Know what you need to build a secure future.
Financial essentials: saving for retirement
Financial information can be complicated, and most of us don’t learn the basics in school. So let’s explore some financial essentials: saving for retirement, investing and budgeting.
Start saving early
We have a core belief: The right time to start saving for retirement is now.
Whether your retirement is a far-off destination or a soon-to-be milestone, it’s always a good time to build a secure financial foundation. The more time you have, the more it can work to your advantage.
Let’s say two people start their retirement savings at different ages.
One is 25, the other is 35. Each saves $1,000 per year.
Both savers earn a 7% annual return—that is, every year the amount of money in their savings accounts will grow by 7%. This is also called “earning interest.”
After 20 years, they have saved the same amount.
After putting away $1,000 every year for 20 years, both people have saved $20,000. This is called the “principal,” meaning the amount you originally invested.
But the saver who started younger has more by age 65.
Each year both savers earned 7% interest on the money they saved plus the interest they’ve earned. But the saver who started earlier had 10 more years of earning interest. So even though they saved the same amount, the one who started earlier has more money by age 65.
70%
of retirees would advise their younger selves to save earlier.1
51%
of retirees said their expenses in retirement are higher than expected.2
What is a contribution?
It all starts with your first retirement contribution. So let’s begin there.
A contribution is any money you put into a retirement account.
You might contribute regularly or just whenever you can. Odds are, you already save for retirement through paycheck deductions, where a portion of your pay automatically goes to your retirement savings account.
Sometimes, your employer matches your contribution.
If you have a retirement plan from your job, your employer may also “match” your contributions. When matching, the company deposits additional money on top of what you contribute.
Every dollar saved is a win for your future.
That’s money helping you achieve your ultimate, long-term goal: a secure retirement.
Types of retirement accounts
For most, dedicated retirement accounts are the best way to save.
First, there are employer-sponsored plans.
The most common employer-sponsored plans are 401(k) (for-profit companies) and 403(b) (non-profit companies). With these plans, you contribute a set portion of your paycheck. Your employer may contribute on your behalf or match your contribution.
Then there are individual retirement accounts, or IRAs.
Anyone can open an IRA and start saving for retirement. You contribute to them independently and have control over how much you set aside.
Both have limits on what you can contribute.
Contribution limits, set yearly by the IRS, can vary depending on the account type, your age, and more. We’ll cover the limits for 2024 in the Tax Benefits section.
Tax benefits
What sets these accounts apart are their unique tax advantages.
IRAs and employer-sponsored retirement accounts—403(b) and 401(k)—come in two “flavors“: traditional and Roth. Each type handles taxes differently.
Traditional
- Applies to: IRA, 403(b), 401(k)
- Contributions: Made tax-free
- When you save on taxes: Today, as you contribute to your account
- Helpful for: People who expect to have a lower tax rate later in life and want to avoid paying more taxes today
Roth
- Applies to: IRA, 403(b) contributions, 401(k) contributions
- Contributions: Taxed before making it to your account
- When you save on taxes: In retirement—you won’t pay taxes on withdrawals
- Helpful for: People who expect to have a higher tax rate later on in life and want to avoid paying more in income tax down the line
Let’s bring it all together and see how these options compare.
Traditional IRA |
Roth IRA |
Traditional 403(b) or 401(k) |
Roth contributions to 403(b) or 401(k) |
|
| How you get one | You open an account with an IRA provider, like TIAA. | You open an account with an IRA provider, like TIAA. | The account you contribute to is provided by an employer. | The account you contribute to is provided by an employer. |
| Who contributes | You make and manage your contributions. | You make and manage your contributions. | You make and manage contributions. Your employer may contribute or match. | You make and manage these contributions. Your employer may contribute or match. |
| Tax advantages | Reduces your taxable income today. Defers taxes until you withdraw in retirement. | You pay taxes now, but you’ll be able to withdraw that money tax-free in retirement. | Reduces your taxable income today. Defers taxes until you withdraw in retirement. | You pay taxes now, but you’ll be able to withdraw that money tax-free in retirement. |
| For you if | You expect to have a lower tax rate in retirement. | You expect to have a higher tax rate in retirement. | You expect to have a lower tax rate in retirement. | You expect to have a higher tax rate in retirement. |
| Contribution limit (for 2024 calendar year) | If you’re under 50: $7,000 (Limited by your tax filing status and income) |
If you’re under 50: $7,000 (Limited by your tax filing status and income) |
$23,000 + $7,500 for catch-up contributions | $23,000 + $7,500 for catch-up contributions |
Contributions to a 403(b) or 401(k) come out of your paycheck before taxes, reducing your overall taxable income. So if you make $100,000 a year and contribute 5% ($5,000) to your 403(b) or 401(k), you’re only being taxed on an income of $95,000.
