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Your Retirement Planning Guide: 8 Steps to a Better Future



Asier Romero /

Editor’s Note: This story originally appeared on NewRetirement.

Retirement planning is probably not on your top-10 list for how to spend your time. However, getting your hands around your finances and planning a secure future retirement can make you feel great. And, it doesn’t have to be hard. Here is your complete retirement planning guide.

This simple plan will help you feel better — and less stressed — about retirement.

Whether your are fabulously wealthy or just getting by, this retirement planning guide will help you discover your path to a secure future by:

  1. Choosing how you want to plan
  2. Documenting where you are/what you have now
  3. Setting goals for your money and — more importantly — time
  4. Assessing the strengths and weaknesses of your plan
  5. Making trade offs, if necessary
  6. Building confidence by planning for unknowns
  7. Looking for opportunities for more wealth
  8. Maintaining and updating your plans over time

Step 1: Choose How You Want to Plan Now for Your Future Retirement

Senior couple doing retirement planning and math
wavebreakmedia /

We’ve outlined the steps for retirement planning. Sure, you can kind of do some of these things in your head, but you will feel better if you formalize the planning process.

Managing your finances month to month is okay for the short term. However, maintaining a long term written plan is critical for a secure and successful future. You have three main options.

A. Create your own spreadsheet

Couple planning their investments
fizkes /

Lots of people do this, but doing it well can be challenging.

B. Do it yourself with the help of an online tool

Couple looking at a laptop at their kitchen table
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While a simple retirement calculator won’t cut it, sophisticated and comprehensive online retirement planning resources can facilitate the process of creating a reliable retirement plan.

Online budgeting apps and investment tools are common, but what you are looking for is an online do it yourself planner that has a comprehensive set of inputs and detailed charting and analyses.

C. Hire a financial or retirement advisor

Older couple with financial planner
EdBockStock /

Many people benefit from having an advisor walking them through the process.

Advisors typically charge anywhere from $500 to thousands, depending on how complicated your situation is and whether or not you want tax planning and investment advice or not.

Step 2: Start With Where You Are and Resources You Have Now

A man plans his finances on his laptop and with notes
Rido /

“You can’t really know where you are going until you know where you have been.” — Maya Angelou

Documenting where you have been and where you are now is the first step to achieving a secure retirement.

You need to write down what you have in terms of time and money. This is the first step to achieving a secure future. This should be an easy step. And, as a big bonus, it is proven to reduce stress and make you feel better and more confident about your future.

However, you can’t really feel good about your retirement plan until you add a lot more detail. At a minimum, you want to make sure that you:

  • Accounted for your spouse’s information separately from your own
  • Included all sources of future retirement income: retirement jobs, pensions, annuities, income from investments, passive income and more
  • Documented inflation rates for general expenses, medical cost and housing — these typically rise at different rates
  • Thought carefully about your expenses and how they will change over the 20-30 years you’ll be retired
  • Budgeted any big one time expenses
  • Documented debts and how you are paying them off
  • Included all of your retirement accounts, the rate at which you are saving into them and their rates of return

Step 3: Set Concrete Goals for Now and Your Future

Happy couple doing taxes budgeting
Dean Drobot /

Retirement planning shouldn’t be entirely about savings accounts and calculations.

How you spend your time is an undervalued aspect of retirement planning. Think about it. You could probably retire right now — you would just live very frugally. You could set a goal to retire early and need to make some trade offs now to achieve that goal. Or, you could opt to work well past age 65.

Retirement — especially a “new” retirement — is not so much about how much money you have, it is also about what you want to be doing, when and with whom.

Without a plan for life after retirement, many retirees find themselves feeling vaguely unfulfilled and restless, craving something more but not knowing what that something might be. Focusing on the financial aspects of retirement is important, but the personal side of your retirement plan is just as important, and could ultimately guide how you use your retirement assets.

Thinking about what you want from your future can help you find the motivation and willpower to make the kinds of trade offs you will need to make.

Learn more about how to set short-, medium- and long-term financial goals.

Step 4: Assess if Your Plan Right Now Offers You a Secure Future

Middle-aged worried couple
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Once your plan is detailed enough, you will want to take a really hard look at whether or not you are all set. Is your future secure?

  • When — if ever — do you run out of money?
  • How balanced is your cash flow? Do your expenses exceed income?
  • Are you tapping savings at an unsustainable level?
  • How much savings do you have now? What will the value be of those savings next year and all the years thereafter?
  • How much should you have saved now? What are the benchmarks for future years?

However, don’t worry if you are not yet secure. Very few people just so happen to naturally have a perfect financial plan where they can automatically drift off into a blissful retirement without a worry in the world.

With the remaining steps, you will discover how to find your path to the secure future you want.

Step 5: Make Optimizations and Trade-Offs

Happy couple talking about their finances.
Ground Picture /

Now, here is where retirement planning can get fun.

Think of planning a secure future as playing sudoku or a video game. You just need to find the right combination of elements that meet the intersection of your goals, interests and resources (time and money).

