Saving for retirement is a financial goal workers of all ages should prioritize. Early and consistent contributions to 401(k)s and IRAs are a good way to establish a substantial retirement nest egg.

However, many Americans struggle to understand the nuances of overly complex employer-sponsored retirement plans and inadvertently leave money on the table.

Over time, not maximizing retirement contributions can translate into hundreds of thousands of dollars missed out on and shape the quality of your retirement plans.

💰💸 Don’t miss the move: SIGN UP for TheStreet’s FREE Daily newsletter 💰💸

Though most Americans have a retirement plan, many feel behind on their retirement savings goals. Balancing competing financial priorities and increased prices from inflation has made it difficult to focus on planning for the future.

Despite financial headwinds, workers have still been able to set money aside for their retirement accounts. However, it may not be enough to reach an account balance that can last them throughout their entire retirement.

Americans are saving for retirement, but it may not be enough

Most workers note that saving for retirement is their biggest financial goal, and 89% are saving through their employer-sponsored retirement plans.

However, most Americans only save an average of 9% of their annual salary in their 401(k), falling short of the 15% recommended by experts. Fidelity estimates that the average worker would need a yearly retirement income between 55% and 85% of their working salary.

Those who start saving for retirement later in their careers will have to increase their contributions to compensate for the time lost and compound interest.

More on retirement strategies:

• Tony Robbins warns Americans on Social Security mistake to avoid
• Dave Ramsey has blunt words on Medicare for retired Americans
• Suze Orman offers candid advice on Social Security for retirees

Fidelity estimates that a 35-year-old worker who has just started saving for retirement would need to contribute 23% of their salary to their retirement plan, as opposed to the 15% savings rate that would be sufficient for a worker beginning to save at 25.

Identifying how many years you’ll need to live off of your retirement savings is the main variable — and biggest unknown — in determining the ideal retirement savings goal.

More than half of workers believe they can withdraw about 10% of their account balance per year once they hit retirement, but the standard withdrawal rate typically falls between 3% and 4%.

The ideal 401(k) and IRA withdrawal rate depends on a few factors

Morningstar estimates that 3.7% is the highest ‘safe’ withdrawal rate from a retirement investment portfolio as of 2024. However, each person’s withdrawal will depend on their account balance, expenses, and planned retirement income.

While most people have a retirement savings plan, having a retirement spending plan is less common but equally important.

Related: Suze Orman warns U.S. workers on Social Security, 401(k) change

Bob Powell, CFP and editor at TheStreet’s Retirement Daily, recommends that every senior create a retirement policy statement.

“If you’re retired, you need a policy statement that says, ‘This is how I plan to withdraw money. This is how I plan to monitor my withdrawals,'” Powell said. “’ This is how I plan to monitor my investments, this is how I will adjust my withdrawal rate, and how I’ll adjust my asset allocation in retirement should x, y, z happen.’”

“You should create not just one plan but three: a best-case scenario, a worst-case scenario, and a probable-case scenario.”

Related: Veteran fund manager issues dire S&P 500 warning for 2025