Building a retirement fund—which we will define as saving enough money to pay your bills when you are no longer working—can seem like a daunting challenge. Taking a pract𒐪ical approach that focuses on what you can do today will help you tackle the challenꦫge one step at a time.

Retirement Fund Theory vs. Reality

Regardless of your current age or income, the recipe for a successful retirement fund has a simple formula: Set a goal, commit to it, and repeat. One common approach encourages would-be investors to participate in their employer-sponsored retirement savings plan. Another suggests entering personal information into a 澳洲幸运5官方开奖结果体彩网:retirement planning calculator to project how much money will be nꦜeeded to fund retirement.

While both ideas are great in theory, reality can come crashing down quickly. Consider, for example, that about 30% of all private-sector workers in the U.S. don’t have access to retirement benefits, as of March 2023, as reported by the U.S. Bureau of Labor Statistics. That, of course, leaves 70% who do, but only 75% of workers with access to a plan choose to participate in it, and only 53% of all American workers in the private industry are saving in one.

Also, the enormous dollar amounts that most people see when they use a retirement plannin🔯g calculator can be disheartening. A savings goal of a million or more dollars can seem unreachable to younger workers with low incomes, high debts, and nothing in the bank.

“Thinking in terms of the total amount of money you will need in retirement is daunting. But I believe if you break it down into small steps, it is much eas🍷ier to swallo♕w,” says Shane P. Larson, CFP, an independent financial planner.

Given these realities, let’s start with a difficult scenario—one most of us find ourselves in early in our careers—and lay out a practic🎐al plan for building a retirement fund. Under this scenario, we’ll assume that you do not have an employer-s꧟ponsored savings plan and a high-paying job and do have a high debt burden from college loans, a car payment, and rent or a mortgage, in addition to living expenses

Set a Goal, Commit, Repeat

Several goals can be set in this scenario. The first is to start saving. Even if it’s just a few dollars a week, open up a bank account and deposit the money. While a bank account isn’t the best investment vehicle in the world, it is a great way to start to 澳洲幸运5官方开奖结果体彩网:make saving a habit. Remember, 澳洲幸运5官方开奖结果体彩网:building a retirement fund is a long-term journey—and, as the sayin🥃g goes, even a journey of a thousand miles starts with a single step.

Once you’ve set and committed to the goal of saving, the next goals are clear: increase your income and reduce your debts. Achieving the first objective will help you achieve the seco꧅nd one. To increase your income, you can either take a second job or get a better-paying job than the one you currently have.

Although it may take time and effort to increase your income💖, it will help you stick to your plan if you keep in mind that this is a long-term effort. Set a goal of getting a better job (or a second job), then commit time to a dedicated job search.

Once you’ve achieved your goal, your newfound income will enable you to reduce your debts. Then you will be able to tuck more money into your retirement fund. Putting together a budget can help you with this process. It’s a great way to make sure your money is being used wisely. Remember th🦂at the earlier you start, the more time your savings have to increase through what experts call “the magic of compound interest.”

“The power of compound interest is the eighth wonder of the world. Having a long-term mindset with compound interest as your ally will allow you to turn a small, consistent savings rate into a comfortable𒉰 retirement,” says Mark Hebner, founder, and president of in Irvine, Calif., and author of "Index Funds: The 🧸12-Step Recovery Program for Active Investors."

Don’t Just Save, Invest

Once you’ve increased your income and your savings, you should have enough money saved up to trade in your bank account for an 澳洲幸运5官方开奖结果体彩网:individual retirement account (IRA). At this stage,ꦫ you are transitioning from saving money to investing money.

The Internal Revenue Service (IRS) establishes the annual limit as to how much a person can contribute to an IRA. For 2023, individuals under age 50 can contribute $6,500 to an IRA. If you're 50 or over, you can add a catch-up contribution of $1,000 for a total of $7,500 per year. For 2024, these numbers are $7,000 and $8,000, respectively.

You can, of course, start with a much smaller amount. An IRA is different from a regular investment account; you need to open one with a firm that handles IRAs. If you don’t know much 澳洲幸运5官方开奖结果体彩网:about investing, think of it as a way to put your money to work earning more money. From a practical standpoint, you can start by putting your money into a mutual fund, as it is one of the easiest methods of investing for beginners.

Just choose either an index fund that replicates a major U.S. stock market index, such as the S&P 500, or an actively managed fund that invests in blue-chip stocks. To get focused, set a goal of learnin▨g more about investing and commit to that goal.

Start by checking out Investopedia's introduction to investing to pick up the basics and get the terminology down. Let topics that catch your attention help you to determine the next subject that you would like to learn about.

Again, this is a long-term endeavor. Don’t try to absorb ev♛erything all at once. Just start reading, commit to doing it regularly, and stick to it. As you learn more, take time to teach yourself about mutual fund fees and make sure you aren’t reducing your returns by paying more than you need to.

Get Yourself a 401(k)

Once you master the art of budgeting and start investing, you’ll probably want more money to increase both your standard of living and the amount you invest. Anothe🐠r job search can help you to achieve these goals.

This time, look for a job that offers 澳洲幸运5官方开奖结果体彩网:a 401(k) plan with an employer that matches your contributions. Invest enough to get the full company match. Over time, as you get raises and promotions, increase your contribution rate t༒o the maximu🅘m allowable amount.

“Working for a company with a 401(k) is one thing. Working for a company that offers 澳洲幸运5官方开奖结果体彩网:matching contributions is another. 401(k) matching is where you can really see your funds grow—and fast,” says Davi🍸d N. Waldrop, CFP, president of , in El Dorado Hills, Calif.

The IRS has established annual contribution limits for 401(k)s. The maximum contribution to a 401(k)—as an employee—is $22,500 for 2023 ($23,000 for 2024). If you are 50 or over, catch-up contributions of $7,500 for each year are also allowed.

For example, let's say you earn $50,000 per year, and your employer is willing to match 5% of your salary as long as you also contribute a minimum of 5%. As a result, your minimum contribution would be $2,500 (5% of $50,000), and your employer would deposit $2,500 annually into your 401(k). The employer match is free money.

The ann🌜ual match has the p♊otential to increase your savings rate dramatically because the matching contributions get invested, and the interest and earnings on that money get compounded over the years along with your contributions.

The Bottom Line

澳洲幸运5官方开奖结果体彩网:Retirement planning is a long-term endeavor. Think of a marathon rather than a sprint. It will take most people a 𝔉lifetime of effort to buil♚d a solid retirement fund.

“Preparing for retirement is more about persistence and less about brilliance,” says Craig L. Israelsen, Ph.D., investment portfolio designer of in Springville, Utah. “When thinking about 澳洲幸运5官方开奖结果体彩网:getting ready for retirement, think Crock-Pot—not microwave.”

Commit to the effort and continue bettering your position by reducing your debts, improving your income, and inc🌃reasing your education (among other activities). While the early years will be a challenge, with every pa𒉰ssing year, the progress that you have made will become more evident.