Saving for retirement is not easy. Many people struggle to cover today’s bills, let alone stash extra money in a brokerage account for tomorrow. As such, it’s not all that surprising that more than 60% of Americans worry that they won’t have enough money for their old age, according to a recent AARP survey.

There are a few ways to approach this. You can aim to save a percentage of your income. You can also set a goal based on the amount you think you’ll need and work backwards. A financial advisor can help you create a retirement plan that fits your needs.

Answer these questions to know if you are saving enough.

1. Are you saving 15% of your income?

Fidelity analysts estimate that if you contribute 15% of your income between ages 25 and 67, you’ll be able to accumulate savings large enough to live comfortably once you retire. So if you earn $60,000 a year, the idea would be to put $9,000 of that amount into your retirement account. As your salary increases, the amount you save also increases.

It’s helpful to have a 401(k) plan and your employer matches part of your contributions. Let’s say your employer contributes every dollar you contribute up to 4% of your salary. In the example above, that would mean you could contribute $6,600 and your employer would contribute $2,400.

Know what is enough: By this logic, you’re on the right track if you’ve been investing 15% of your salary since you were 25. If, like many of us, you start after 25, you’ll need to save a higher percentage. of your salary.

2. Are you maximizing your tax-advantaged contributions?

If you don’t have access to a 401(k) through work, you can use an individual retirement account (IRA) to get tax breaks on your retirement savings. There are a couple of different types of IRAs, as well as limits on how much you can contribute each year. The maximum total contribution you can make to your IRA in 2024 is $7,000 ($8,000 if you are over age 50).

Generally speaking, a traditional IRA will reduce your tax bill today. With a Roth, you contribute after-tax dollars and make tax-free withdrawals once you retire. The best thing about Roth IRAs is that investments can compound tax-free, so you won’t have to pay taxes on your earnings. There are also IRA accounts designed for self-employed people and small business owners.

It’s easy to open an IRA. The best brokers for IRAs have a broad mix of investments, low fees, and affordable tools. Some brokerages, like Robinhood, will even match some of the money you invest. Click here to learn more about Robinhood’s 1% IRA match and open an account.

Know what is enough: If the thought of retirement planning gives you a headache, start by maximizing your IRA contributions. There is no one-size-fits-all retirement figure, but it is unlikely to be enough on its own. Still, sometimes taking that first step is half the battle.

3. Do you know how much you need?

We can use different rules of thumb to estimate retirement needs. It is said that we will need about 80% of our pre-retirement income once we stop working. So if your salary is $60,000 a year now, you may need $48,000 once you retire.

You won’t need the entire amount to come from your investment portfolio; Other sources of income (like Social Security) will also make a difference. If you earned, say, $20,000 from other sources, you would need to generate $28,000 a year from your retirement fund.

So how big should your portfolio be to pay $28,000 plus inflation each year for the rest of your life? This is where another financial guideline comes into play: the 4% rule. The idea is that you can safely withdraw 4% of your fund in your first year of retirement. After that, you’ll be able to withdraw that inflation-adjusted amount over the next 30 years.

So to get $28,000 in your first year, the calculations would look like this:

• Year 1 amount ÷ 0.04 = retirement fund goal
• $28,000 ÷ 0.04 = $700,000

Know what is enough: In the scenario above, you would need a fund of $700,000 to retire comfortably. Do your own math to figure out how much you might need and how close your current contributions will get you.

In a nutshell

If all the math and estimating seems overwhelming to you, don’t let that stop you from investing. The most important thing you can do is get started. The more years you invest, the longer compound interest can work in your favor.

Start by depositing at least 15% of your salary into your retirement account. Then you can try to increase that number each year. And, as you approach retirement, you can talk to a financial planner or use retirement calculators and review your contributions.