If you make $100,000 a year and contribute 5% ($5,000) to your Roth 403(b) or 401(k), you’re still being taxed on $100,000—but you won’t pay any taxes on the money when you take it out in retirement.
Savings check-up
Retirements are built dollar by dollar. The first step is getting started.
These four savings tips can help you start (and keep) saving.
Get enrolled
Making sure you're enrolled is the first step. If your employer offers TIAA retirement benefits you may have been automatically enrolled, or you may need to do so yourself. To enroll follow the steps below. If your employer isn't listed, that means they don't have a TIAA retirement plan—but you can still easily enroll in an IRA to start saving.
MYTH: Enrolling in a plan is complicated and confusing.
FACT: We’ve worked hard to make TIAA enrollment easy. In just a few simple steps, you can look up your employer plan or find the right IRA for you.
Start contributing, big or small.
If funds are tight and you’re not sure what you can afford, experts recommend starting with a contribution of 1% of your income and slowly increasing to 15%. Rome wasn’t built in a day. The same goes for your retirement.
MYTH: I can’t save because I am paying off debt.
FACT: Having debt can limit how you save, but many people with debt still put some money aside for the future. Don’t let it stop you from getting started.
Save
Be sure you’re contributing.
Confirm you’re enrolled and saving. Your workplace may enroll you automatically, but you may need to do it yourself.
Monitor
Know what you’re saving.
Make sure to know the amount of money you contribute and how often.
Manage
Check in as you go.
Meet with a financial consultant each year to talk about your savings. At TIAA, check-ins come at no additional cost.
Get your employer match.
If you have a retirement plan through your employer, see if they match. Typically, they’ll contribute up to a certain percentage of what you contribute. Make it your goal to max it out—it’s free money.
MYTH: Just saving what my employer will match is enough.
FACT: Getting your full employer match is always a good move. However, depending on your workplace plan and retirement needs, you may still need to set aside more to stay on track for retirement.
See how you’re invested.
Your plan may allow you to view how your savings are invested and make adjustments to match your goals or career stage. In the next section, we’ll get into investing in more depth.
MYTH: I need to be cautious with my retirement savings because I can't afford to lose them.
FACT: It's true that at a certain point, you will want to protect your savings. But if you still have many years until retirement, being too conservative may limit the potential growth of your assets.
Investing for retirement builds a strong foundation.
Financial essentials: Investing for retirement
Understanding basic investment strategies can help you save more and isn’t as complicated as it seems. We’ll break down what investing means for retirement, including funds you can invest in, asset types, and how risk impacts your approach.
Growing your money
Investing can help your savings go the distance.
To keep up with rising costs and inflation, your savings will need to grow over time—faster than they will in a savings account alone. Having your money in the market gives it the chance to grow and helps you build a dependable nest egg.
Most retirement plans offer investments in mutual funds.
A mutual fund gathers money from multiple people and invests it together, or “mutually.” These funds typically invest in pursuit of a specific financial goal shared by everyone who has invested in it—for example, retirement. There are many kinds of mutual funds, each with different things to offer.
Target-date funds are the most common type.4
Target-date funds are designed to be diversified and usually invest in variety of assets like stocks, bonds, and sometimes real estate and annuities. They automatically adjust over time, investing more aggressively when you’re younger and more conservatively when you’re closer to your retirement “target-date.”
Why are they so common?
Target-date funds are popular due to their low costs, convenience and risk-balancing nature.
You can also choose funds yourself.
You can always choose how your savings are invested, and there are many mutual funds to explore, each with different goals. Here are just a few types. Our team can help you consider all your options.
Should I choose my own funds?
