By the time you hit 65, you’ll need about 70% to 80% of your pre-retirement income just to keep up with basic living costs. That’s not luxury - that’s food, housing, medicine, and utilities. And if you’re counting on Social Security alone, you’re already behind. The average monthly Social Security check in 2025 is $1,907. For most people, that’s not enough. The real question isn’t whether you should invest - it’s how to do it so your money lasts longer than you do.
Start by knowing exactly how much you’ll need
Most financial advisors say you need 25 times your annual retirement expenses saved up. That’s the 4% rule - withdraw 4% each year and your money should last 30 years. But that rule assumes stable markets, low inflation, and no big surprises. Real life doesn’t work like that. If you spend $50,000 a year now, you’ll likely need $65,000 to $75,000 by retirement because of inflation. And if you retire early, say at 60, you’re stretching that money over 35 years, not 25. So don’t guess. Use a retirement calculator - the one from the Social Security Administration is free and accurate. Plug in your current income, expected Social Security, and your estimated expenses. Then adjust for inflation. That number? That’s your target.
Max out tax-advantaged accounts first
Before you buy a single stock, get the free money. That means maxing out your 401(k) and IRA. In 2025, you can contribute up to $23,500 to a 401(k) if you’re 50 or older. If your employer offers a match, contribute at least enough to get the full match. That’s an instant 50% to 100% return on your money - no investment can beat that. If you’re under 50, you can put $23,000 into a 401(k) and $7,000 into an IRA. Use a Roth IRA if you expect taxes to be higher when you retire. Use a traditional IRA or 401(k) if you want the tax break now. Either way, automate it. Set up payroll deductions so you never see the money. Out of sight, out of mind - and growing.
Build a diversified portfolio - but keep it simple
You don’t need to pick individual stocks. In fact, most people who try end up losing money. The average individual investor underperforms the market by 4% a year because they chase trends and panic-sell. Instead, use low-cost index funds. A basic portfolio for someone 10-15 years from retirement might look like this: 60% in a total U.S. stock market fund, 30% in a total international stock fund, and 10% in a bond fund. Rebalance once a year. That’s it. No fancy strategies. No crypto. No meme stocks. Just broad exposure to the entire market. Vanguard, Fidelity, and Charles Schwab all offer these funds with expense ratios under 0.10%. That means for every $10,000 you invest, you pay just $1 a year in fees. Compare that to a mutual fund charging 1% - you’d pay $100. That $99 difference compounds over time. Over 20 years, it could mean an extra $50,000 in your pocket.
Don’t ignore real estate - but do it right
Real estate isn’t just for landlords. You can invest in it without buying a rental property. Real Estate Investment Trusts (REITs) let you own shares in apartment buildings, shopping centers, warehouses, and hospitals. They pay dividends - often 4% to 6% a year - and they’re traded like stocks. Add a REIT fund to your portfolio, maybe 5% to 10% of your total investments. It adds diversification and steady income. But avoid buying rental properties unless you’re ready to handle repairs, tenants, and property taxes. Most people think they’ll make passive income. They end up working weekends fixing leaky faucets and dealing with midnight calls. If you want real estate exposure, go through a fund. Keep it simple.
Delay Social Security if you can
Claiming Social Security at 62 cuts your benefit by 30%. Wait until 70, and you get 24% more than your full retirement age benefit. For someone with a $2,000 monthly benefit at full retirement age, that’s $2,480 a month at 70. That’s $5,900 more a year - and it’s guaranteed for life, adjusted for inflation. If you have other income - savings, part-time work, a pension - delay claiming. The longer you wait, the more your benefit grows. And if you’re married, the survivor benefit also increases. That’s not just your money - it’s your spouse’s security too.
Protect yourself from the biggest risk: outliving your money
The biggest threat to retirement isn’t market crashes. It’s living too long. People are retiring at 65 and living to 90. That’s 25 years of expenses. One bad year early in retirement - like 2008 or 2022 - can wipe out decades of savings if you’re withdrawing too much. That’s why you need a buffer. Keep 3 to 5 years of living expenses in cash or short-term bonds. That way, if the market drops, you don’t have to sell investments at a loss. You wait. You let them recover. This simple move can make the difference between a comfortable retirement and running out of money. And consider an annuity - but only a fixed immediate annuity. It’s not a product you buy to get rich. It’s insurance. You hand over $100,000, and they send you $600 a month for life. It’s not glamorous, but it guarantees you’ll never run out.
