Fundamentals of Retirement Planning

Most people view a financially secure retirement as one of their main financial goals. As you begin your financial journey, retirement might seem distant and not worth stressing over. However, by taking a little time now and following some simple steps, you can put yourself on the road to a financially secure retirement.

You will have four sources of income when you retire:

1. Employer Retirement Plans
2. Individual Retirement Accounts (IRAs)
3. Other Personal Savings
4. Social Security

The future of the Social Security system and the benefits you might receive could be uncertain, but you have control over the first three items listed above. By starting early and making a few smart choices, you can shape the financial lifestyle you’ll have in retirement, no matter how far into the future that may be.

Employer Retirement Plans – 401(k) Plans

Most large companies and many other organizations offer a retirement plan as part of their employee benefits. 401(k) plans have become popular and fairly widespread. With this type of plan, employees contribute a portion of their wages to the plan, reducing their taxable income, and their employer often matches some of those contributions. In other words, the company helps fund your retirement, and you receive a tax advantage.

Earnings on plan assets are not taxed until withdrawn, and employees can typically choose from a range of investment options for their funds.

There are limits on how much can be contributed, but recent tax law changes have significantly increased the amounts that can be accumulated in corporate retirement plans, especially 401(k) plans.

• Employee deferral limit - $24,500 for 2026.
• Additional contribution limit for those ages 50 and over - $8,000 for 2026. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2026, this higher catch-up contribution limit is $11,250 instead of $7,500.
• Maximum total contribution limit (employee and employer) - $70,000 for 2026.

Be sure to participate in a 401(k) plan if one is available. Contribute as much as you can to your 401(k) plan, and aim to contribute enough to receive the full employer match. Review your investment options and choose wisely.

Individual Retirement Accounts (IRAs)

Anyone with earned income can contribute to an IRA to supplement other retirement planning savings. Both regular IRAs and Roth IRAs provide tax-deferred accumulation of funds within the accounts. Contributions to a regular IRA may be deductible if you do not participate in an employer-sponsored retirement plan or if your income does not exceed certain levels. Roth IRA contributions can be made by individuals with income below certain levels.

Contributions to Roth IRAs are not tax-deductible, but Roth IRAs offer the additional benefit of tax-free distributions and greater distribution flexibility. In addition, individuals ages 50 and over can make additional annual contributions. Here are the contribution limits for both regular and Roth IRAs.

Roth IRA and Regular IRA Contribution Limits

For tax year	IRA contribution limit	Additional contribution limits for those age 50 and over
2026	$7,500	$1,100

If you can afford it, add to your retirement nest egg by funding your IRA every year. Even annual contributions of $1000 can make a significant difference over time. Time is on your side.

Other Personal Savings

Another source of retirement income will be your other savings. Accumulations in savings and investment accounts, while not enjoying the tax preferences of 401(k) plans and IRAs, remain a major component of most individuals’ retirement income. Saving more and earning more on these funds can significantly enhance your retirement lifestyle.

Consider using automatic savings plans with monthly transfers to a savings or investment account. Ensure your investment strategy is sound, with consideration for your goals, time horizon, and risk tolerance.

Social Security Retirement Benefits

The Social Security system has played a major part in Americans’ retirement planning for decades. The current examination and debate over the system’s future will likely lead to changes for future retirees. Here are some basic facts you may want to remember:

• Full Retirement Age – the age when you can start receiving “full” benefits is gradually moving from 65 to 67.
• Early Retirement Age – at age 62, you can start receiving a reduced retirement benefit.
• Average Retirement Benefits for retired couples for 2026 – about $3,200.
• Maximum Retirement Benefit for retired workers at full retirement age for 2026 – about $4,152.

At this point, there is little, if anything, you can do to change the benefits you will receive from Social Security.