If you enjoy managing your finances and think you can monitor and adjust your investments, you can consider choosing your own funds. If you want to “set it and forget it,” a target-date fund may be a better option.
Equity funds
Equity funds invest in the shares (or stocks) of companies and generally carry more risk than other investment types.
Environmental, social and governance (ESG) funds
ESG funds drive impact through responsible investing in sustainability, social change and more.
Index funds
Index funds are passive investments that match the returns of a larger market index, like the S&P 500. They are typically very low-cost investments.
A diverse portfolio
Investing in a broad range of assets can help grow and protect your savings.
You’ve probably heard that you want a “diversified portfolio”—that means making a variety of types of investments so you can spread out your risk.
Each type of asset has a different job to do for your money.
You don’t need to know every single item in your portfolio, but knowing the mix of things you are invested in—and what they offer you—can help you understand how your money moves.
Equities offer growth potential.
When you invest in equities, aka stocks, you own shares in a company and can benefit from its potential profits. Equities tend to be riskier than other assets, but offer more growth potential.
Real estate adds opportunity.
Here, you’re investing in commercial properties, like malls or apartment buildings. Since real estate's value typically isn't tied to stock or bond markets, these investments can help diversify your growth opportunities and potentially add new sources of income.
Fixed income provides balance.
For most of us, fixed income means bonds. With a bond, a company (or the government) borrows your money and pays you back in interest over a certain amount of time. Bonds tend to be lower risk and can offer regular income without the ups and downs of equities.
Guaranteed helps protect you.5
Accessed through fixed annuities, this portion of your savings grows every day, no matter what the market does. When you retire, an annuity can be converted into a retirement check that lasts as long as you live.
Money market gives you access.
Money market funds (which are different from money market accounts) are meant to be low-risk investments that are easy to turn into cash—so they’re sometimes called “cash equivalents.” Investing in a money market fund allows you to earn interest while keeping your money available in case you need it.
Understanding risk
Your investments reflect you, your goals and your capacity for risk.
Different investments have different levels of potential risk and return. Typically, as risk rises so does your potential payout. And the reverse is true as well: Safer investments tend to come with lower return expectations.
When choosing an investment you’ll want to understand its risk, as well as your own personal attitudes towards risk.
With investing, there is a balance of risk and reward.
Practical and personal factors shape how much risk each of us can handle. Consider these factors when thinking about your relationship with risk.
Age and time to retirement
These are your practical considerations. When do you want to retire? How much time do you have to save? The answer to these questions will shape how aggressively you invest and how much risk you can take on.
Your personal risk tolerance
It’s not all about numbers—how you feel when taking risks should shape your approach. If you become anxious when your funds fluctuate, you may want to be a bit more conservative in how you invest. If you can sit tight through market changes, you may take a more aggressive approach.
Types of accounts
For most, dedicated retirement accounts are the best way to save.
An aggressive approach takes on the most risk with the goal of achieving growth.6
An aggressive portfolio mix puts more money in riskier assets, like stocks. This kind of portfolio has the potential for quicker gains, but the investor must be comfortable with volatility and the value of their savings fluctuating from day to day.
May be a fit for: Younger savers who have time to recover any potential losses. This might also be an option for people who are trying to catch up on their savings.
Not sure where you stand when it comes to risk? Our questionnaire can help you land on an answer.
A moderate approach seeks to balance risk and return.6
A moderate portfolio mix aims to achieve growth and preserve savings through a mix of bonds and equities.
May be a fit for: Retirement savers midway through their careers who are concerned with protecting what they have saved already while achieving additional growth.
A conservative approach values protection and stability.6
A conservative investment mix achieves predictability by investing heavily in fixed income. In exchange for security and peace of mind, this approach tends to have a lower potential for growth.
May be a fit for: Soon-to-be retirees who want to protect their savings or savers who don’t want the potential stress of a riskier approach.
More for investors
Next steps for the investor in you.
Rebalance portfolio or set up auto-rebalance
If you’re invested with TIAA, you can rebalance your investments or set it up to happen automatically.
Take the risk profile quiz
Want to know your risk profile? Get a sense of your tolerance for risk with this quick and easy quiz.
Get advice
Investing can be overwhelming. Get help the way you want it, via a meeting or our do-it-yourself tool.
