lowering your taxable income for the year, and you pay taxes on your withdrawals in retirement. With a Roth 401(k), contributions are taken after taxes, and your withdrawals in retirement are tax-free.

Other employer-sponsored plans like 403(b)s are for those who work in education, health-care, and other tax-exempt organizations, and the way they work is similar to a 401(k). Another type of employer sponsored plan, a 457 plan, is offered to some government employees and those who work for certain tax-exempt organizations.

All of these employer-sponsored plans have the same annual employee contribution limits: up to $23,500 in 2025 and $24,500 in 2026 for those under age 50. For 2025, individuals age 50 and up can contribute an additional $7,500 in catch-up contributions, and in 2026, they can contribute an additional catch-up contribution of $8,000. (In both 2025 and 2026, those ages 60 to 63 can contribute up to an additional $11,250 instead of $7,500 in 2025 and $8,000 in 2026, thanks to SECURE 2.0.)

Under a new law regarding catch-up contributions that went into effect on January 1, 2026 (as part of SECURE 2.0), individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their catch-up contributions for these employer-sponsored plans into a Roth account. With a Roth account, as noted above, these individuals will pay taxes on their catch-up contributions upfront, but can make eligible withdrawals tax-free in retirement.

Total contributions limits (including employer contributions) are $70,000 in 2025, and $77,500 for the standard catch-up, and $81,250 with the SECURE 2.0 catch-up. In 2026, the total contribution limit is $72,000, and $80,000 with the standard catch-up, and $83,250 with the SECURE 2.0 catch-up.

Investment Options

While investing for retirement can seem overwhelming, it doesn’t have to be. There are various retirement strategies suited to different personality types and risk-tolerance levels, as well as a number of investment options, so you can choose methods and plans that are the best fit for you.

Here are a few options for retirement investing to consider:

DIY Investing

For investors who feel confident in managing their own retirement portfolio, taking a DIY approach may be an option.

You can open an investment account and purchase stocks, bonds, commodities, mutual funds, or any other types of securities for your long-term portfolio. While the term “active investing” brings to mind day traders, active investing can also mean taking a hands-on approach to managing your own portfolio.

This strategy isn’t for everyone. It’s time and energy intensive, and it requires a certain amount of expertise. For instance, anyone interested in something like IPO investing, which can be risky and speculative, according to the Securities and Exchange Commission (SEC), should be a very experienced investor.

In addition, if you go the DIY route, bear in mind that the same rules apply to all long-term investors.

• Be mindful of the contribution limits and tax implications of the retirement account you choose.

• Consider the cost of your investments, as fees can reduce your earnings over time.

• Consider using a strategy that includes some portfolio diversification, as this may, over time, help mitigate unsystematic risk, which is the type of risk unique to a particular company or industry (something that’s due to the management of a specific company, say). But remember, risk is inherent in all investing.

Index Funds

An index fund is a type of fund that tracks a broad market index. One of the most popular types of index funds tracks the S&P 500 index, for example, which mirrors the performance of the 500 largest U.S. companies.

There are hundreds of indexes, and many have corresponding funds that track different sectors of the market, such as smaller companies, technology companies, sustainable or green companies, various types of bonds, and more. Most are index funds.

Index funds don’t rely on a live team of portfolio managers, so they tend to be less expensive than actively managed funds. However, they have a downside which is that your money is pegged to the securities in that sector.

Mutual Funds

Mutual funds are a type of pooled investment. Mutual funds may include stocks, bonds, commodities, and other securities that are in what you might think of as a basket. An investor buys shares or fractional shares of a mutual fund, which gives them exposure to a variety of different companies or assets and may help with portfolio diversification. Unlike stocks and ETFs, mutual funds trade just once a day, at the end of the day.

Mutual funds were designed to get people started with investing. Buying even just a few shares of a mutual fund invests an individual in all the individual securities the fund holds.

Mutual funds may be actively or passively managed. Passively managed funds track an index, while actively managed funds attempt to beat the performance of an index with careful investment selection. Actively managed funds typically cost more than passively managed funds, so you’ll want to watch for transaction and operating fees.

Automated Options

In the world of investing there isn’t a truly automated “set it and forget it” strategy that will work on its own, without any input, for decades. But there are some options that are more hands-off than others.

• Target Date Funds

One such option is a target date fund. A target date fund is designed to be an all-inclusive portfolio option for people that are looking to retire on or near a certain date. For example, a 2050 target date fund is intended for people that will be ready for retirement in 2050.

Target date funds use a set of calculations to adjust a portfolio’s asset allocation over time. When a target date fund is decades away from the specified date, it might invest 80% in equities and 20% in fixed income or cash/cash equivalents, for instance. As the date draws nearer, it will automatically move more of its investments away from equities towards bonds, cash, or other investments with lower risk. This automatic readjustment is referred to as the glide path.

• Robo Advisors

Another option is automated investing, commonly known as a robo advisor (although these services are not robots, and don’t typically offer advice).

A robo advisor platform offers a questionnaire for investors to gauge their time horizon (years to retirement or another financial goal), their risk level, and so forth.

The platform then uses sophisticated technology to recommend a portfolio of low-cost index and exchange-traded funds (ETFs).

While automated options do offer the convenience of managing a portfolio on your behalf, they also have some drawbacks. The cost can be higher than other types of investment options. And there is limited flexibility. Investors typically have less control to adjust the securities in these funds.

Hire an Advisor

If you don’t feel comfortable investing for retirement on your own, you may want to consider using a financial advisor. Talk with your trusted friends or family members to get a recommendation.

