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One day you鈥檒l likely want to close the book on your career and start a new chapter of your life, but do you know how to plan for retirement?

The majority of working Americans say they are behind on their retirement savings goals, . If you don鈥檛 know how to plan for retirement, you could find yourself in the same position.

A financially secure retirement might feel like a lofty goal, but it鈥檚 totally within reach if you educate yourself on a few fundamental retirement savings concepts.

It鈥檚 time to take the first step toward confident retirement planning. Ryan Inman, a financial planner, and Andy Wang, managing partner at an investment management firm, are here to help. Below, they share the concepts that you need to master if you鈥檙e wondering how to learn about retirement planning.

But first: Test your knowledge with our retirement quiz. When you鈥檙e done, the experts鈥� guidance on how to plan for retirement can help you fill in any gaps to ace the quiz鈥攁nd your retirement.

Retirement quiz: What do you know about retirement?

Harnessing the power of compound interest

Compound interest has been called the eighth wonder of the world. Its surprising ability to grow wealth can feel like a miracle, but it鈥檚 actually just good old-fashioned math.

鈥淐ompounding is the key to most great investors鈥� success,鈥� Wang says. That鈥檚 because as you earn interest on your money, your money grows. He points out that over time, you earn interest not just on your initial deposit but also on the interest that accumulates.

This same principle applies to stock investing where constant reinvestment of capital gains produces a compounding effect so you earn gains on your gains, he adds.

Because the interest you earn is based on an ever-growing amount of money, your rate of wealth accumulation accelerates as the years go by.

How compound interest works: An example

An example can help when you鈥檙e learning about retirement planning, especially when math is involved.

Let鈥檚 say you put $10,000 into a diversified 60/40 mix of equities and fixed income that has an average annual return of 6% within your IRA. This is how compound interest would fuel your money鈥檚 growth over the years:

• Year 1: You would make 6% on the $10,000, which is $600.
• Year 2: You would make 6% on your money again, but this time it would be on a balance of $10,600. As a result, you鈥檇 add $636 to your account.
• Year 3: You would make 6% on $11,236, or $674.16.
• Year 10: You would have $17,908.48 in your account thanks to the power of compounding.

You can play with the numbers in a to see the phenomenon yourself.

Compound interest is fundamental to how you plan for retirement because it yields bigger results over longer periods of time鈥攁nd saving for retirement is all about the long term.

鈥淭he longer your money is invested, the more compound interest grows,鈥� Inman says.

As a result, he says one of the biggest retirement savings mistakes you can make is to put off saving for retirement鈥攂ecause it prevents you from harnessing the impressive power of compound interest.

Understanding your tax-advantaged retirement options

When saving for retirement, Inman and Wang recommend that you make use of any available tax-advantaged accounts (in other words, accounts that save you money on taxes).

Some savers have access to a 401(k) or other employer-sponsored retirement accounts through their jobs. Every American who has earned income can contribute to an individual retirement account, or IRA.

Let鈥檚 take a closer look at each of these tax-advantaged retirement options to help you understand how to plan for retirement.

The 401(k) retirement plan

The most common employer-sponsored plan is the 401(k), which allows employees to put a certain amount of each paycheck toward retirement. 鈥淭he 401(k) is one of the best options you have to save for retirement,鈥� Wang says.

One of the reasons it鈥檚 such a great option, he says, is that contributing to a 401(k) can ease your tax bill each year.

鈥淭he money you contribute doesn’t count toward your gross income for the year, and that lowers your taxable income as a result,鈥� he explains. 鈥淔or example, let鈥檚 say you make $25,000 per year and you contribute $2,000 into your 401(k). As far as the IRS is concerned, you made $23,000 and you鈥檒l be taxed on the $23,000.鈥�

In addition to lowering your tax bill, your 401(k) is growing your retirement savings thanks to the power of compound interest.

401(k) match

Sometimes, employers will also offer what鈥檚 known as a 401(k) match, which means they鈥檒l match whatever you contribute to your retirement savings up to a certain amount.

For example, Inman says that if your employer offers a 3% match and you鈥檙e contributing at least 3% of your salary to your 401(k), then your employer will contribute an additional amount equal to 3% of your salary.

If your employer offers a 401(k) match and you鈥檙e not enrolled, 鈥淵ou鈥檙e not only missing out on the tax benefits of a 401(k), but you鈥檙e leaving free money on the table,鈥� Inman says.

Vesting periods

How to learn about retirement planning means understanding your vesting period. Inman notes that some companies have vesting periods, which means you won鈥檛 receive the full 401(k) match until you satisfy a particular length of employment.