Financial freedom begins with a budgeting and savings plan.
Financial essentials: budgeting
We'll help you better understand budgets, so you can stay in control of your money.
Set your goals
To build your budget, let your goals lead the way.
Maybe you want to take a vacation, buy a home or save for college. Whatever your goal, a budget can help make it possible.
Keep it S.M.A.R.T.
Using this framework, you can identify the goals you want to focus on.
S — Specific
Specify your financial objectives clearly.
Example: I want to have a vacation fund in a savings account.
M — Measurable
Make sure your goals have clear, trackable benchmarks.
Example: My savings target is $200.
A — Achievable
Focus on realistic goals you can accomplish.
Example: I’ll create a plan where I save $20 each week for 10 weeks.
R — Relevant
Make sure the goal you set connects back to your retirement plan.
Example: I want to travel more in retirement.
T — Time-bound
Set a timeframe for yourself.
Example: In two months, I’ll have saved $200.
Parts of a budget
Wherever you’re going, a budget can help you get there.
Every budget is unique, but they all have one thing in common: they help us manage our expenses, savings and debt.
Expenses
Essential expenses are things you have to pay, like bills. Discretionary expenses are fun, like hobbies or vacations.
Additional savings
We often save for a few things at once, for example a major expense (a home, education) or an emergency fund.
Retirement savings
A common rule is to budget for at least 70% - 100% of your total preretirement income during retirement.
Debt
If you have debt, you may feel like you can't save. But if you can prioritize effectively, it’s possible to repay and save.
Start your own
Now is the time to start building a budget.
You don’t need to build your budget all at once. Just taking the time to get comfortable with your money is a step in the right direction.
Have a free minute? Spend it on your budget.
10 min: Take stock.
Make a list of everywhere you have or owe money. That includes checking accounts, savings accounts, retirement accounts, and even things like credit cards and auto loans. A bird’s-eye view of your entire financial reality is the first ingredient of a good budget.
Have a pay stub handy?
Grab it and take note of the amount. If you can, grab a few. Knowing your general rate of income is key to building a budget you can stick to.
20 min: Track your spending.
Grab a notebook or create a spreadsheet and start noting your expenses. Create categories for important things like groceries, gas, utilities, entertainment, child care and debt payments. As you do this, you should start to get a sense of where your money goes.
How long should I track for?
Try tracking your expenses for an extended period of time so you can get an accurate picture. A few months should give you an accurate idea of your spending.
30 min: Set some goals.
Write down your goals. Ask yourself: Which are most important to you? If you need help identifying the right goals, use the S.M.A.R.T. framework featured earlier in this experience to guide you.
Paying down debt can be a goal.
For many Americans, paying off a debt—like a student loan—is a top priority. If you’re one of them, you can make zeroing out the balance a goal.
45 min: Start building a budget.
To get started with your budget, make sure you know your income, average spending and financial goals. A budget will reflect you, and there’s no “right” way it should look.
MYTH: I have cash in my pocket, so I don’t need a budget.
FACT: Good budgeting habits can benefit you even if you’re financially secure.
Let’s talk about what you can do today.
Let's get started
There’s never a wrong time to begin a financial planning journey.
Take action
Tell us about you to see your next steps.
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1 Source: EBRI,
2 Source: ERBI,
3 As of September, 2024.
4 As with all mutual funds, the principal value of a target date fund isn’t guaranteed at any time, including at the target date, and will fluctuate with market changes. The target date approximates when investors may plan to start making withdrawals. However, you are not required to withdraw the funds at that target date. After the target date has been reached, some of your money may be merged into a fund with a more stable asset allocation. Target date funds share the risks associated with the types of securities held by each of the underlying funds in which they invest. In addition to the fees and expenses associated with the target date funds, there is exposure to the fees and expenses associated with the underlying mutual funds.
5 Any guarantees are backed by the claims-paying ability of the issuing company. Retirement check refers to the annuity income received in retirement. This material is for informational or educational purposes only and is not fiduciary investment advice, or a securities, investment strategy, or insurance product recommendation. This material does not consider an individual’s own objectives or circumstances which should be the basis of any investment decision.
6 The portfolios may not take into account your particular goals or preferences. Please note that no strategy can eliminate or anticipate all market risks, and losses can occur.