Because an advisor introduces a new level of cost, be sure to ask how the person is compensated. Some advisors charge a flat fee or an hourly rate, and some earn commissions — or combinations of the above.

Tips When Investing for Retirement

As you start investing for retirement, here are a few things that you’ll want to keep in mind:

Ask About Fees

Many investments come with fees that are charged by the advisor or company that manages the investment. These investment fees may be explicitly charged to your account, or they may be captured as part of the investment’s returns. Make sure to check any fees that are charged before you invest. There are many low-cost mutual funds that offer investment fees under 0.1% as compared to a financial advisor who may charge 1% or more. Even a small difference in the fees charged can make a huge difference on your returns when compounded over decades.

Plan for Taxes

You’ll also want to account for how your retirement investments will be taxed.

• Tax-Deferred Accounts

If you contribute to a traditional 401(k) or IRA, you may be eligible for a tax deduction in the tax year that you make the contribution (meaning a contribution for tax year 2025 can typically be deducted on your 2025 taxes).

These accounts are called tax-deferred because you will owe taxes on your withdrawals.

• After-Tax Accounts

If you contribute to a Roth 401(k) or Roth IRA, you won’t get a tax deduction when you contribute because you deposit after-tax dollars. Instead, your qualified withdrawals will be tax-free.

There are other differences between tax-deferred and after-tax accounts that can impact your nest egg. For example, once you reach the age of 73, you’re required to take RMDs from a traditional IRA or 401(k) every year. That doesn’t apply to Roth accounts.

• Taxable Investment Accounts

If you invest for retirement in a non-retirement or taxable account, such as a brokerage account, you’ll owe income taxes on your gains whenever you sell those securities, which will affect your portfolio’s overall performance.

Setting a Retirement Goal

Setting a retirement goal can help you establish a road map for your future and get you to the place you want to be financially and personally.

To get started, decide at what age you’d like to retire. Next, determine what you’d like to do in retirement. Travel? Visit family frequently? Move to a new city? Think about what suits you best. Then figure out how much money you’ll need for a comfortable retirement based on what you want to do in your after-work years, the costs associated with the goal, and your life expectancy.

Setting goals can motivate you to take action and step up your retirement savings. Revisit your goals periodically to make you’re on track to reach them.

Rebalancing Your Portfolio Over Time

It’s generally considered a good idea to periodically adjust your investments by rebalancing your portfolio. Portfolio rebalancing is a way to adjust the mix of your investments. It means realigning the assets of a portfolio’s holdings to match your desired asset allocation.

How Often Should I Adjust My Investments?

Investors who are managing their investments themselves can rebalance when they like, based on their personal preferences. Some choose to do it at certain points, such as quarterly or annually. Others do it when their target asset allocation changes.

If you have a robo advisor or investment advisor, they likely have you set up with a specific target of different types of investments. Over time, the advisor will typically rebalance your portfolio to keep it in line with your target percentages. Check in periodically and review what’s going on to make sure everything is on track.

Signs It’s Time to Rebalance Your Portfolio

There is no one answer for when to rebalance your portfolio —it is up to each investor and what they are comfortable with. However, there are certain situations that indicate it might be time to consider a portfolio rebalance. These typically include:

• Major life changes that affect your financial goals or risk tolerance. For instance, perhaps you lost your job or got divorced. Or on a happier note, maybe you inherited some money or had a baby.

• Market volatility has caused your asset allocations to stray from your target goals.

• You’re concerned your portfolio isn’t diversified enough.

Strategies for Adjusting Investments with Age

The mix of assets in your portfolio will likely shift with age. When you’re younger and you have a longer time horizon until retirement, you may want to have more assets that are considered riskier with more potential for growth, like stocks, because you have more time to ride out any market volatility.

As you get older and closer to retirement, however, you will likely want to shift your allocation to have fewer riskier assets and more assets considered less risky, such as bonds, to help protect your money from any drops in the market.

Each investor’s financial situation is different, so individuals’ asset allocation will vary. Every investor needs to determine the best allocation for their age and circumstances.

The Takeaway

Investing for retirement is important as part of an overall financial plan. And with some research, picking the right investment options doesn’t have to be overwhelming.

You can learn about different types of retirement plans, including employer-sponsored plans and IRAs, and investment options. Then, you can weigh the pros and cons and pick those that suit your financial situation, risk tolerance, and goals. Make sure you are aware of any fees involved, along with tax implications.

If you don’t feel comfortable managing your own portfolio, you might want to consider such alternatives as working with an advisor or using an automated portfolio. Whatever you do, start saving as soon as you can so that you’ll have more time to work toward your retirement goals.

Easily manage your retirement savings with a SoFi IRA.

FAQ

Can I invest for retirement if I have limited funds?

It is possible to invest for retirement if you have limited funds. In fact, if you have limited funds, that may be one reason it’s even more important to invest for retirement as soon as you can. Especially if you are younger and have a long time before retirement, even a small amount can potentially grow to be a sizable nest egg when investment returns are compounded over many decades.

Should I adjust my investment strategy as I approach retirement?

How you choose to invest will depend on a number of factors, one of which is how close you are to retirement. One common strategy is to be more aggressive with your investment strategy when you are years or decades away from retirement. This type of higher-risk, potentially higher-rewards strategy can possibly lead to higher overall returns while you have a long time to weather the ups and downs of the market. Then, as you get closer to retirement, you’ll likely want to be more conservative with your investments in an attempt to better preserve capital.

