A 2024 study from Morningstar found that as many as 45% of seniors who retire at age 65 could run out of money in retirement. The number climbs to 54% for workers who retire at 62.
The research concluded that the crisis could be prevented if more workers had access to and used workplace investment plans.
The good news is that whether you’re just starting your career or have already exited the workforce, there are ways to maximize your savings and build a more secure future.
Yahoo Finance spoke with several retirement professionals who shared their top strategies for building a retirement nest egg at every stage.
Retirement may be a daunting goal for young professionals in their 20s and 30s, who often face student loans and other forms of debt repayment.
According to Fidelity Investments, Gen Z workers have an average of $6,500 saved for retirement, while millennials have saved an average of $24,000.
BlackRock’s global head of retirement solutions, Nick Nefouse, said that Gen Z “got the memo” after watching their parents struggle with saving for retirement. A BlackRock survey found that more than 7 in 10 Gen Z workers reported feeling on track to retire.
While financial advisers and experts agree that there is no “perfect” nest egg number, there are general guidelines for being retirement-ready.
Nefouse recommended those just getting started contribute 5% to 6% of their salary annually.
“People often ask how much should they save, and my answer is usually ‘more,'” Nefouse told Yahoo Finance. “But … start off with something small — 5%, 6%. Make sure you’re saving to that 401(k) match, and then every year, try to raise it by about 1 or 2 percentage points to get to higher levels.”
The first step for many young workers is to enroll in their employer’s 401(k) match program if one is offered.
“If you have access to a 401(k) plan, you usually have access to a corporate match,” Nefouse said. “What a corporate match means is your employer will give you money if you’re saving as well. So you always want to start with your 401(k) plan and save up to that match.”
After you’ve maxed out your 401(k) match, you can explore other retirement savings accounts.
“Once you’ve done that, that’s when you want to start looking at something like a Roth IRA,” Nefouse continued. “And then, if you’ve maxed out the Roth IRA, maybe there’s income tax reasons why you might want to consider a traditional [IRA]. But always start with that 401(k).”
By their 40s and 50s, most workers are becoming realistic about the type of lifestyle they can attain in retirement.
One expert said it’s a great time to go over your priorities by categorizing “needs, wants, and wishes.”
“Your needs are definitely going to be your typical retirement savings,” Andrew Fincher, a financial adviser at VLP, told Yahoo Finance. He also recommended taking into account the cost of medical care through Medicare or private insurance as part of this calculation.
Next, Fincher advised factoring in lifestyle goals, such as taking vacations.
“People … maybe want to travel abroad,” Fincher said. “Maybe it’s just to the lake down the road. Either way, there’s some cost associated with that.”
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Lastly, those established in their careers may be thinking about long-term wishes, such as paying for a child’s wedding or making charitable contributions. “We categorize it to know you need to start at the needs and then work your way down [to] see what the probability of success is for that,” Fincher said.
As part of Secure Act 2.0, workers ages 50 and up can contribute an additional $7,500 on top of the 2025 maximum contribution limit of $23,500 for 401(k)s.
“If you have cash flow that allows for it, it not only helps you save for retirement but also reduces your current tax liability as well if you’re in higher tax brackets,” Fincher said.
Tapping into your retirement account before turning 59 1/2 comes with a high probability of a 10% tax penalty. But in your 60s, you no longer need to worry about being penalized for taking early distributions.
“In your 60s, you’re in the sweet spot,” Sarah Brenner, Ed Slott & Company director of retirement education, told Yahoo Finance. “You can tap your money without concern about early distribution penalties, and you’re not forced to take money out yet. No RMDs [required minimum distributions start] until age 73, so it really is the sweet spot for planning.”
Catch-up contributions can also be supercharged beginning at age 60 until age 64.
“If you’re age 50 or over, you can contribute more to your employer plan,” Brenner said. “But for those who are ages 60, 61, 62, and 63, there’s an even higher catch-up limit. And we call these super catch-up contributions.”
For 2025, 401(k) participants ages 60-63 can put away an additional $11,250 in catch-up contributions, greater than the $7,500 limit for those in their 50s. However, “once you reach age 64, that goes away,” Brenner said.
A whopping 4.18 million seniors turn 65 this year, notching another record year for baby boomers entering retirement age.
“What we know is that by 2030, almost all baby boomers, I think all 71 million, will be over the age of 65,” Fidelity Investments vice president of retirement offerings Rita Assaf told Yahoo Finance. “So it is definitely a tsunami. … It’s coming and it’s coming very quickly.”
According to data from Fidelity, baby boomers have an average 401(k) balance of $250,900 and an average IRA balance of $250,966.
At this point, those in or nearing retirement should identify where they want to live in retirement and what they want to do.
“You want to determine if you have enough money to last throughout your retirement,” Assaf said. “Ideally, you want to have essential expenses covered by guaranteed income sources such as Social Security or annuities because these keep up with inflation.”
It’s also important to strike the right balance of risks for your investments.
“You’ll need a balanced portfolio that keeps in mind some short-term investments that you can use for your day-to-day living, but then some growth potential that can help you,” Assaf said. “So for conservative investments, you’ll want to really look at anything with a fixed return, such as a CD or annuity, and then anchor that with growth investments that can [be] withheld and grow with inflation if that actually occurs.”
According to the CDC, the average life expectancy for all Americans is over 77 years old, and women tend to live an average of 80.2 years. Assuming retirement between 60 and 65, that means your savings need to last over a decade.
As a rule of thumb, advisers recommend having 10 to 15 times your most recent annual earnings saved or 20 to 25 times your average annual expenses.
One expert recommended allocating funds into “time buckets” to help determine when to put money to work in retirement.
“You don’t want to have all your money designed for long-term investments,” Lawrence Sprung, author of “Financial Planning Made Personal,” told Yahoo Finance. “Maybe additional risk involved, but you also don’t want it super conservative in case inflation starts rearing its head.”
Art lovers admire paintings in the Royal Academy, on Sept. 16, 2023, in London, England. (Richard Baker / In Pictures via Getty Images) ·Richard Baker via Getty Images
Sprung suggested diversifying across several time horizons, using a high-yield savings account for short-term needs and conservative investments for mid-term needs. For funds you won’t need for six years or longer, he recommended looking toward more high-growth investments.
Importantly, at age 75 (or 73 for those born before 1960), retirees are required to take minimum distributions from their retirement accounts, which carries implications for taxes.
Charles Schwab noted that drawing down tax-deferred accounts without penalty starting at age 59 1/2 can reduce RMDs and help keep taxes in check.
“Based on 2025 federal tax rates, without pre-RMD withdrawals, RMD income pushes the investor into the 32% tax bracket at age 75 and the 35% bracket at about age 81,” said Hayden Adams, director of tax and wealth management at Charles Schwab.
“When you go into [the] RMD phase, you can end up putting yourself in another bracket, paying higher Medicare premiums as a result,” Sprung explained. “So the way to avoid the taxes on the required minimum distribution … is [to] convert earlier [to a Roth IRA], pay the taxes now, and then … you’ll never pay taxes on it again while it’s in the Roth IRA.”
