What Are The First Steps Of Retirement Planning

by | Mar 28, 2023

Retirement planning is an important part of long-term personal financial health.

It involves determining how to maintain the best goals, such as setting yourself up for a comfortable retirement, selecting the right investments, and ensuring you have enough saved to continue enjoying your lifestyle without worrying about money.

Planning early and often is essential. While it may seem too far away now, retirement will be here before we know it!

Knowing where to start can be daunting, but this blog post will provide actionable steps toward reaching those goals with ease.

You’ll learn key elements like why having specific objectives in mind before investing matters, selecting the right investments that can benefit your household income in retirement, prioritizing different financial goals for your financial well-being, and more.

Continue reading if you’re ready to begin arming yourself with everything needed to create a successful retirement plan!

Decide Your Retirement Age

The most typical retirement age is sixty, but it can range from individual to individual.

Some would like to continue working past sixty, while a select few might prefer to retire as early as fifty-five. Ultimately, it’s simply a personal preference.

Accurately predicting your retirement age is a significant process, as once you reach it, your usual earnings will either cease or markedly decrease (if you qualify for a pension).

Thus, relying on your savings and investments would best meet your post-retirement requirements.

If you are 25 and want to retire at 50, you have 25 years to plan. It is important to consider your retirement now, as this timeframe can seem short.

Starting early will allow you to more easily determine what financial resources, investments, and savings plans will be necessary for a successful retirement.

Furthermore, the earlier you begin planning for retirement; the more options are available for securing an adequate lifestyle after leaving your job.

Life expectancy is a significant factor when determining the age at which you will retire.

This refers to the estimated years you can expect to live based on medical conditions, age, family history, and other demographic details.

Determine Retirement Funds Needed

The funds you require to retire are based on various elements, including your current income and outgoings and the anticipated alteration in those costs once you have retired.

It’s important to consider how much money you will need for daily living when planning for retirement, such as paying rent or mortgage payments and bills, buying groceries, and covering healthcare costs.

Your retirement lifestyle choices should also be considered, whether you want to travel or stay home more often.

These elements combine to form the total savings necessary for a comfortable retirement.

  • You should save a significant portion of your income to achieve a successful retirement. Generally, it is suggested that you will be able to obtain around 70-90% of your pre-retirement income through savings and Social Security before retirement. Therefore, individuals need to plan and accumulate enough funds to maintain their desired lifestyle after they retire.
  • A retiree expecting to receive an annual gross income of $63,000 before retiring should anticipate needing between $44,000 and $57,000 annually during their retirement. This amount will likely be lower than the amount of money they were bringing in before entering retirement. However, it should be enough to cover living expenses while ensuring a comfortable lifestyle.

Prioritize Your Financial Goals

Retirement may be one of many financial goals for many individuals; other objectives, such as eliminating credit card debt or student loan payments and creating a robust emergency fund, may take precedence.

Establishing these goals before retirement is essential to secure a comfortable financial future.

It is highly recommended that you plan for retirement and start a savings fund simultaneously, especially if you have access to an employer-sponsored plan with a matching contribution program.

By taking advantage of this opportunity, you can exponentially increase your savings.

Saving for retirement is one of the most important financial decisions you will make, so it’s essential to begin planning and contributing early on.

Select Your Retirement Investments

Retirement accounts, for example, opening a taxable investment account, can provide various investments, including stocks, bonds, and mutual funds.

Choosing the ideal combination for your particular needs depends on how long you have until you require access to the money and your attitude towards risk-taking.

Some retirement account holders may opt for a more conservative approach with low-risk investments depending on these two factors.

In contrast, others may be willing to take greater risks to reap higher returns potentially.

  • Generally, investing assertively and with great energy when young is wise. Over time, as you approach retirement age, it becomes prudent to reduce the risks associated with your investments and become more conservative in your investment strategies. This allows for greater security as you transition toward retirement and ensures that your savings will be available when needed. Since you have plenty of time, to begin with, the negative impact of brief market downturns can be mitigated, and your savings should take advantage of the long-term growth typically seen in stock markets. As you switch jobs, expand your family, face stock market fluctuations, and approach the date of retirement, investing for retirement adapts with you.
  • If you want to take ownership of your retirement savings, it is possible to do so with only a few cost-effective mutual funds. You can get a little into investment management. However, enlisting a financial advisor’s services is viable if you prefer professional guidance and investment advice.

Downsize Your Debt

You could look into ways to speed up payments so that you can pay off your mortgage before retirement.

Another option to prevent taking on new credit card debt is to use cash for big-ticket items rather than using credit. You can minimize interest payments on retirement income by making yourself debt free.

Anil Suri, the managing director in the Chief Investment Office at Bank of America, states that paying off a credit card with an interest rate of 15% would be identical to making a risk-free investment and earning a 15% return.

Cut Down On Unnecessary Expenses

If you cannot gather the necessary funds, one potential solution would be to cut down on non-essential expenditures.

This could mean forgoing entertainment activities regularly, refraining from dining out or purchasing items impulsively, and avoiding overseas excursions.

Reducing these costs can assist you in investing more and getting nearer to your desired corpus.

Start The First Steps Of Retirement Planning

Now that you know the first retirement planning steps, it’s time to start saving. The sooner you start saving for retirement, the better off you will be.

If you have any questions about retirement planning, be sure to consult with a financial advisor. They can help you create a customized plan that meets your specific needs.


  • Scott Hall

    Scott realized about 5 years ago that he was woefully behind on retirement savings and needed to catch up. He began writing about it on Assets.net

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