What investment options are suitable for conservative investors?

Choosing your investment options will depend on your overall financial situation and tolerance for risk. Some examples of more conservative investments include bonds, cash, CDs, and Treasury bills. As you get closer to retirement, it likely makes sense to choose more conservative investments. You may give up some possible returns, but you may also be better insulated against large losses.

How much should I save monthly to reach my retirement goal?

How much you should save monthly to reach your retirement goal depends on what your goal is, your time frame for reaching it, and your financial situation. One guideline is to put 15% to 20% of your income toward your retirement, and aim for specific targets based on your age, such as having 1 times your salary saved by age 30, 3 times your salary by age 40, and 10 times your salary saved by the time you are 67. Those are just rough guidelines, but they can give you a point of reference.

Is it safe to rely on Social Security for retirement?

Typically, Social Security doesn’t provide enough of a retirement income for most people. For instance, in 2023, retirees received about $1,900 per month, on average. That’s why it’s a good idea to start saving for retirement as early as possible, through an employer-sponsored retirement plan or an IRA, or both, and not rely on Social Security as the main source of your retirement income.

Photo credit: iStock/monkeybusinessimages

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. This should not be considered a recommendation to participate in IPOs and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation. New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For more information on the allocation process please visit IPO Allocation Procedures.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOIN-Q125-053
CN-Q425-3236452-44
Q126-3525874-017

Feb

2026

A smiling man and woman in sunglasses driving in a convertible, enjoying their retirement.

What Is Retirement? What Does It Really Mean?

By Rebecca Lake | invest, Investing, Preparing for Retirement | Comments Off

Table of Contents

Retirement Definition
Qualified Retirement Plan Definition
Retirement Statistics
Saving for Retirement
Retirement Investment Accounts
Investing for Retirement With SoFi
FAQ

There once was a time when retirement meant leaving your job permanently, either when you reached a certain age or you’d accumulated enough wealth to live without working. Today’s retirement definition is changing, and it can vary widely depending on your vision and your individual financial situation.

It’s important for each person to develop their own retirement definition. That can help you establish a roadmap for getting from point A to point B, with the money you have, and in the time frame you’re expecting.

Key Points

• Retirement’s definition may vary based on individual financial situations and personal visions.

• Retirement has both financial and lifestyle aspects that need to be considered in its definition.

• Being retired means relying on savings, investments, and perhaps federal benefits for income instead of a regular paycheck.

• Retirement doesn’t necessarily mean individuals completely leave the labor force, as some retirees may have part-time jobs or pursue new careers.

• Retirement statistics show that a significant portion of retirees rely on Social Security, and savings levels vary among individuals.

Retirement Definition

Retirement’s meaning may shift from person to person, but the bottom line is that retirement has a financial side and a personal or lifestyle side. It’s important to consider both in your definition of retirement.

Retirement and Your Finances

Being retired or living in retirement generally means relying on accumulated savings and investments to cover expenses rather than counting on a paycheck or salary from employment. Depending upon their retirement age, an individual’s income may also include federal retirement benefits, such as Social Security and other options.

Retiring doesn’t necessarily mean that a person stops working completely. Some retirees might have a part-time job or side hustle, or they may choose to start a small business once they retire from their career. But the majority of their retirement income may still come from savings or federal benefits.

Retirement and Your Lifestyle

Some people embark on a new life or a new career in retirement, complete with new goals, a new focus, sometimes in a brand-new location. But retirement doesn’t have to be a period of reinvention. It depends on how you view the purpose and meaning of retirement. Many people enjoy this period as a time to slow down and enjoy hobbies or priorities that they couldn’t focus on before.

Consider the notion of moving in retirement. While strolling on sandy, sunlit beaches is depicted as a retirement ideal, many people don’t want to move to get there. In fact, 75% of people 50 and older want to remain in their current homes as they get older, according to a 2024 survey by the AARP.

Qualified Retirement Plan Definition

A qualified retirement plan provides you with money to pay for future expenses once you decide to retire from your job. The Employment Retirement Security Act (ERISA) recognizes two types of retirement plans:

Defined Contribution Plans

In a defined contribution plan, the amount of money you’re able to withdraw in retirement is determined by how much you contribute during your working years, and how much that money grows as it’s invested. A 401(k) plan is the most common type of defined contribution plan that employers can offer to employees.

There are other kinds of retirement plans that fall under the defined contribution umbrella. For example, if you run a small business, you might establish a Simplified Employee Pension (SEP) plan for yourself and your employees. Profit sharing plans, stock bonus plans, and employee stock ownership (ESOP) plans are also defined contribution plans.

A 457 plan is another defined contribution option. They work similar to 401(k) plans, in that you decide how much to contribute, and your employer can make matching contributions. The main difference between 457 and 401(k) retirement accounts is who they’re designed for. Private employers can offer 401(k) plans, while 457 plans are reserved for state and local government employees.

Defined Benefit Plans

A defined benefit plan (typically a pension) pays you a fixed amount in retirement that’s determined by your years of service, your retirement age, and your highest earning years. Cash balance plans are another type of defined benefit plan.

Generally speaking, defined benefit plans have been on the wane in the last couple of decades, with more of the responsibility for saving falling to workers, who must contribute to defined contribution plans.

Retirement Statistics

Retirement statistics can offer some insight into how Americans typically save for the future and when they retire. Here are some key retirement facts and figures to know, according to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2024, which was released in May 2025:

• 27% of adults considered themselves to be retired in 2024, though some were still working in some capacity.

