Understanding your Retirement

What is a Retirement?

A Retirement is a tax-advantaged retirement savings plan offered by public schools, non-profit organizations, and some government employers. It works almost identically to a 401(k) — the main difference is who offers it. If you work at a hospital, university, school district, or non-profit, your workplace retirement plan is likely a Retirement.

Contributions are made pre-tax directly from your paycheck, which lowers your taxable income today. The money grows tax-deferred, meaning you don't pay taxes on gains until you withdraw in retirement — ideally when you're in a lower tax bracket.

Some employers also offer a Roth Retirement option, where contributions are made after-tax. You don't get the upfront tax break, but withdrawals in retirement are completely tax-free — often the better choice if you expect to be in a higher bracket later.

How it works

Pre-tax contributions

Every paycheck, a percentage you choose gets deposited into your Retirement before income taxes are calculated. If you earn $75,000 and contribute 6%, that's $4,500/year going into your account — and your taxable income drops to $70,500.

Employer match

Many employers match a portion of what you contribute. A common structure is "100% match up to 6% of salary" — meaning if you put in 6%, they put in another 6%. Some employers, like yours, offer a flat match regardless of your contribution. Either way, the match is free money and should be captured in full before anything else.

Investment growth

Once inside your Retirement, your money is invested in funds you choose — typically a mix of stock index funds, bond funds, and target-date funds. Over decades, compound growth turns modest contributions into substantial balances. The S&P 500 has returned roughly 10% annually before inflation (about 7% inflation-adjusted) over the long run.

Withdrawals

You can begin taking withdrawals at age 59½ without penalty. Withdrawals are taxed as ordinary income. Required Minimum Distributions (RMDs) kick in at age 73, meaning you must withdraw a minimum amount each year whether you need it or not.

2025 contribution limits

Source: IRS Rev. Proc. 2024-25. Limits typically increase with inflation each year.

These limits cover your contributions only. Employer contributions are separate and do not count against your limit.

How Americans are saving — the data

Here's the real picture of where Americans stand on retirement savings, using the most recent available data. A key thing to understand: averages are skewed upward by high earners. The median — the middle value — is a more honest reflection of where most people actually are.

401(k) / Retirement balances by age (2024–2025)

Sources: Empower Personal Dashboard (2025), Vanguard How America Saves (2025), Fidelity Q4 2025. Note that Empower figures include users of their financial dashboard who tend to be more financially engaged than average Americans.

Contribution rates

The "magic number" myth

Americans say they need $1.26 million to retire comfortably (Northwestern Mutual 2025). The median retirement savings for those aged 55–64 is $185,000. That gap is stark — and it's exactly why starting early and being consistent matters so much more than any single investment decision.

Debt context by age group

Debt competes directly with retirement savings. Here's where Americans stand on debt by generation, which affects how much is realistically available to save.

Sources: Experian Consumer Debt Study June 2025; Self.inc / NY Fed 2025.

Gen X carries the most total debt of any generation and also has the least time before retirement — making their savings challenge the steepest. Millennials hold the highest average mortgage debt, reflecting recent home purchases at elevated prices and rates.

How much should you save?

The most widely cited guidance is 10–15% of gross income, including any employer match. Here's how to think about it in practice:

• Minimum: capture the full employer match. If your employer matches 10% of salary, contribute at least enough to get that — it's the highest-return "investment" available to you.
• Target: 15% total (your contribution + employer match combined). At this rate, starting in your 20s or 30s, you're on track for a comfortable retirement.
• Catch-up: 20%+ if you're behind. If you're in your 40s or 50s with less than the benchmarks above, increasing contributions aggressively now can close a significant gap.

Fidelity's salary-multiple benchmarks

Source: Fidelity Investments retirement guidelines. Assumes retiring at 67 with a 45% income replacement target from savings.

Practical tips

Start early, increase gradually

Time is the most powerful variable in retirement savings. $100/month at age 25 becomes roughly $350,000 by 65 at 7% growth. The same $100/month starting at 45 becomes only about $52,000. Start now at whatever rate you can, then increase by 1% each year — you'll rarely notice the difference in your paycheck.

Use the calculator to find your number

The most useful thing you can do right now is open the Retirement calculator and model your specific situation — your salary, current balance, employer match, and expected retirement age. A few minutes of input gives you a personalized projection that general advice can't match.

Increase contributions after a raise

When you get a salary increase, direct at least half of it toward your Retirement before lifestyle expenses expand to fill the new income. This is the single most effective habit for long-term savings growth.

Don't panic in market downturns

Only 5.4% of Fidelity participants changed their asset mix during the volatile Q4 2025 — a wise majority. Retirement accounts have decades to recover. Selling during a downturn locks in losses permanently.

Consider a Roth Retirement if available

If your employer offers a Roth option and you're earlier in your career (lower tax bracket now, likely higher later), the Roth is often the better choice. Tax-free withdrawals in retirement can be extremely valuable, especially if tax rates rise over time.

Common mistakes

• Not contributing enough to get the full match. This is leaving free money on the table — the single most common and costly retirement mistake.
• Cashing out when changing jobs. Taking a lump-sum payout when leaving an employer triggers taxes plus a 10% penalty. Always roll it over to an IRA or new employer's plan.
• Staying in the default investment. Many plans default new participants into a money market or stable value fund. Check that your contributions are actually invested in a diversified fund — ideally a low-cost target-date fund or index fund.
• Ignoring fees. A 1% higher expense ratio on your funds can cost you 20%+ of your final balance over 30 years. Look for index funds with expense ratios below 0.10%.
• Not increasing contributions over time. Starting at 3% and never adjusting is a common pattern. Set a calendar reminder to increase by 1% every January.

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