Maximum contributions

The maximum contribution is the total amount you鈥檙e allowed to contribute to your 401(k) each year. This limit can change year to year according to the latest tax laws. In the 2025 tax year, for example, you can contribute a maximum of $23,500 to your 401(k) account, . If you鈥檙e over 50, you can take advantage of catch-up contributions鈥攗p to an additional $7,500 per year.

The individual retirement account (IRA)

Another popular retirement account is the IRA. According to Inman, there are two main types of IRAs, each with a different tax advantage.

Traditional IRA

Generally speaking, Inman says, a Traditional IRA allows you to deduct your contributions from your taxes now, but you鈥檒l need to pay taxes on the money you withdraw in retirement. You can withdraw your contributions and earnings without IRS penalty at age 59陆.

Roth IRA

The other type of IRA is the Roth IRA. Inman notes that contributions to a Roth IRA can鈥檛 be deducted from your taxes now, but when you withdraw your earnings in retirement (at age 59陆 or later, to avoid a penalty), you do so tax-free. Because you pay taxes on your contributions, you can withdraw those from your Roth IRA anytime.

鈥淪ome earners鈥� income is too high to qualify for a Roth IRA,鈥� Inman says. (In 2025, the income limit is $165,000 for individuals and $246,000 for married couples filing jointly, according to .)

Unsure of which type of IRA to choose? Dive into all the differences between a Roth IRA and a Traditional IRA. Check the before selecting the best option for you.

Automating your retirement savings

If you find yourself thinking about how to plan for retirement but not actually doing the regular saving that you need to, then automating your retirement savings might be for you.

Inman and Wang note that most 401(k) plans have automation features: Once you opt in and configure your preferences, your plan will deduct a certain dollar amount or percentage out of every paycheck and invest it in the funds you pre-selected.

There are even mobile apps that have emerged to make it easier for people to automate their retirement savings than ever before. They allow savers to set up automatic deposits from their checking or savings accounts into a retirement savings fund according to their risk tolerance and goals.

鈥淭echnology鈥檚 come a long way in helping us automate our retirement savings,鈥� Inman says.

When considering how to plan for retirement, automating your retirement savings has two key benefits:

1. Automation removes emotion from investing

The fact is, it鈥檚 not always a pleasant experience to move money from your checking account into your retirement savings. Wang notes that when you鈥檙e automating your savings, 鈥測ou won鈥檛 even miss that money, but it can grow to a significant amount over time.鈥�

Because of this out-of-sight-out-of-mind phenomenon, Inman suggests increasing your 401(k) contribution amounts whenever you get a raise at work.

2. Automation helps you take advantage of dollar-cost averaging

You might have noticed that the stock market can be up one day and down the next. These unpredictable swings pose the risk that you could 鈥渂uy high鈥� right before the prices swing lower.

Inman points out that when you鈥檙e automating your savings, you鈥檙e investing the same amount of money at regular intervals. So if the market is up, your retirement savings go up, but you鈥檙e buying at higher prices. If the market goes down, your savings go down, but you鈥檙e also buying at lower prices.

Over time, your costs average out, and this is what is known as dollar-cost averaging. 鈥淎utomation is allowing us to dollar-cost average without us even knowing that we鈥檙e doing it,鈥� Inman says.

Estimating how much money you鈥檒l need in retirement

You could use every savvy retirement strategy in the book, but how do you know how much you should save before you can retire?

鈥淐onventional wisdom says that you should expect to need 70% to 90% of your annual pre-retirement income in retirement,鈥� Wang says. For example, he says that a person who earns an average of $100,000 per year before retirement should expect to need $70,000 to $90,000 per year in retirement.

The 4% rule

Another frequently used rule of thumb when learning about retirement planning is known as the 4% rule, Wang says. The idea is that if you can withdraw no more than 4% each year from your savings in retirement (adjusting for inflation and taxes along the way), then 鈥測ou should have a very high probability of not outliving your money during a 30-year retirement,鈥� he says.

If our eventual retiree will need to withdraw $80,000 a year, that annual pre-tax income needs to represent no more than 4% of their retirement savings. Because 4% is the same as 1/25, they would need to multiply $80,000 by 25 to arrive at a target retirement savings goal of $2,000,000.

Put your knowledge to work toward your retirement

By taking this retirement quiz and studying new retirement concepts, you鈥檝e taken the first steps toward how to learn about retirement planning.

Now, it鈥檚 time to make the moves that your future self will thank you for. See how pp电子官网 can empower you to confidently follow your retirement plan.

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*The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. Please consult your tax advisor with respect to information contained in this article and how it relates to you.