• 53% of adults said they retired to do something else, while 49% said they’d reached their normal retirement age.

• 78% of retirees relied on Social Security for income, increasing to 91% among retirees age 65 or older.

• 61% of adults had savings in a tax-preferred retirement account, including 401(k)s and IRAs.

• 35% of non-retirees felt that they were on track with their retirement savings efforts.

So, how much does the typical household have saved for retirement? According to the Transamerica Center for Retirement Studies, the estimated median retirement savings among American workers is $54,000. Just 27% of adults who are traditionally employed and 24% of self-employed individuals have saved $250,000 or more for retirement.

Saving for Retirement

Saving for retirement is an important financial goal. While Social Security may provide you with some income, it’s not likely to be enough to cover all of your expenses in retirement — particularly if you end up needing extensive medical care or long-term care. In January 2025, according to the Social Security Administration, the average monthly benefit amount was $1,976.

Financial experts often recommend saving 15% of your income for retirement but your personal savings target may be higher or lower, depending on your goals. The longer you have to save for retirement, the longer you have to take advantage of compounding interest. That’s the interest you earn on your interest and it’s one of the keys to building wealth.

Selecting a retirement plan is the first step to getting on track with your financial goals. When saving for retirement, you can start with a defined benefit or defined contribution plan if your employer offers either one. Defined contribution plans can be advantageous because your employer may match a percentage of what you save. That’s free money you can use for retirement.

If you don’t have a 401(k) or a similar plan at work, a retirement investment account, otherwise known as an individual retirement account (IRA), is a general option.

Is your retirement piggy bank feeling light?

Start saving today with a Roth or Traditional IRA.

Retirement Investment Accounts

A retirement investment account is an account that enables you to save money for the future, but it isn’t considered a federally qualified retirement plan, like a 401(k). IRAs are tax-advantaged investment accounts that you can use to purchase mutual funds, exchange-traded funds (ETFs), and other securities.

There are two main types of IRAs you can open: traditional and Roth IRAs. A traditional IRA allows for tax-deductible contributions in the year that you make them. Once you retire and begin withdrawing money, those withdrawals are taxed at your ordinary income tax rate.

Roth IRAs don’t offer a deduction for contributions because you contribute after-tax dollars. You can, however, make 100% tax-free qualified withdrawals in retirement. This might be preferable if you think you’ll be in a higher tax bracket once you retire.

For tax year 2025, individuals can contribute up to $7,000 in a Roth and traditional IRA. Those aged 50 and up can contribute up to $8,000, which includes $1,000 of catch-up contributions. For tax year 2026, individuals can contribute up to $7,500 in a Roth IRA and traditional IRA, and those 50 and over can contribute up to $8,600.

You can open an IRA online, or at a brokerage, alongside a taxable investment account for a comprehensive retirement savings picture.

Pros of Retirement Investment Accounts

Opening an IRA could make sense if you’d like to save for retirement while enjoying certain tax benefits.

• If you’re in a higher income bracket during your working years, being able to deduct traditional IRA contributions could reduce your tax liability.

• And not having to pay tax on Roth IRA withdrawals in retirement can ease your tax burden as well if you have income from other sources.

• IRA accounts often give you more flexibility in terms of your investment choices.

Cons of Retirement Investment Accounts

While IRAs can be good savings vehicles for retirement, there are some downsides.

• Both types of accounts have much lower contribution limits compared to a 401(k) or 457 plan. Annual contribution limits for a 401(k) are $23,500 in 2025 and $24,500 in 2026 for those under age 50. Those aged 50 and over can make an additional catch-up contribution of $7,500 per year, to a 401(k) for 2025, and an additional $8,000 for 2026. And in 2025 and 2026, those aged 60 to 63 only may contribute an additional $11,250 instead of $7,500 and $8,000 respectively, thanks to SECURE 2.0.

(It’s worth noting that under a new law that went into effect on January 1, 2026 as part of SECURE 2.0, individuals aged 50 and older with FICA wages exceeding $150,000 in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account. With Roths, individuals pay taxes on contributions upfront, but can make eligible withdrawals tax-free in retirement.)

• With traditional IRAs, you must begin taking required distributions (RMDs) based on your account balance and life expectancy starting at age 73 (401(k)s have a similar rule). If you fail to do so, you could incur a hefty tax penalty.

• Roth IRAs don’t have RMDs, but your ability to contribute to a Roth may be limited based on your income and tax filing status.

Investing for Retirement With SoFi

However you choose to define your retirement, making a financial roadmap will help you get the retirement you want.

SoFi Invest offers traditional and Roth investment accounts to help you build the future you envision. You can also open a SEP IRA if you’re self-employed and want to get a jump on retirement savings. Another way to keep track of your retirement savings is to roll over your old accounts to a rollover IRA, so you can manage your money in one place.

SoFi makes the rollover process seamless and straightforward. There are no rollover fees, and you can complete your 401(k) rollover without a lot of time or hassle.

Help build your nest egg with a SoFi IRA.

FAQ

What is the meaning of retirement?

Retirement generally means leaving your job or the workforce, and living off your savings and investments, but that definition is changing for some. Some people may choose to continue working in retirement, though it may not be their primary source of income. Others may shift their work to focus more on lifestyle changes.

How common is retirement?

According to the Federal Reserve, about 27% of adults considered themselves to be retired in 2024, though some were still working in some capacity. Of these, 53% said they had retired to do something else, while 49% said they’d reached their normal retirement age.

How does retirement work?

