Retirement Savings

3 Smart Steps for Retirement

March 6, 2018
These guiding principles can help you chart a course for savings success.

Key Points

  • While investment choices are important, success is largely dependent on how much money you save.
  • Maintain an appropriate exposure to equities up to and throughout your retirement years.
  • Work toward a goal of saving 15% of your salary, starting with what you can.

When it comes to saving for retirement, it’s easy to feel overwhelmed. Strategies abound, and you may feel uncertain about what plan best suits your needs. Consider the following three guidelines to help keep your retirement savings on track.

1. Invest more early on.

Nearly two-thirds of people surveyed believe that what you invest in (equity, fixed income, and cash) is more important than how much you invest.* While a diversified portfolio with an asset allocation appropriate for your risk tolerance and time horizon does matter, the amount you save actually has the greatest impact on your portfolio value. “If you’re not saving enough, even the best investments won’t help you achieve a successful retirement,” says Judith Ward, CFP®, a senior financial planner with T. Rowe Price.

2. Save 15% for retirement.

Your retirement most likely will be funded by both Social Security benefits and your personal investments. We recommend saving at least 15% of your salary (including any employer contributions) in order for your assets to support you through a retirement that could last decades.

You may not be able to save 15% right away, but you can take steps to get there. For instance, if you have access to an employer retirement plan, such as a 401(k), contribute enough to receive any company match, and if no match is available, start by contributing 6% of your salary. Then, increase your contributions by one or two percentage points each year until you reach that 15% target.

If you’re not saving enough, even the best investments won’t help you achieve a successful retirement.

- Judith Ward, CFP®, Senior Financial Planner

3. Maintain exposure to equities.

Equity investments can lose value in a market downturn, but they also generate the highest growth potential over the long term. Your retirement could last three decades or more, so your time horizon may be longer than you think.

Having all your assets in cash won’t keep pace with inflation. Fixed income investments help to dampen the short-term swings in a portfolio, while equities provide the long-term growth potential needed to keep pace with inflation and help your money last throughout retirement. It’s important to balance the three asset classes to address risks while still providing the growth potential your portfolio needs. (See “Model Asset Allocation by Age.") Of course, all investments involve risk, including possible loss of principal.

“Saving for retirement does not have to be as complicated as it sounds,” says Ward. “By focusing on what you can control, and by following these three guidelines, you can help keep your retirement savings on track.”

Model Asset Allocation by Age

Even older investors can benefit from a large exposure to equities.


These allocations are age-based only and do not take risk tolerance into account. Our asset allocation models are designed to meet the needs of a hypothetical investor with an assumed retirement age of 65 and a withdrawal horizon of 30 years.

The model asset allocations are based upon analysis that seeks to balance long-term return potential with anticipated short-term volatility. The model reflects our view of appropriate levels of trade-off between potential return and short-term volatility for investors of certain ages or time frames. The longer the time frame for investing, the higher the allocation is to equities (and the higher the volatility) versus fixed income or short-term investments.


While the asset allocation models have been designed with reasonable assumptions and methods, the chart provides models based on the needs of hypothetical investors only and has certain limitations:

  • The models do not take into account individual circumstances or preferences and/or may not align with your accumulation time frame, withdrawal horizon, or view of the appropriate levels of trade-off between potential return and short-term volatility.
  • Investing consistent with a model allocation does not protect against losses or guarantee future results.

Please be sure to take other assets, income, and investments into consideration when evaluating model allocations. Other T. Rowe Price educational tools or advice services use different assumptions and methods and may yield different outcomes.

1 T. Rowe Price 2017 Parents, Kids & Money Survey.  

This material has been prepared by T. Rowe Price for general and educational purposes only. This material does not provide fiduciary recommendations concerning investments or investment management. T. Rowe Price, its affiliates, and its associates do not provide legal or tax advice. Any tax-related discussion contained in this material, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or professional tax advisor regarding any legal or tax issues raised in this material.

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