Review your plan every year - and adjust
Retirement isn’t a one-time setup. It’s a living plan. Every year, check your progress. Did your expenses go up? Did your investments perform as expected? Did you get a raise? Did you inherit money? Did someone in your family need help? Life changes. Your plan should too. Don’t wait for a financial advisor to tell you. Do it yourself. Use free tools like Personal Capital or the Vanguard Retirement Nest Egg Calculator. If you’re on track, keep going. If you’re behind, don’t panic. You can still catch up. Increase your contributions. Work a few extra years. Cut spending. It’s never too late to make a change.
Stop listening to the noise
Every day, someone is selling you a new investment. Crypto. Private equity. Gold. Bitcoin. NFTs. They promise 10x returns. They show you screenshots of people who got rich. But those are outliers. The real path to a secure retirement isn’t flashy. It’s consistent. It’s saving 15% of your income every year. It’s investing in low-cost index funds. It’s avoiding debt. It’s delaying Social Security. It’s staying calm when the market drops. You don’t need to be a genius. You just need to be steady.
Start now - even if it’s small
If you’re 25 and you save $300 a month and earn 7% a year, you’ll have over $700,000 by 65. If you’re 45 and you start now, saving $800 a month, you’ll still hit $400,000. That’s not enough for a luxury retirement, but it’s enough to cover essentials with Social Security. The only thing worse than not starting is waiting. You don’t need a big bonus. You don’t need to win the lottery. You just need to start today. Even $50 a month into a Roth IRA adds up. Compound interest doesn’t care how much you put in. It cares how long you leave it there.
How much should I have saved for retirement by age 50?
By age 50, aim to have saved about 6 times your annual income. So if you earn $70,000, you should have around $420,000 saved. This assumes you’re on track to replace about 80% of your income in retirement. If you’re behind, don’t panic - increase your contributions, delay retirement by a few years, or downsize your expected lifestyle. The key is to keep moving forward.
Is it too late to start investing for retirement at 55?
No, it’s not too late. At 55, you can still catch up. Max out your 401(k) - you can contribute $31,000 in 2025 if you’re 50 or older. Add $7,000 to a Roth or traditional IRA. If you save $38,000 a year for 10 years and earn 6% annually, you’ll have over $500,000. Combine that with Social Security and you can have a solid, if modest, retirement. The goal isn’t to be rich - it’s to be secure.
Should I pay off my mortgage before retiring?
It depends. If your mortgage rate is low - under 4% - and you’re earning more than that in investments, keep the loan and invest the extra cash. But if the payment stresses you out or you’re worried about cash flow in retirement, paying it off can give you peace of mind. Having no housing payment means you need less from your savings each month. That’s often worth more than the extra return you’d earn.
What’s the safest investment for retirement?
There’s no such thing as a completely safe investment - only safer ones. For retirement, the safest options are U.S. Treasury bonds, CDs, and fixed annuities. But safety comes at a cost: low returns. If you put everything in these, inflation will eat your savings over time. The real strategy is balance: mostly stocks for growth, some bonds for stability, and cash for emergencies. Diversification is your best safety net.
How do I avoid running out of money in retirement?
Follow the 4% rule as a starting point, but keep 3-5 years of expenses in cash or short-term bonds. Avoid withdrawing during market crashes. Consider a fixed immediate annuity to cover basic needs. Work part-time if you can. Cut non-essential spending. And never stop monitoring your balance. Running out of money is usually a slow process - not a sudden event. Stay aware, stay flexible, and you’ll be fine.
What to do next
If you’re not contributing to a retirement account right now, open one today. Even $25 a week adds up. If you’re already saving, check your asset allocation. Are you still in aggressive funds at 60? Are you paying too much in fees? If you’re unsure, use a free tool like Vanguard’s Retirement Income Calculator. It takes 10 minutes and tells you exactly where you stand. Don’t wait for a financial advisor. Don’t wait for the perfect moment. The perfect moment was 10 years ago. The next best time is now.
