How to start saving for retirement

Your retirement journey isn't only about saving money. Learning how to start saving for retirement is about creating future opportunities for yourself. Through strategic retirement planning, you can build a life where you pursue your passions, support your loved ones and make a lasting difference in your community.

Whether you're moving into the next stage of your career or you're ready to get serious about your financial future, now is a great time to start saving. Here's how to get going on building your retirement foundation.

Developing a retirement plan starts with identifying your cash flow spending needs now and in the future. This includes estimating retirement income and expenses. Consider creating a budget to track your income and expenses and look for savings opportunities. There are plenty of popular budgeting methods. Finding the right one for you is the first step toward making the most of your money.

Keep in mind that your eventual retirement budget may differ from your current budget. Some expenses (like housing or commuting costs) may decrease while others (like health care) could increase.

The $1,000-a-month rule is a simple way to estimate your future needs. For every $1,000 in monthly retirement income you want, aim to save $240,000. For example, if you expect to need $3,000 a month in retirement income, plan to save up about $720,000. It's not a perfect formula, and everyone's needs differ, but it can give you a starting point. (Don't forget that investment compounding supercharges your savings, so you don't necessarily need to save that amount dollar for dollar.)

Explore different tax-advantaged retirement savings plans and their investment options to improve your long-term growth potential efficiency. These accounts offer different benefits—some reduce your taxes today while others provide tax-free income in retirement. Understanding the various types of retirement savings accounts can help you choose the best savings strategy for your needs.

Many workplaces offer retirement savings plans—like a 401(k) or a 403(b)—which allow for automatic payroll deductions to help you consistently invest in your future. Taking advantage of employer match opportunities is another way to boost your savings. There are tax benefits to contributions based on the idea that you won't access the money until age 59½ (with some exceptions).

These employer-sponsored plans may be traditional or Roth. The two varieties have some notable differences to consider:

With a traditional 401(k) or 403(b):

• Contributions are made before you pay taxes on your earnings, which reduces your taxable income now.
• Your money can grow over the years without you owing annual taxes on the earnings.
• You pay income tax on the money in the account only when you withdraw it. Ideally, you'll wait to take money out until at least age 59½; withdrawing before then may mean paying a penalty.

With a Roth 401(k) or 403(b):

• Contributions are made after you pay income taxes on your earnings, so you won't get an immediate tax break.
• The account's growth is tax-free over the years, as long as you don't withdraw these earnings before age 59½. (If you do, you may have to pay a penalty.) Withdrawals are prorated between contributions and earnings. Earnings are subject to taxes and a penalty.*
• Qualified withdrawals of any money in the account after reaching age 59½ aren't taxed at all.*

An IRA is an option for saving for retirement on your own. Whether you have a workplace retirement plan or not, you can invest your earned income in an IRA. They offer tax advantages and often have more investment options and flexibility than workplace plans.

As with 401(k)s, IRAs come in traditional and Roth varieties, and they have the same differences. There's one additional provision, however: Roth IRAs have income limits. If you make too much money, you may have a cap on how much you can contribute, or you may not be able to contribute at all.

Health savings accounts are designed to give you tax advantages for your medical expenses if you're enrolled in a high-deductible health plan, but they also can be a valuable retirement tool. After reaching age 65, you can withdraw HSA funds for any purpose. You'll still have to pay taxes on anything that isn't a medical expense, but you won't have to pay a penalty, which means they can essentially work like a traditional IRA.

There are many ways to save for retirement, and many people use more than one to maximize various tax benefits and investment options. But the most important thing to realize is that being consistent—even if the effort is small—will add up over time.

Aim to develop habits that make saving easy and fit within your budget. Whether you're just getting started or looking to elevate your retirement savings strategy, these tips can help:

• Automate your contributions. Setting up automatic contributions to your retirement accounts ensures consistency and removes the temptation to spend it.
• Start small and build over time. Even if you can only save a little now, you can increase your contribution rate over time. Work your way up to saving at least 15% of your income for retirement and then pitch in extra when you can.
• Maximize employer-matching contributions. If your employer offers a 401(k) match, it's smart for you to contribute enough to receive the full match amount. It's essentially "free money" for your retirement savings.
• Boost your savings with side income. Extra earnings from freelance work, gig jobs or side businesses may mean you can put a bit more toward retirement.
• Consider additional retirement accounts. If you have room in your budget to contribute beyond your employer-sponsored plan, exploring options like an IRA can give you more flexibility and tax advantages.

Everyone's financial situation is different, and the right approach depends on your goals, income level and long-term plans. But saving consistently will help you build a stronger foundation for your future goals.

When developing your retirement planning strategy, consider risk tolerance and how that aligns with your asset allocation. A diversified portfolio is key to managing risk. Many people start with employer-sponsored accounts, which usually offer target-date funds that automatically adjust your asset mix over time. Even with this primarily hands-off approach, it's important to review your account and risk tolerance periodically.

Your investment mix—the balance between stocks, bonds and other assets—should align with your age and risk levels. For younger investors, a higher risk tolerance may offer more aggressive growth early on while those within years of retirement may prefer less risky assets that preserve their savings.

Saving for retirement is a long-term commitment, and you can expect challenges to pop up along the way. Expecting and preparing for potential roadblocks can help you avoid setbacks. Common mistakes include:

• Waiting too long to start saving. The earlier you start saving, the more time your money has to grow. Even small contributions made consistently can add up over time.
• Dipping into your retirement savings. Withdrawing funds early can lead to penalties and lost growth. Instead, consider building an emergency fund to cover unexpected expenses.
• Letting daily spending derail long-term goals. Overspending can make it difficult to prioritize savings. Budgeting and setting clear financial goals can help keep spending in check and ensure retirement savings are a priority.
• Missing out on employer matching. If your workplace offers matching contributions, contributing enough to receive the full match can be a valuable way to maximize your savings potential.

Getting started with retirement savings is one of the most important steps you can take toward long-term financial stability. No matter where you are on your journey, taking action today can make a difference.

A Thrivent financial advisor can help ensure your savings strategy matches your personal goals and investment comfort level. Working together, you can create a financial plan that adapts as your life circumstances change but always has your future in mind.