10 Expert-Approved Retirement Planning Tips for When You’re Starting To Save

If you’re just starting to save for retirement, congratulations! You’ve undertaken the most important step. Since a large number of Americans have little to nothing saved for retirement, you’re already ahead of the game. But if you want to succeed in the long run, you’re going to need a road map to ensure that you’re saving enough, investing the right way and holding yourself accountable.

To help guide you on your path, here are some of the most important retirement planning tips when you’re just starting to save, according to well-known experts in the field. 

No less of an authority than the U.S. Department of Labor urges savers to begin as early as possible. According to the DOL, if you save $6,000 per year and earn a 7% return on your investments, you’ll have $150,774 after 15 years. But if you can keep up those savings rates for 25 years instead, you’ll end up with $829,421 instead. In other words, by saving for a relatively short 10 additional years, you can build a nest egg more than five times as large.

Most financial experts agree that planning out your retirement savings — even if you don’t exactly know what retirement will look like for you — is an important early step in the process. Ray Zick, CFP®, AIF®, CPFA®, recommends that young adults should go ahead and “put a goal out there, take some meaningful steps towards it, even if you have to change the goal.” Celeste Byers, CFP®, agrees, “When you plan ahead, you’re removing future stressors down the road. It gives you the empowerment to do something today to help alleviate stress for you down the road, because it’s not going to be any less stressful if you don’t have enough money for retirement.” Making a retirement plan can not only improve your chances for financial success but also give you some peace of mind along the way.

The U.S. Department of Labor contributes another retirement planning gem that is seconded by many analysts across the country. Contributing to your employer’s retirement plan is one of the single best ways to build a solid nest egg for yourself. For starters, you’ll receive tax advantages from contributing to a retirement plan, from the deduction you’ll likely receive on your contributions to the deferral of taxes on your investment gains until you withdraw them. Additionally, you might benefit from matching contributions from your employer.

The experts at Fidelity investments suggest that you save at least 15% of your income, which is more than the 10% suggested by many financial advisors. According to Fidelity, most Americans will need their savings to generate about 45% of their retirement income. Based on those figures, the investment firm calculated that saving 15% of your income from ages 25 to 67 should suffice. The younger you can start saving 15% of your salary or wages, the less of a burden you will feel as your income grows throughout your professional career.

No less than the “Oracle of Omaha” himself, Berkshire Hathaway CEO Warren Buffett, has long been a proponent of index funds for most investors. He has even instructed the executor of his estate to put 90% of his assets into index funds after he passes. And he has essentially the same advice for those saving for retirement. According to Buffett, “The trick is not to pick the right company, the trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low cost way.”

Famed billionaire Mark Cuban is known for his no-nonsense approach to wealth and investing. One of his basic principles for investors is that you have to take calculated risks if you want to get ahead. In a 2017 interview with Money magazine, Cuban said that while it’s possible to save $1 million, it takes dedication and risk-taking. In other words, according to Cuban, you can’t be afraid to take risks if you’re looking to build long-term financial success.

Although Cuban urges investors to take risks to meet their goals, there’s a limit to how far out on the spectrum you should go. For Cuban, this means limiting truly speculative, risky investments to 10% of your portfolio. As he told Vanity Fair, “If you’re a true adventurer and you really want to throw the Hail Mary, you might take 10% and put it in bitcoin or Ethereum, but if you do that, you’ve got to pretend you’ve already lost your money.” So, if you’re looking to juice your retirement returns, do so in a prudent manner, and limit your true speculations to a small fraction of your portfolio.

If you’re looking for the type of “prudent risk” that Mark Cuban suggests you should be taking, stocks should be near the top of your list. Larry Fink, CEO of investment firm Blackrock, said that most retirement investors should have the bulk of their portfolios in stocks, echoing the advice of other famed investors such as Warren Buffett. According to Fink, even investors as old as 50 should have the bulk of their money in stocks in order to achieve the long-term returns they need.

Even the most disciplined investor may find it hard to consistently add money to investment accounts over decades. That’s why it’s important to automate your savings. By “paying yourself first,” rather than only investing money you have leftover at the end of every month, nothing stands in the way of your retirement plan contributions. Debra Greenberg, director of Retirement and Personal Wealth Solutions at Bank of America, said that making your retirement contributions automatic each month gives you the opportunity to grow your nest egg without having to think about it.

Fans of ’80s movies and the stock market might remember Gordon Gekko, Michael Douglas’s character in the movie “Wall Street,” saying “Don’t get emotional about stock. Clouds the judgment.” While Gekko was a fictitious character, the truth of the statement is seconded by some of the most notable minds in the investment world. Charlie Munger, vice chairman of Warren Buffett’s Berkshire Hathaway, once said, “A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” If you’re just starting to save for retirement, you’ll no doubt encounter plenty of times when you’ll feel emotional about your investments. Just remember to stick to your long-term financial plan and not get carried away by emotion.

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