Your 2025 guide to retirement

The path to retirement is paved with good intentions and unavoidable setbacks. But as long as workers get started, retirement is possible. 

"Start as early as you can because savings is a snowball rolling downhill," says Sharon Carson, retirement strategist at JP Morgan. "If you get started, even if you can't keep adding to it, it's on its own momentum." 

For many workers, contributing any doable amount to their company's 401(k) plan is the best first step, even if it means they can't contribute enough to reach their employer's match. However, Carson acknowledges that retirement savings may not be a priority — and maybe shouldn't be — for workers just trying to get by. According to an AARP survey, one in four U.S. adults over 50 do not expect to retire. 

Read more: Should parents be saving for their child's retirement?

With rising costs of housing, groceries and healthcare, this isn't exactly shocking — nearly half of Americans feel they are living paycheck to paycheck, according to research from the Bank of America Institute. While a closer look at bank accounts revealed that a quarter of households actually survive from one paycheck to the next, it doesn't undermine the fact that many Americans aren't confident in the state of their finances. 

Carson walks hopeful retirees through a prioritized to-do list, accounting for the fact that not everyone is ready to throw a chunk of their salary into 401(k)s. 

Build your foundation

Before workers can be too disappointed in themselves for not contributing to a 401(k) plan, Carson asks that they first put aside money into an emergency savings account. She suggests building enough funds to cover two to three months of expenses.

"This point is a little controversial because there's a strong argument to be made that a company match is free money, and you should never pass it up," says Carson. "But anyone can have an emergency, and if you don't have a fund, you can end up drawing money out of your 401(k) plan and paying the tax penalty. An emergency fund is the foundation to saving, and then you build up from there."

This may mean taking a good look at your monthly expenses and finding where you can save. Carson advises employees to ignore any expectations they may find on the internet about how much they need to put aside each month and find an amount they can work with. While this may also mean postponing 401(k) contributions, Carson stresses that emergency funds are an essential part of the retirement journey — one where those savings don't end up routinely raided. 

Take advantage of your benefits

The next step is to add a percentage of your paycheck to your employer's 401(k) plan. The ultimate goal here is to maximize your employer's match, but workers don't have to do this from the jump, underlines Carson. If an employer has a 3% match, then workers should try to contribute at least 3% of their salary so they can get their money matched dollar for dollar by their company. 

Read more: Are you giving your employees bad retirement advice?

Workers should also consider investment solutions  — or at least ensure their retirement money is being invested. In most cases, employer-provided 401(k)s are automatically invested, while some plans allow the employee to choose how they want their account invested. A common go-to for employers and employees alike is target date funds, or TDFs, which provide investors with a ready-made portfolio built to bolster their savings. TDFs are designed to yield high growth early on in their lifespan and then stick to safer, slower investments as workers get closer to retirement age.  

Carson emphasizes that there's no shame in just sticking to the employer's default investment solution. Although, there's no harm in wanting to learn more about how your money is building.

"Employers have a duty to pick a good choice for their employees overall," says Carson. "It's a great solution for people who don't have somebody to advise them and don't want to keep up on what they invest in themselves."

Don't forget about debt

The next step on the road to retirement is ensuring you don't bury yourself under credit card debt. According to Bankrate, nearly half of credit card holders have debt, and of that cohort, 53% have been in debt for at least a year. Before jumping to outdo your employer match, Carson advises workers to focus on paying off their credit card debt, stressing that the card's high interest rates likely beat out whatever growth is yielded on their retirement accounts. 

Save for healthcare

If an employee is comfortable with having a high deductible health plan, then they will likely gain access to a health savings account, or HSA. HSAs are lauded for offering a triple tax advantage: Contributions to the account are tax-free, the money in the account can be invested and grow tax-free, and withdrawals for qualified healthcare costs are tax-free, too. Granted, depending on someone's annual healthcare needs, a high deductible health plan may do more harm than good, but employees should carefully weigh the pros and cons. 

"If you don't have to use your [HSA], and you can let that money sit there, you can use it to pay for your healthcare expenses in retirement," says Carson. "It is the most tax-efficient way to do that and is an absolutely fabulous account type."

Read more: 10 best and worst states to retire

Beyond HSAs, Carson doesn't recommend that workers try to save with a specific number in mind for their healthcare costs during retirement. If the worker in question is young, Carson encourages them to just focus on saving for their overall retirement goals, noting that she isn't confident in what Medicare will look like that far down the road. 

For generations closer to retirement, namely Gen X and boomers, Medicare and Medigap (supplemental insurance that fills gaps Medicare doesn't cover) costs should be identified and planned for. For example, Carson estimates that a Medicare plan plus the most expensive Medigap plan will cost $7,000 a year. Add a 6% year-over-year inflation rate, and older workers will have some idea of what they'll need. 

As for long-term care, Carson recommends that once workers hit their 50s, they start looking into insurance products they may need during retirement. Finding the right long-term care insurance may require a conversation with family and friends about whether they can help as caregivers and to what extent. It's another cost to account for, but hopeful retirees need to add it to the list, says Carson. 

The future of Social Security

While many Gen Z and millennial workers admit they have little confidence in the existence of social security in their retirement, Carson does have some good news.

"It's a myth that young workers will get nothing from Social Security," she says. "Even if Congress does nothing, there's projected to be enough payroll taxes to fund 73% of social security benefits for the next 75 years." 

Carson is confident that Congress will act closer to 2033, when Social Security's Old-Age and Survivors Insurance Trust Fund is expected to run out. However, Social Security wouldn't cease to exist regardless. Instead, Americans would just face a cut in benefits — given that the average retiree received $1,920.48 per month in 2024, that doesn't bode well for anyone who may need to rely heavily on the benefit. But young workers can expect to see some money come their way, says Carson. 

Read more: The retirement race: Women have less saved than men

No matter how you cut it, saving for retirement won't be easy. Carson advises hopeful retirees to start and start small. They don't have to know everything about retirement plans, Medicare and investing to successfully save for their futures. 

"Start early and increase as you go a little at a time," says Carson. "It's often recommended that you contribute 15% of your salary up front, but a lot of people can't. But you can get your savings rolling."