When someone retires, they stop working at their job. Or, in the case of a business owner, they hand the business over to someone else. At that point, it’s up to them to decide how they want to spend their retirement, which might include taking care of family, traveling, working part-time, or exploring new hobbies. Their sources of income might include savings, investments, a pension, and Social Security benefits.

Photo credit: iStock/Alessandro Biascioli

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOIN-Q425-086
Q126-3525874-018

Feb

2026

Individual Retirement Account (IRA) vs Thrift Savings Plan (TSP)

By Dan Miller | invest, Investing, Preparing for Retirement | Comments Off

Although an IRA and a TSP are both types of retirement accounts, they are governed by different sets of rules, starting with the fact that anyone with earned income can open an IRA, but only employees of the U.S. government or the armed forces can fund a thrift savings plan.

A TSP effectively functions more like the government version of a 401(k) plan, with similar rules and contribution limits to these private company-sponsored plans.

When considering the advantages of an IRA vs. a TSP, remember that in many cases it’s possible to fund both types of accounts, as long as you understand the rules and restrictions that apply to each.

What Is an IRA?

You may already be familiar with what IRAs are: These are individual retirement accounts that are tax advantaged in different ways. Anyone with earned income can open an IRA, as long as they meet certain criteria.

Retirement savers can generally choose between traditional and Roth IRAs, with some exceptions owing to Roth eligibility rules (more on that below).

Traditional IRAs allow for pre-tax contributions, while Roth IRAs involve after-tax contributions and permit qualified tax-free withdrawals in retirement.

For tax year 2025, the maximum annual amount you can contribute to either type of IRA is $7,000; $8,000 if you’re 50 or older. For tax year 2026, the maximum amount you can contribute to either type of IRA for the year is $7,500; $8,600 if you’re 50 or older. These amounts are the total annual contribution amounts allowed across all ordinary IRA accounts.

So, if you contribute $3,000 to a Roth IRA in 2025 and you’re under age 50, then you can only contribute up to $4,000 in another IRA for that year. And if you contribute $3,000 to a Roth IRA in 2026 and you’re under age 50, you can only contribute up to $4,500 in another IRA for the year.

Calculate your IRA contributions.

Use SoFi’s IRA contribution calculator to determine how much you can contribute to an IRA in 2024.

What Is a TSP?

The Thrift Savings Plan (TSP) is an employer-sponsored plan that is open to members of the military and civilian employees of the federal government. TSPs are tax-advantaged plans that share many similarities to 401(k) plans offered by private employers.

Like 401(k) plans, you can contribute to a traditional TSP or a designated Roth TSP, both of which come with the types of tax advantages that are similar to traditional and Roth IRAs, as described above. In other words, many different types of retirement accounts may also offer a Roth-style option, for after-tax contributions. Be sure to check the rules and restrictions on contributing to both sides of a plan.

Perhaps the biggest difference with a TSP vs. an IRA is the annual contribution limit. You can contribute up to $23,500 for tax year 2025; for those 50 and older there is also an annual catch-up contribution of up to $7,500 per year, for a total of $30,500. Also, in 2025, those aged 60 to 63 may contribute a catch-up of up to $11,250 (instead of $7,500) for a total of $34,750, thanks to SECURE 2.0.

For 2026, you can contribute up to $24,500, and there is a catch-up contribution of up to $8,000 for those age 50 and up for a total of $32,500. Also, in 2025, those aged 60 to 63 may again contribute a catch-up of up to $11,250 (instead of $8,000) for a total of $35,750.

Under a new law regarding catch-up contributions that went into effect on January 1, 2026 (as part of SECURE 2.0), individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their TSP catch-up contributions into a Roth account. With Roth accounts, individuals pay taxes on contributions upfront, but can make qualified withdrawals tax-free in retirement.

But contribution limits for IRAs are $7,000 for tax year 2025 ($8,000 for those 50 and up), and $7,500 for tax year 2026 ($8,600 for those 50 and older).

TSP vs. IRA

In addition, there are other similarities and differences between a TSP and an IRA.

Similarities

Both the TSP and IRAs provide tax-advantaged ways to save for retirement. With both TSPs and IRAs you can choose between a traditional (tax-deferred) account or a Roth (tax-free) account.

• With a traditional-style TSP or IRA, funds are deposited pre-tax, and you owe ordinary income tax on the withdrawals.

• With a Roth-style TSP or IRA, you deposit after-tax money, and qualified withdrawals are tax-free starting at age 59 ½, as long as you’ve held the account for at least five years.

• With both types of accounts, you may face tax consequences and/or a penalty if you withdraw your funds before age 59 ½.

Differences

There are far more differences between TSPs and IRAs, as you’ll see in the table below.

IRAs	TSP
Anyone with earned income can open an IRA	Only members of the military and government employees are eligible
Annual contribution limits for 2025 are $7,000 and $8,000 with the catch-up provision; annual contribution limits for 2026 are $7,500 and $8,600 with the catch-up.	Annual contribution limits for 2025 are $23,500; $31,000 with the catch-up provision and $34,750 for those aged 60 to 63; annual contribution limits for 2026 are $24,500; $32,500 with the catch-up provision and $35,750 for those aged 60 to 63.
A wide range of investment choices	Investment choices are limited to the funds the TSP provides
You have some control over the investment fees you pay, so be sure to check your all-in costs.	You have little control over the investment fees you pay, though TSP account and investment fees tend to be low.
You cannot take a loan from your IRA	TSP loans may be available
You are solely responsible for contributions	The government typically provides matching contributions of up to 5%
Traditional IRAs are subject to RMD rules; Roth IRAs are not	RMD rules apply to TSPs, but there are different distribution options: e.g. an installment plan or a lifetime annuity, among other choices

Pros and Cons of IRAs

As the name suggests, an IRA is an account that you manage individually. As such, it comes with its own set of advantages and disadvantages.

