Retirement Strategies

Retirement can mean a lot of things to different people. When you're younger, it's something that can seem so far away — maybe a time to travel the world. Yet, as you get older and retirement approaches, your golden years might quickly feel like much more of a reality.

What's important to realize, however, is it's never too early (or too late) to start thinking about planning and saving for retirement. There are a number of retirement strategies that could help you start to prepare for the future.

1. Create a Yearly Budget

When planning for retirement, one way to take a look at your financial situation is to create a budget. While the simplest way to look at a budget is as something that helps track your income and expenses, it can also help you accomplish a lot more. Regardless of your age, your budget can help you create a plan for the future and develop financial goals — including saving for retirement.

If you're years from retirement, you might use your budget to track your current income and expenses. This could also be an opportunity to identify where you can save in order to pay down debts or put more money into your retirement accounts.

For those with retirement just around the corner, a budget can help you figure out the costs of your current lifestyle if you intend to sustain it. Creating a retirement budget can help you monitor your costs and highlight expenses you might otherwise overlook, including health care costs.

2. Maximize Your Workplace Plan

In 2025, the contribution limit for a 401(k) plan is $23,500 for most employees.¹ If you're over the age of 50 and participate in a 401(k), then you're allowed to contribute an additional $7,500; this is called a catch-up contribution.

Many employers also offer matching programs. This means your employer will match some or all of your contributions. For example, an employer might match 100% of your contributions up to 3% of your salary. For every dollar you contribute to your 401(k), your employer will add in a dollar. For instance, if you make $65,000, this will cap at 3% or $1,950.

So one retirement strategy you might consider is to maximize your 401(k) contribution to take advantage of employer matching. This way, even if you can't quite afford the full amount allowed by the IRS, you're still getting that match from your employer to help boost your retirement savings.

3. Open an IRA

An individual retirement account (IRA) is another type of retirement savings plan. An IRA is not sponsored by your employers, so you can open one in lieu of, or in addition to, a 401(k) or other plan.

The IRS also sets contribution limits for IRAs. In 2025, contributions to both traditional and Roth IRAs are limited to $7,000. Once again, if you're over 50, you can make a catch-up contribution of up to $1,000.

4. Consider an Annuity

Another retirement strategy to consider is using an annuity for retirement income. An annuity is essentially a contract between you and an insurance company. In exchange for money that you contribute, either through a lump sum or a series of payments, interest will accrue tax-deferred and the insurance company will pay you regular disbursements.

There are two basic types of annuities: immediate and deferred. With an immediate annuity, you pay a lump sum to the insurance company and typically begin receiving payments from the company immediately. With deferred annuities, the money you contribute to the annuity has potential to grow. Then, during the payout period — which is delayed from when the annuity is first opened — you receive payments from the insurance company.

5. Have a Plan for Withdrawing Money

You might want to start considering your withdrawal strategy at least a few years before you retire. This is one way having a budget and knowing your long-term retirement funding strategies can help. Determining how much you will need to withdraw each year during retirement might help you keep up with your expenses.

When it comes to your retirement accounts, the IRS doesn't allow you to keep money in there untouched forever. The deadline for taking required minimum distributions (RMDs) is December 31 each year.² You may delay taking your first RMD (and only your first) until April 1 of the year after you turn 72. If you choose to delay your first RMD, you'll have to take your first and second distribution in the same year.

For your employer-sponsored retirement plans, if you are still working and don't own more than 5% of the business you're employed by, you may be able to delay taking an RMD until April 1 of the year after you retire. Keep in mind, this rule does not apply to IRAs or plans with companies you no longer are employed with.

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6. Maximize Your Social Security Benefits

You may want to consider having a strategy for any Social Security benefits you'll receive. The age at which you start claiming your Social Security benefits can have a long-term impact your monthly benefits.

For example, if you chose to start claiming your benefits before you've hit full retirement age — which is 66 for those born between 1943 and 1954 — you won't receive your full monthly benefit amount.³ However, for every month past your full retirement age that you delay claiming your benefits up to age 70, you'll receive a larger benefit.

So, while many retirees don't fully rely on Social Security benefits in retirement, having a strategy to maximize benefits might help boost your overall retirement income.

As you start developing your withdrawal plan, keep these rules and regulations in mind, along with your expected cost of living plans, so you can develop a strategy for your long-term needs.

7. Understand Retirement Plan Withdrawal Fees

There are various fees and potential penalties that may incur depending on when and from where you withdraw your retirement funds. These costs can add up over time, so paying attention to the rules and regulations around them can help inform your strategy.

For example, the IRS has set age 59 1/2 as the starting date for when you can begin withdrawing funds from IRAs and 401(k)s. If you withdraw funds before this age, you'll have to pay a 10% tax penalty on those funds, as well as regular income tax on the distribution. Many people try to avoid early withdrawal as much as possible to avoid the 10% tax penalty.

Annuities have surrender fees as well. You may be charged a surrender fee or charge if you withdraw from your annuity early or if you cancel the contract. You can find information about surrender fees in your annuity contract.

As you're picking your retirement investments, like those in your 401(k), for example, you may also want to pay attention to the associated fees.

8. Know the Factors That Could Impact Your Retirement Planning

As you develop your overall retirement plan, there are other factors to consider that could impact your strategy, including longevity, inflation and market volatility. Here's a quick overview of each and how they might impact your retirement strategies in the long term.

Longevity

Today, retirement is lasting longer than ever before. The Social Security Administration found the average person can expect their retirement to last approximately two decades if they retire at 65.⁴

And for a third of people, who are living into their 90s, retirement can last even longer. With this in mind, you might want to plan for the long haul to help make sure your retirement money will last, especially if you've lived a healthy lifestyle over the years.

Inflation

Inflation is something else retirees might want to pay attention to in their golden years. The cost of living doesn't always match up with inflation, which can put a dent in the spending power of your retirement funds.

With many retirements lasting more than 20 years, even small increases in inflation each year can have an impact on spending power.

Market Volatility

When it comes to the market, there are no guarantees. You might want to prepare for any outcome, including periods of growth as well as market downturns.

In this case, your age can matter. For instance, if you're in your 30s, a bear market might impact your future retirement income differently from those who are a week away from retirement. As part of your planning, consider your strategies for times of market uncertainty.

For so many, retirement is the culmination of a lifetime of effort spent working and saving for the future. Planning effectively now might help you enjoy your golden years in the way you want when the time comes.

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Sources

1. 401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000. https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000.
2. Retirement Plan and IRA Required Minimum Distributions FAQs. https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs.
3. If you were born between 1943 and 1954 your full retirement age is 66. https://www.ssa.gov/benefits/retirement/planner/1943-delay.html.
4. Retirement & Survivors Benefits: Life Expectancy Calculator. https://www.ssa.gov/OACT/population/longevity.html.