Retirement questions answered: How to start saving today

Updated March 22, 2024  |   Published July 11, 2023

For some, retirement may seem too far away to worry about building up savings now. However, the younger you start saving for retirement, the younger you’ll be able to retire. We’re here to answer the important questions about retirement savings – like why, when, and how?


Why start saving for retirement?


You shouldn’t depend on Social Security Benefits as your only source of retirement income. According to the U.S. Department of Labor: on average, Social Security benefits replace only 40% of your pre-retirement income. So you’ll likely want to find a way to effectively replace the other 60%.


When should I start saving for retirement?


Aim to start saving for retirement in your 20s. This can be quite easy to do once you enter the workforce, as many employers offer company-sponsored retirement accounts that you can opt to contribute to each time you get a paycheck. Companies that offer these typically will offer an employer match of a certain percentage, but this percentage varies.


What this means is, with every paycheck you get, 3% (for example) is being deducted from it and deposited in the retirement account and your employer is depositing that exact amount into it too. You make the decisions and you can always opt to contribute more or less than 3% from your own paycheck, but don’t expect your company to match any higher than the percent limit they set.


If your employer offers a plan with company match, it would be in your best interest to take advantage of that benefit as early as you can.


How much should I be saving for retirement?


Some experts recommend that by age 30, you should have at least your yearly salary amount in a savings account. Others recommend that you save 10% to 15% of your pre-tax income per year. In order to know how much you will really need to live comfortably when you retire, you’ll have to determine your personal goals and plans for retirement living. Here are some things to consider:

  • Will you continue living in the same home or will you downsize?
  • Will you have remaining debt that will need to be paid off?
  • Are you saving for yourself, for your children, or both?
  • What new hobbies and pastimes will you be using your money for? Do you plan to do a lot of golfing or cruising?
  • Medical costs can be expensive especially as you get older. Think about your health.
  • Do you want/need to save for funeral expenses?


Some of these things can be daunting to think about at a young age, but are all important things to consider. The U.S. Department of Labor says the average American spends roughly 20 years in retirement. So you will need to have 20 years of expenses saved up, and then some – in case of emergencies.


What are my options for retirement accounts?


The three most popular types of accounts used for retirement savings are a 401(k) or Roth 401(k), an Individual Retirement Account (IRA) or Roth IRA, and a Pension. All three of these types of accounts can be offered by employers, but likely only one of the three. It’s important to know how these benefit plans work.

Each retirement account has limits on how much you can contribute per year. If you plan on saving any more than those limits, you may want to consider other types of savings accounts like a traditional savings, certificate, or money market account for the excess.


401(k) vs. Roth 401(k)


  • Contribution Limits: $23,000 per year under age 50. Age 50 or older can contribute an additional $7,500, totaling $30,500 per year.*

Traditional 401(k) accounts are company-sponsored accounts in which you set up deductions from your paycheck to be deposited automatically. These will be deducted from your gross income, and income taxes are paid on the funds only when they are withdrawn. As we already mentioned, the biggest benefit of this type of account is the employer match.

Contributions to a Roth 401(k) are deducted from your after-tax income. When you withdraw the money at retirement, you will not have to pay any taxes.

Funds of these accounts can also be invested, typically in mutual funds or exchange-traded funds, which you will choose. As a result of this, your savings can go up or down with the stock market.


IRAs vs. Roth IRAs


  • Contribution Limits: $7,000 per year under age 50. Age 50 or older can contribute an additional $1,000, totaling $8,000 per year.*

In simple terms, a Traditional IRA is funded with pretax money. You pay taxes on the funds when they are withdrawn from the account. Like the Roth 401(k), a Roth IRA is funded with post-tax money. You pay taxes on your contributions each year, but pay nothing when you withdraw the funds at retirement. It’s up to you whether you want to pay as you go, or pay out what could be thousands when it’s time to withdraw. These accounts typically earn compound interest.

At Webster First, we offer IRA certificates. These accounts come in terms ranging from 12-60 months.** You can choose from a Traditional, Roth, or Spousal IRA. A Spousal IRA is the same as a regular IRA, but allows members with no or low earned income to contribute based on a few eligible requirements. (See our IRA product page for more info or speak with someone in our branches to see which is right for you.)

The funds in these accounts earn dividends. To know what happens when your term expires, see “What happens when my certificate matures?




Traditional Pensions are different from these other accounts and are now rare to come by, but they do still exist. With a pension, your employer will contribute to a pool of funds invested for the benefit of all their employees, sometimes with the option for you to contribute part of your wages as well. This plan guarantees a specific monthly payment to you after your retirement. Many companies have moved away from this type of plan because it leaves the employer liable for the payments if the pension account runs out. 401(k)s and IRAs put the responsibility of saving on the individual, not the company.


These are the most popular types of retirement accounts, but there are more options. See for a full list of available retirement plans.


When should I withdraw my savings?


The simple answer to this is – withdraw it when you retire. But you should also withdraw it when you are ready. If you reach retirement age and you don’t think you have enough saved to stop working just yet, you can wait. However, traditional IRAs and 401(k)s will have Required Minimum Distributions (RMDs) when you reach age 73 – meaning you will have to start withdrawing the money.


Any retirement account you choose may be subject to a penalty for early withdrawal. The IRS allows penalty free withdrawals from retirement accounts after age 59 ½. Note that the retirement age requirement to start collecting full Social Security benefits in 2023 is 67 (for people born in 1960 or later).


Visit a branch to get started with an IRA certificate.

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*These contribution limits are accurate per as of 2024. 401(k) limits. IRA limits.
**Limited-time special offers not included. See our rates page for more.