Pros

• You can open an IRA at most brokerage firms, and manage it yourself, as long as you have earned income.

• An IRA account typically offers access to a wide range of investment options.

• Traditional and Roth IRAs offer different tax treatments; you can choose whatever works best for your financial plan.

Cons

• Annual contribution limits are lower than many other types of retirement plans.

• Eligibility rules for Roth IRAs are complicated and can be limiting.

• Only you can fund an IRA; there is no employer match for a traditional IRA or Roth.

• You cannot take a loan from any type of IRA (but you may be able to take early withdrawals under some circumstances without owing a penalty; see IRS.gov).

Pros and Cons of TSPs

Remember that you can only participate in a TSP if you are an employee of the federal government or a member of the armed forces. Here are some other considerations.

Pros

• The annual contribution limits are higher than IRAs, and the same as 401(k) plans.

• TSPs include an employer match up to 5%.

• When setting up your income plan in retirement, TSPs offer a range of options for taking withdrawals, including fixed installments and a lifetime annuity option.

• You can take a loan from a TSP.

• TSP accounts have lower fees, generally, than IRA accounts

Cons

• Investment options within a TSP can be limited.

• If you leave your government job, you can no longer contribute to your TSP.

• TSP plan participants have less control, and cannot opt for lower-fee or investment options.

Can You Roll a TSP Into an IRA?

Yes, you can rollover your TSP funds into a qualified trust or eligible retirement plan. Eligible retirement plans include IRAs as well as qualified employer-sponsored plans.

Keep in mind that generally you generally need to rollover funds from a traditional TSP account into a traditional IRA and funds from a Roth TSP account into a Roth IRA in order to avoid taxes on the amount you rollover.

You may want to consult with a professional.

The Takeaway

The Thrift Savings Plan (TSP) is a government program intended to help government employees and members of the military save for retirement. It is an employer-sponsored plan similar to a 401(k). An individual retirement account (IRA) is also a way to save for retirement, but is an account you open and manage yourself.

While there are advantages and disadvantages to each, a TSP allows you to invest more of your savings over time; contribution limits are lower for traditional and Roth IRAs.

Help grow your nest egg with a SoFi IRA.

FAQ

Is a TSP or IRA better?

A TSP and an IRA are two different ways to save for retirement, and may suit different people for different reasons. Contributing to an IRA may provide you with more investment options, while you can save more in a TSP and the government may match some of your contributions — but not everyone has access to a TSP.

Should you move your TSP to an IRA?

If you leave government service, you can’t contribute to your TSP anymore — but you may be able to open an IRA and rollover the TSP funds. Doing a TSP-to-IRA rollover within the standard 60-day window can help ensure that you don’t have to pay any taxes or penalties, and this may help your retirement plan.

Is a TSP the same as an IRA?

No, a TSP is not the same as an IRA. A TSP is for employees of the government or the armed forces, and it’s comparable to an employer-sponsored plan like a 401(k) or 403(b). By contrast, anyone can open an IRA, as long as they have earned income and qualify.

Photo credit: iStock/Dilok Klaisataporn

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN0523003
CN-Q425-3236452-50
Q126-3525874-022

Feb

2026

What Is the Average Retirement Age?

By MP Dunleavey | Budgeting & Goals, invest, Preparing for Retirement | Comments Off

The average retirement age in the US is age 62, but that number doesn’t reveal the wide range of ages at which people can and do retire.

Some people retire in their 50s, some in their 70s; other people find ways to keep pursuing their profession and thus never completely “retire” from the workforce. The age at which someone retires depends on a host of factors, including how much they’ve saved, their overall state of health, and their desire to keep working versus taking on other commitments.

Still, having some idea of the average age of retirement can be helpful as a general benchmark for your own retirement plans.

Key Points

• The average retirement age in the U.S. is 62, with variations by state.

• Retirement age is influenced by financial, health, and personal factors.

• Many people retire earlier than planned due to unforeseen circumstances, which can lead to financial challenges.

• Specific savings benchmarks are recommended at different life stages to achieve retirement goals.

• One rule of thumb is to save 10 times one’s income by age 67 for a comfortable retirement.

What Is the Average Age of Retirement in the US?

The average age of retirement from the workforce in the U.S. is 62, according to at least two recent studies.

Age 65 may be what many of us think of as the traditional age to retire, and according to 2024 research by the Employee Benefit Research Institute, more than half of workers surveyed expect to retire at age 65 or older. Yet 70% of the retirees in that study reported retiring before age 65.

In addition, the age of retirement by state varies widely. According to the U.S. Census Bureau’s American Community Survey, these are the states with the highest and lowest average U.S. retirement ages:

• Hawaii, Massachusetts, and South Dakota is 66.

• Washington, D.C., is 67.

• Residents of Alaska and West Virginia it’s 61.

A lower cost of living may be what’s helping West Virginia residents retire so young. West Virginia was one of the 10 states in the country with the lowest costs of living, according to the latest Cost of Living Index.

While those previously mentioned states give a look at two ends of the average retirement age spectrum in the U.S., many states have an average retirement age that falls closer to what one might expect.

