How to know if you're saving enough for retirement

Sure, it’s important to save for retirement. But other major priorities, such as your kids’ tuition, or a big wedding to plan, could throw you off course.

So now that you’ve been at it for a while and have grappled with all kinds of expenses, you may be thinking, “Will I have enough to live the retirement I’ve planned?” If you’re willing to make some changes and a few sacrifices here and there, you’ll find that retirement doesn’t need to be an either/or proposition.

Let's take a look at some typical challenges to retirement-savings success—and how you can address them while keeping your retirement savings humming along.

Roadblocks happen. Understand the common challenges to maintaining your retirement savings plan by taking a look at them one by one and deciding if they should take precedence over your security in retirement.

It may almost sound too simple to list. But when your household lacks a sound spending plan, your savings are bound to suffer. While there are many budgeting approaches to consider, the best option for you is the one you will stick to.

No household should be without an emergency savings account—typically three to six months of take-home pay. It provides you with a buffer when you need it, while also helping you to avoid either raiding a retirement account or racking up yet more credit-card debt. But it shouldn’t tip the scales against retirement savings.

Debt is one of the most common retirement-savings challenges—particularly non-secured debt, such as credit card balances and student loans.

You may be thinking “I can’t really save for retirement until I’m debt-free.” But that kind of first-this-then-that approach to retirement planning could waste valuable years of gaining compound interest on your retirement account balances. What’s more, if you pay off your debts while also saving, your savings’ compounded growth may exceed your debt’s compounded interest. And that’s just what you want.

Perhaps you’ve had some totally unexpected expenses to manage. Consider these possibilities:

• Your adult child returned home after losing their job to work on “next steps.” (If so, you’re in good company. According to a Thrivent Boomerang Kids Survey,¹ 40% of parents report having an adult child who is currently living with them. And 26% had an adult child who was temporarily living with them but then moved back out. Read more about how to manage your finances when an adult child has needed to move back in.

• Your parents have moved in with you and your family due to budget concerns. You’re pitching in for their medical and everyday expenses.

• An unexpected surgery has suddenly saddled you with a five-digit hospital bill for out-of-network charges.

If you don’t have sufficient emergency funds, such expenses may have you considering a retirement-fund withdrawal. In many cases, 401(k) investors opt for tapping their 401(k) versus IRA. But withdrawing funds early from a qualified retirement plan should be an absolute last resort. Additionally, funds may not be available from your employer plan for medical emergencies or have specific loan provisions. If the provisions of a 401(k) plan do let you borrow the money and pay yourself back over time, it will be with interest. This may seem foolproof. But think about the bigger picture: Can the interest you pay replace the growth you could have had with that cash still in your account? And do you have time to make up the difference?

Perhaps you’re staring down the dilemma of saving for and managing rising your children's college costs. In Academic Year 2022-2023, American parents contributed $28,026 on average or 50% of the total annual cost. Though more than half of American families have created an education savings plan, they may still be stressed.

It’s possible to contribute to your kids’ futures while not shortchanging your future financial security.

Savings isn’t just about rainy days and retirement. You’ll want money already set aside for when your children get married, you want to buy a new car or a lake house, or take a big vacation for your 25th wedding anniversary. Budgeting can help you provide for your family’s most joyful moments while keeping to your savings plan.

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The ultimate guide to retirement savings by age

Each decade of your working life serves as a guide to navigating the nuances of creating a strong retirement savings plan. We explore retirement planning in your 30s, 40s, 50s and 60s.

See the guide

You’d be surprised at how much you can still accomplish financially when you have a plan to follow. Here's how to work through those roadblocks.

Without a budget, you’ll have no way of knowing if you’re balancing spending, saving and debt management. Start by tracking your expenses for a month, without making any changes in your spending habits. Then, see where you may be overspending and how you can redirect that cash towards your retirement goals. Keep experimenting month to month. And remember, you’re likely going to earn more in your career, which will give you even greater savings flexibility.

• Learn more: Why budgeting is important: 5 key benefits

Sure, you may not always understand all the nitty-gritty details of how IRAs or 401(k)s work. But you already know about one of the most powerful retirement-savings tools of all: Compound interest. Right about now, you may be seeing how well compounding has worked on all those retirement-fund contributions you made 15 or 20 years ago.

How can you take full advantage of this secret weapon? Contribute regularly to your plan—no matter how little you’re able to deposit—and leave it alone. You could be amazed at the results if you give yourself time.

You hear this one all the time, and there are at least four great reasons for contributing as much as you are allowed by the IRS:

• You’ll reduce your adjusted gross income (AGI), giving you more money for your shorter-term financial goals, like household savings or making a large purchase.

• The more you contribute as early as possible, the greater the opportunity for compounded growth. It can be a great hedge against inflation, one of the most significant risks to your retirement income plan.

• If you’re 50 or older, you can make larger “catch-up contributions” to save on taxes and increase growth potential. If you have a 401(k) or traditional IRA, the money may be deductible from your taxable gross income for the current year as it grows tax-deferred in your account.

• You don’t want to leave matching funds from your employer on the table—it’s truly “free money.” Even if you can’t max out every year, matching funds help in compensating for those times.

Having debt is no reason to put off retirement savings, especially if your debt is relatively low-cost. However, in some cases, student or consumer debt may stand in the way of savings that you need for your life goals and retirement vision. Luckily, you have options.

Pay off your debt, starting with the highest interest rate loan first and moving down the list. Automating your payments can make the process easier. You’ll be surprised how much it reduces the pain when you don’t have to hit “send” manually.

Consider if refinancing a student loan or consumer debt could help you lower your interest rate. You can either keep the same monthly payment and pay off the loan faster or lower the monthly payment (which extends the loan’s duration and total cost). You may want to convert a variable interest rate to a fixed interest rate.

• Learn more: Overwhelmed by debt? Here are 7 actions to take today

When you set up a small automatic savings deduction, chances are you won’t even notice the pinch. You may even want to make deposits to a separate bank that doesn’t provide immediate access to your cash, as a deterrent against impulse withdrawals.

• Learn more: Emergency funds: How much you should save and where to keep it

Raises and less-expected windfalls such as an inheritance or a tax refund are a great opportunity to balance out your savings. Split the net proceeds among your highest-interest debt, retirement accounts, emergency savings accounts and maybe 10% or so towards a want. That way, you’re covering all of your priorities, while also not depriving yourself of having some fun right now.

Will you pay for some or all of your child’s college education? If the answer is “some,” what other sources can fill the gap? Grandparents’ contributions, children’s savings and scholarship programs are just a few options you can build into your plan. Start talking about college with your kids early on. This sets a firm foundation for more specific discussions in high school about their goals and your expectations.

• Learn more: Smart strategies for saving for college

No matter how well you plan, you will more than likely face challenges to your retirement goals. When this happens, you can incorporate some of the strategies and tactics we’ve discussed here to help stay on track with your retirement goals.

Use our retirement income planning calculator to see how you’re progressing with your goals. Then sit down with a financial advisor to review your retirement income plan. Planning for retirement is a complicated topic, and objective guidance could make a real difference.