10/13/2014 04:09 pm ET Updated Dec 13, 2014

Baby Steps to Retirement

People fail at retirement planning for a variety of reasons, but one of them is that they get overwhelmed by the sheer size of the task. After all, when you calculate how much money it will cost to fund a comfortable retirement, reaching that goal can seem like scaling Everest.

It helps to break the retirement saving process down into a series of component parts. After all, even the most experienced mountain climbers take on Everest in stages, and they get there in what are virtually baby steps, rather than trying to reach the summit in a single leap.

A journey of a thousand miles

If you take a stage-by-stage approach to retirement savings, here's how you can fund your retirement in baby steps:

  1. Avoid early debt. With student loan debt outstanding now exceeding $1.2 trillion dollars, this is easier said than done. In addition to that burden, many young adults make the mistake of racking up excessive credit card debt early on. Student loan debt can be a worthwhile investment if you are able to lay out a realistic repayment schedule, but just blindly taking on debt to stay in school can put your retirement savings behind schedule before it even gets started. If the Everest of retirement savings seems like a big mountain to climb, imagine how it looks if you start by digging yourself a deep hole.
  2. Start retirement plan deferrals from day one. As soon as you are eligible to participate in a retirement plan, start deferring some part of your pay into the plan. Don't wait till you have a concrete retirement savings target figured out. This step is important, but the reality is that most people don't go through the process until they have been working several years. On day one, the idea is to get started in the right direction -- you can worry about the pace of your progress later on. Early savings have the greatest opportunity to grow, and if you get in the habit of directing some of your paycheck toward retirement savings from the start, you'll never miss that extra cash.
  3. Use raises to maximize deferrals. There are both individual plan guidelines and IRS rules that put a ceiling on how much you can defer each year, and your goal should be to reach that ceiling as soon as possible. The best way to do this is to use a healthy portion of your raises to up your retirement deferrals. That way, your daily budget never has to take a step back.
  4. Make some concrete projections. Start to figure out specific retirement savings assumptions about 10 years into your career. By that time, you should have enough of a handle on your career to make decisions about what kind of lifestyle you are going to want in retirement.
  5. Calibrate your projections. A great deal can change on the way to retirement. Investment surprises, career successes and disappointments, and life events can all influence what you want and need out of retirement. Don't keep following a plan you set in your early 30s when you know more about the future with each passing year.

Taking a series of slow cautious steps requires great patience, but the most important step is the first one. No goal was ever reached without the decision to get started.

Also by Richard Barrington:

5 Ideas For A Thrifty Retirement