Colorado, Connecticut, Iowa, Kansas, Maryland, Minnesota, Nebraska, New Hampshire, New Jersey, North Dakota, Rhode Island, Texas, Utah, Vermont, and Virginia all have an average retirement age of 65.

Factors Influencing Retirement Age

There are many different factors that affect the typical retirement age. Some key factors include:

• Financial situation and retirement savings: How much retirement savings a person has, whether it’s in an investment account or an employer-sponsored plan, is an important determinant of their average retirement age. A recent survey by the AARP found that more than half of all respondents were worried about not having enough money for retirement.

Concerns like this may delay retirement age. In addition, those who are waiting to get their full Social Security benefits may decide to wait until the government’s designated full retirement age of 66 or 67, depending on their year of birth.

• Health: The state of a person’s health can also influence the age at which they retire. Those in good health may opt to work for more years, while those with medical conditions or disabilities may need to retire earlier.

• Location: Where they live may also affect how long an individual keeps working. In places where the cost of living is higher, people may work longer to pay their expenses now and in retirement. Others who are expecting to move to a more affordable place might retire earlier.

• Lifestyle goals: How a person plans to spend their retirement affects how much money they may need, which can impact when they retire. Someone who hopes to travel frequently may choose to work longer to keep earning money, for instance.

Retirement Expectations vs. Reality

Expectations can lead to disappointment. Anyone who has ever planned for a sunny beach vacation only to see it rain every day knows that.

Now imagine a person spending most of their adult life expecting to retire at 65 or earlier, and then realizing their retirement savings just isn’t enough.

According to the Employee Benefit Research Institute’s 2024 Retirement Confidence Survey, the expected average age of retirement is 65 or older. However, as noted previously, the actual average retirement age in the U.S. is 62, according to that same survey as well as other research. Retiring at 62, or earlier than planned, could lead to not having enough money to retire comfortably.

How to Know When to Retire

Not everyone retires early by choice. Six in 10 people retired earlier than they expected, mostly because of health problems, disabilities, or changes within their companies, according to a 2024 survey by the Transamerica Center for Retirement Studies.

It can be difficult for workers to exactly predict at what age they will retire due to circumstances that may be out of their control. For example, among adults who save regularly for retirement, 33% say they won’t have enough money to be financially secure in their post-employment years, and 31% don’t know if they will have enough, the AARP survey found.

In order to bridge any financial gap caused by not having enough retirement savings, 75% of pre-retirees in the Employee Benefit Research Institute’s survey expect they will earn an income during their retirement by working either full time or part time.

The survey found that half of respondents have calculated how much money they will need in retirement, and 33% estimate they will need $1.5 million. However, there is a gap between their expectations and their actions. One-third of respondents currently have less than $50,000 in retirement savings.

Common Misconceptions About Retirement Age

There are some misconceptions about the typical retirement age. These are two of the more common ones:

• There is an ideal age to retire. While research shows that many people believe age 63 is the best age to retire, it is a highly individual decision. Some people may need to work longer for financial reasons; others may have to take retirement sooner than anticipated.

• Age 65 is the traditional retirement age. The average retirement age in the U.S. is actually 62. Many people retire earlier than they think they will, often for health reasons or changes within their companies.

How Much Should You Have Saved for Retirement?

To retire comfortably, the IRS recommends that individuals have up to 80% of their current annual income saved for each year of retirement. With the average Social Security monthly payment being $1,177, retirees may need to do a decent amount of saving to cover the rest of their future expenses.

This is something to keep in mind when choosing a retirement date.

Retirement Savings Benchmarks by Age

To have enough savings for a comfortable retirement, one common rule of thumb is to save 10 times your income by the age of 67. To stay on track toward that goal, these are some retirement savings benchmarks individuals can aim for along the way.

Age	Retirement savings
30	1x income
35	3x income
40	3x income
45	4x income
50	6x income
55	7x income
60	8x income
67	10x income

Calculating Your Personalized Retirement Goal

To help determine how much money you’ll need for retirement, look at how much you currently have in retirement savings, what your Social Security benefit will be at the age you plan to retire — you can use the Social Security calculator to find this number — and any other income sources you may have, such as a pension or inheritance funds.

Then, draw up a retirement budget to get a sense of how much money you may need. Be sure to include estimated living expenses, housing, and health care costs. Plugging those numbers into a retirement calculator can help you determine how much money you might need per year.

Comparing what you’ll need annually for approximately 30 years of retirement with your savings, Social Security benefit, and other income sources will help you see how much money you still need to save in order to get there — and give you a target goal to aim for.

It’s Never Too Early to Start Saving for Retirement

Since retirement can last 30 years or more, financial security is key to enjoying your golden years.

Any day is a good day to start saving, but saving for retirement while a person is young could help put them on the path toward a more secure retirement. The more years their savings have to grow, the better.

“A very helpful habit,” explains Brian Walsh, CFP® at SoFi, “Is truly automating what you need to do. Recurring contributions. Saving towards your goals. Automatically increasing those contributions. That way you can save now and save even more in the future.”

You could even use something like automated investing if you think it could be helpful. Whatever you do, be sure to start saving as soon as possible. The longer you wait to save for retirement, the more you will need to save in a shorter period of time.

Benefits of Starting Early with Compounded Growth

Starting retirement saving early can be powerful because of a process called compounding returns.

Here’s how it works: Say you have money invested in your retirement account, or maybe you even do self-directed investing, and that money earns returns. As long as those returns are reinvested, you will earn money on your original investment and also on your returns.

