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3 Things to Know About Saving for Retirement—and Why It’s Never Too Early to Start

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A comfortable retirement is a big priority for Americans and one that’s becoming even more important with life expectancy on the rise. According to the U.S. Census Bureau, the average retirement lasts for 18 years, and many retirees have retirements that last for 20 years or more.

Careful planning is a core part of preparing for retirement, and it can help to address many of the concerns associated with long-term security. Below, we highlight some of the key things to know when it comes to saving for retirement and explain why starting as early as possible is one of the best ways to build a nest egg.

A Diversified Portfolio Can Help You Withstand Market Risks

The market swings of the past few years have led to significant volatility, causing many investors to think about the best ways to safeguard a portion of their assets. Portfolio diversification can play a big role in this respect, and it can help you create a balanced portfolio designed to manage risk and position you for long-term growth.

So, what exactly is diversification? Simply put, diversification is an investment strategy that minimizes risk by focusing on different types of assets. For example, a well-diversified portfolio may include a variety of financial instruments such as stocks, bonds, and alternative investments. The more diversified the asset mix, the greater the chances that your portfolio will be able to withstand market turbulence, and that you’ll be able to achieve your investment goals.

Regular Contributions Have a Significant Impact on Overall Savings

Investing early and often is another key factor when it comes to retirement planning. While it may be tempting to put off saving, research shows that beginning to invest in your 20s gives you the best retirement prospects later in life.

Taking advantage of employer-sponsored retirement plans, such as 401(k)s and 403(b)s is a great starting point, and an individual retirement account (IRA) can help you maximize your savings. 

Whenever possible, we also recommend making maximum contributions to each of your retirement accounts. For a 401(k), this translates to $20,500 for 2022. If you’re not able to contribute the maximum amount, setting aside a percentage of your salary that feels comfortable is another alternative. As long as you’re making regular contributions, your savings will continue to grow as you near retirement.

Annuities Can Provide a Reliable Source of Retirement Income

Having multiple sources of income is also important when preparing for retirement. Social Security benefits, 401(k) plans, and traditional defined benefit plans are among the most common income sources, and they can each contribute to meeting the costs of your retirement.

Annuities are another source of income, and they can help you build a smarter income plan for retirement. The two main types of annuities are fixed annuities and variable annuities. Here are some of the key differences between them:

  • Fixed annuities: Known for their stability and guaranteed income, fixed annuities can be a helpful way to safeguard your savings and receive regular monthly payments throughout your retirement. They can also help you diversify your retirement savings without added risk.
  • Variable annuities: Like fixed annuities, variable annuities offer a reliable lifetime income stream, but they also help hedge against inflation and rising costs in retirement. Providing the ability to invest across asset classes, variable annuities offer investment options at low costs with the potential for higher returns. 

Whether you're just starting to invest for retirement, or looking for ways to optimize your savings, a thoughtful approach can help you achieve your investment goals. For added security, annuity products offered by a company like TIAA can provide you with income and help you prepare for a confident financial future.

Learn How to Talk to Your Financial Advisor About Planning for Retirement

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  1. The Motley Fool. “Here's the Average Length of Retirement. Will Your Money Last That Long?, https://www.fool.com/retirement/2018/02/24/heres-the-average-length-of-retirement-will-your-m.aspx.” Accessed March 14, 2022.