Woman smiling

Retirement Planning: The Basics

Review these five steps to get started on your retirement plan.

You might have an idealistic vision of retirement — an idyllic time in the future when you can live your best life, with extra free time on your hands. But how are you pursuing that vision? Social Security might be around when you retire, but the benefit that you get from Uncle Sam might not provide enough income for your retirement years.

BECU Investment Services

Check the background of investment professionals associated with this site on FINRA's BrokerCheck.

But there's good news: thanks to an abundance of new tools and resources, retirement planning is easier than it used to be. Here are some basic steps to get you started.

  1. Determine your retirement income needs
  2. How much should you save
  3. Calculate retirement savings gap
  4. Retirement calculators
  5. Save, save save

Determine Your Retirement Income Needs

It's common to discuss desired annual retirement income as a percentage of your current income. Depending on who you're consulting, that percentage could be anywhere from 60% to 90% or even more. The appeal of this approach lies in its simplicity. The problem, however, is that it doesn't account for your specific situation. To determine your specific needs, estimate your annual retirement expenses.

Use your current expenses as a starting point but note that your expenses may change dramatically by the time you retire. If you're nearing retirement, the gap between your current expenses and your retirement expenses may be small. If retirement is many years away, the gap may be significant, and projecting your future expenses may be more difficult.

Remember to take inflation into account. The average annual rate of inflation over the past 20 years has been approximately 2%.1 And keep in mind that your annual expenses may fluctuate throughout retirement. For instance, if you own a home and are paying a mortgage, your expenses will drop if the mortgage is paid off by the time you retire. Other expenses, such as health-related expenses, may increase in your later retirement years. A realistic estimate of your expenses will tell you about how much yearly income you'll need to live comfortably.

How Much Should You Save?

A general rule of thumb for how much you should save is 10 times your annual salary by age 67. Refer to these benchmarks to help keep you on track:

  • Age 30: Have the equivalent of one times your salary saved
  • Age 35: Have two times your salary saved
  • Age 40: Have three times your salary saved
  • Age 45: Have four times your salary saved
  • Age 50: Have six times your salary saved
  • Age 55: Have seven times your salary saved
  • Age 60: Have eight times your salary saved
  • Age 67: Have 10 times your salary saved

Calculate Retirement Savings Gap

By the time you retire, you'll need a nest egg that will provide you with enough income to fill the gap left by your other income sources. But exactly how much is enough? The following questions may help you find the answer:

  • At what age do you plan to retire? The younger you retire, the longer your retirement will be, and the more money you'll need to carry you through it.
  • What is your life expectancy? The longer you live, the more years of retirement you'll have to fund.
  • What rate of growth do you expect from your retirement savings? Be conservative when projecting rates of return.

Retirement Calculators

Build Your Retirement Fund: Save, Save, Save

When you know roughly how much money you'll need, your next goal is to save that amount. Assume a conservative rate of return (e.g., 5% to 6%), and then determine approximately how much you'll need to save every year between now and your retirement to reach your goal.

The next step is to put your savings plan into action. It's never too early to get started (ideally, begin saving in your 20s). To the extent possible, you may want to arrange to have certain amounts taken directly from your paycheck and automatically invested in accounts of your choice (e.g., 401(k) plans, payroll deduction savings). This arrangement reduces the risk of impulsive or unwise spending that will threaten your savings plan — out of sight, out of mind. If possible, save more than you think you'll need to provide a cushion.

Get Trusted Advice

Financial advisors* at BECU Investment Services have years of experience helping members with retirement planning. Call 206-439-5720 to get started.

1Calculated form Consumer Price Index (CPI-U) data published by the Bureau of Labor Statistics, January 2020.

Financial Advisors are registered with, and Securities and Advisory Services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. Insurance Products offered through LPL Financial or its licensed affiliates. BECU and BECU Investment Services are not registered broker/dealers and are not affiliated with LPL Financial. Investments are:

Not NCUA/NCUSIF Insured Not Credit Union Guaranteed Not Obligations of BECU May Lose Value

BECU Investment Services Corporate Office located at BECU, 12770 Gateway Dr., Tukwila, WA 98168. BECU, BECU Investment Services and LPL Financial are separate entities.

The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of all 50 states.