Compound returns can be a way for your money to grow over time. The returns you earn each period are reinvested to potentially earn additional returns. And the longer you invest, the more time your returns may have to compound.

3 Steps to Start Preparing for Retirement

It’s not enough to have an idea of when you want to retire. To really reach that goal, it’s important to have a financial plan in place. These steps break down how to prepare for retirement.

Step 1: Estimate how much money you’ll need

One of the first steps a person could take toward their retirement saving journey is to estimate how much money they need to save. Besides the method outlined above, there is also a retirement savings formula that can help you estimate: Start with your current income, subtract your estimated Social Security benefits, and divide by 0.04. That’s the target number of retirement savings per year you’ll need.

Step 2: Set up retirement saving goals

It might be worth considering what retirement savings plans are available, whether that is an employer-sponsored 401(k), an IRA, or a savings account. Contributing regularly is key, even if big contributions can’t be made to retirement savings right now.

Making small additions to savings can add up, especially if extra money from finishing car payments, getting a holiday bonus, or earning a raise can be diverted to a retirement savings account. And periodically review the investments in your account, which may be mutual funds or exchange-traded funds (ETFs), to make sure they’re working for you.

If an employer offers a 401(k) match, it is typically beneficial to take advantage of that feature and contribute as much as the employer is willing to match.

Along with receiving free money from an employer, there are also tax benefits of contributing to a 401(k). Contributions to a 401(k) are pre-tax — that lowers taxable income, which means paying less in income taxes on each paycheck.

In addition, 401(k) contributions aren’t taxed when deposited, but they are taxed upon withdrawal. Withdrawing money early, before age 59 ½, also adds a 10% penalty.

Step 3: Open a Retirement Account

If access to an employer-sponsored 401(k) plan isn’t available — or even if it is — investors might want to consider opening an IRA account. For investors who need a little help sticking to a retirement savings plan, they could consider setting up an automatic monthly deposit from a checking or savings account into an IRA.

In 2025, IRAs allow investors to put up to $7,000 a year into their account ($8,000 if they’re 50 or older). In 2026, they can put up to $7,500 into their account for the year ($8,600 if they’re 50 or older). There are two options for opening an IRA — a traditional IRA or a Roth IRA, both of which have different tax advantages.

Traditional IRA

Any contributions made to a traditional IRA can be either fully or partially tax-deductible, and typically, earnings and gains of an IRA aren’t taxed until distribution.

Roth IRA

For Roth IRAs, earnings are not taxable once distributed if they are “qualified”—which means they meet certain requirements for an untaxed distribution.

Once you set up an IRA, you’ll need to choose investment vehicles for your funds. Investors who don’t have a lot of money to work with might consider something like fractional shares that allow individuals to invest in a portion of an ETF or share of stock, for instance.

Late to the Retirement Savings Game?

Starting to save for retirement late is better than not starting at all. In fact, the government allows catch-up contributions for those aged 50 and over. Catch-up contributions of up to $7,500 in 2025 and up to $8,000 in 2026 are allowed on a 401(k), 403(b), or governmental 457(b). In both 2025 and 2026, those aged 60 to 63 can make a catch-up contribution up to $11,250 (instead of $7,500 or $8,000), thanks to SECURE 2.0.

A catch-up contribution is a contribution to a retirement savings account that is made beyond the regular contribution maximum. Catch-up contributions can generally be made on either a pre-tax or after-tax basis. However, under a new law that went into effect on January 1, 2026, individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k), 403(b), or 457(b) catch-up contributions into a Roth account. Because of the way Roth accounts work, these individuals will pay taxes on their catch-up contributions upfront, but can make eligible withdrawals tax-free in retirement.

As retirement gets closer, future retirees can plan their savings around their estimated Social Security payments. While this estimate is not a guarantee, it might give a retiree — or anyone planning when to retire — an idea of how much they might consider saving to supplement these earnings.

Social Security benefits can begin at age 62, which is considered the Social Security retirement age minimum. However, full benefits won’t be earned until full retirement age, which is 66 to 67 years old, depending on your birth year.

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FAQ

Does the average retirement age matter?

The age at which you retire affects your Social Security benefit. For instance, if you retire at age 62, your benefit will be about 30% lower than if you wait until age 67.

What is the full retirement age for Social Security?

The full age of retirement is 67 for anyone born in 1960 or later. Before that, the full retirement age is 66 for those born from 1943 to 1954. And for those born between 1955 to 1959, the age increases gradually to 67.

How long will my retirement savings last?

One strategy you could use to help determine how long your retirement savings might last is the 4% rule. The idea behind the rule is that you withdraw 4% of your retirement savings during your first year of retirement, then adjust the amount each year after that for inflation. By doing this, ideally, your money could last for about 30 years in retirement.

However, your personal circumstances and market fluctuations may affect this number, which means it could vary. It’s best to use the 4% rule only as a general guideline.

Is early retirement realistic for most people?

While early retirement can sound enticing, for most people, it is not realistic because they don’t have enough retirement savings. For example, one-third of respondents to a survey by the Employee Benefit Research Institute said they have only $50,000 saved for retirement. And according to an AARP survey, 33% of adults who save regularly for retirement say they won’t have enough money to be financially secure in their retirement years.

What’s the difference between early and full retirement age?

When it comes to receiving Social Security benefits, early retirement age is 62 and full retirement age is 66 or 67, depending on your birth year. However, retiring early at age 62 and starting these benefits can result in a benefit that’s as much as 30% lower than waiting until the full retirement age of 67.

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