Photo of a man who is determining how much income he needs in retirement and how annuities can help create retirement income.

Saving for retirement: Helping make your dreams a reality

Retirement may be a ways off, but that shouldn’t stop you from dreaming about how you’ll spend your golden years.

If you start planning and saving now, making those dreams a reality is possible. Figuring out how much money you’ll need to live your best version of retirement—and making sure it lasts for as long as you need it—is a great place to start.

Estimate your expenses

Take a look at your current expenses, and place them into two categories: needs and wants. You need to pay for things like utilities, housing, groceries, and insurance. Do you plan on having a mortgage in retirement? And what about health care? You’ll want to make sure you have enough money to cover the essentials you pay for today, and any new expenses you may have down the road.

Then there are wants—the fun stuff. These are things like travel, dinners out, and personal splurges. How important are wants to your lifestyle now? Do you hope to continue (or enhance) your lifestyle in retirement?

There’s also inflation to consider. Most things you buy will cost more in 20 years (or longer) than they do now, so finding ways to help your retirement savings keep pace is key. 

Determine your income sources

You’ll want to sort your money into 2 categories here, too: guaranteed income and changeable income. Guaranteed income is money you know you’ll have for as long as you need it. This includes Social Security, a pension plan, or an annuity.

Changeable income is everything else. It includes things like investments, your 401(k), IRA, part-time work, and all other sources of income that aren’t guaranteed. Because this income may be dependent on the market or other factors, it can fluctuate.

Bridging the gap

Creating a retirement saving strategy now can help ensure you’ll have enough money to meet all your needs and wants. Of course, if you have a 401(k) or IRA contributing the maximum annual amount can put you in great shape for the future. It’s also a good idea to build your own savings account, if you can. You may be able to turn all of this combined savings into guaranteed income, helping you bridge any future gaps that your changeable income doesn’t cover.

One way to do this is by purchasing an annuity. It lets you save money tax-deferred, and helps you pay yourself for life when you retire. You can choose an annuity that fits your risk tolerance, with options that invest in the market or offer a fixed rate of return.

Start planning now

Make sure you’ll have enough guaranteed income in retirement to live your best life. Learn more about annuities:

Guarantees are based on the claims-paying ability of Principal Life Insurance Company.

This document is intended to be educational in nature and is not intended to be taken as a recommendation. Consult with your financial professional to discuss retirement planning.

Annuity products and services are offered through Principal Life Insurance Company, a member company of Principal, Des Moines, Iowa 50392.

Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.