You have many more levers for achieving a secure retirement than just saving more:

  • Roth conversions and other tax optimizations can save you money.
  • Delaying the start of Social Security can literally gain you hundreds of thousands of dollars over your lifetime.
  • If you own your home, you can tap your home equity for retirement, gaining you more thousands — if not millions to use for retirement.
  • Planning to reduce expenses in retirement can dramatically improve your retirement cash flow. (Downsizing or retirement abroad could also enhance your lifestyle.)
  • What about having a retirement job?
  • Could you delay your retirement by a year? Move it up three years?
  • Accelerating debt payoffs can sometimes be a better use of money than saving into your 401(k).
  • Passive income is an increasingly popular strategy for boosting wealth?

Run as many different scenarios as possible, until you come up with the right combination of factors that gets you to the retirement you want.

Step 6: Build Confidence by Planning for Unknowns

Woman with a computer and notepad at home
Ground Picture /

So, your plan is really coming along. Now you will want to build confidence in your plan by answering the following questions.

A. Do you have enough with both optimistic and pessimistic projections?

Couple shopping online
Fergus Coyle /

There are a lot of things that you need to know to predict your financial security. The trick is that some of these things you can’t actually know. You need to make guesses about inflation (general, medical costs and housing) and returns on investments.

One way to feel confident about your future when there are so many unknowns is to create an optimistic as well as a pessimistic scenario.

If you have not achieved these metrics, you may want to look at working longer, getting a retirement job, reducing expenses, tapping home equity, boost Social Security benefits, improve investment returns, save more, establish passive income and more.

Unlike many calculators, the NewRetirement Planner lets you set all of these assumptions — both pessimistically and optimistically — for yourself.

B. Do you have an income plan? Have you guaranteed enough of your income?

Happy senior couple using computer at home
Goksi /

Once you have established a plan that suggests that you will be secure with both optimistic and pessimistic assumptions, you may want to strive to establish a more detailed retirement income plan.

You will want to answer the following questions:

  • Does your income cover your expenses?
  • What sources of income are you relying on?
  • What level of certainty do you have that you can work as long as you intend to work?
  • If you are relying on withdrawals from savings, have you protected those savings from stock market fluctuations?
  • If you have a pension, does the company have the funds to pay that pension?

Perhaps most importantly, you should consider whether or not you want to guarantee adequate income to cover your expenses. Social Security, pensions and annuities are guaranteed — you will receive them for your lifetime. Most other sources of income are not completely reliable.

C. Can you afford medical care?

Senior couple using a tablet
Chaay_Tee /

The average lifetime out-of-pocket cost of health care for a 65-year-old couple retiring today is $285,000.

That amount is more than most people have in retirement savings.

A few tips for tackling medical costs in your retirement plan:

  • Be sure you understand if medical costs are being calculated and, if yes, how.
  • Actively shop for the best Medicare supplemental policy each and every year. Your health will change and the policies change. It is worthwhile to rethink your coverage annually.

D. What about the potential for a long-term care need?

Worried woman with bills
Monkey Business Images /

Out-of-pocket medical costs can be staggering. However, they won’t cover what might be the biggest health care cost in retirement — a long-term care need.

About 70% of people who turn age 65 will need some type of long term care in their lifetime, according to the U.S. Department of Health and Human Services, but few are prepared to pay for that care.

Strategies for funding these costs include:

  • Buying long-term care insurance
  • Funding an old age annuity
  • Using savings if you have them
  • Relying on family members
  • Downsizing

E. Have you anticipated any other potential gotchas?

Upset senior with laptop
fizkes /

We are covering a lot on this checklist for retirement planning, but you still need to be prepared for other gotchas — expenses you might not have anticipated. You should also be prepared for “give-yas” — unexpected windfalls.

Here are two considerations:

Have an emergency fund: A survey released by the Federal Reserve Board found that 47% of American consumers report they would not be able to come up with $400 for an emergency without borrowing or selling something. That’s half of the country living in a continual state of financial peril. You need to have readily available funds to use if your car breaks down, a family member needs help, natural disaster strikes or some other emergency arises.

Think through your future spending: Imagining your future in as much detail as possible can help you budget appropriately for retirement. A few things to consider:

  • Will your kids graduate college and hopefully be on their own so your budget will be freer?
  • Are you prepared to help your own parents with a long term care need?
  • Will you receive an inheritance?
  • Might you sell your vacation home at some point?
  • Is there a possibility for divorce or remarriage?
  • Are you ready for the death of a spouse?

Step 7: Look for Opportunities for More Wealth

A man in his office watching the stock market.
Kateryna Onyshchuk /

One of the final phases of for retirement planning is about maximizing your wealth — growing or getting as much out of your money as you can.

A. Do you have the right asset allocation?

Multiple piggy banks
Axel Bueckert /

Depending on your financial situation, you may have very different asset allocation goals.

Some people can live comfortably off income from their assets. Others can grow their net worth — even after retirement. And, still others need to make withdrawals to make ends meet.

You need to make sure that your asset allocation strategy really meets your specific goals. Learn about creating an investment policy statement or consider working with a financial advisor to help you position your savings to really maximize your wealth.

B. Have you minimized tax liabilities? Maximized tax efficiencies?

Woman accountant or tax expert or businesswoman using a laptop and a calculator to do finances or tax paperwork
Andrey_Popov /

The average American pays about $10,500 a year in total income taxes — federal, state and local. Of course, many households pay a lot more and some people pay nothing at all — depending on your income level.

Ten thousand dollars is a big chunk — about 14% — of the average budget. So, if you think about it, taxes can be a bigger lever in your budget than investment returns, cutting expenses or waiting to claim Social Security for a bigger benefit check.

C. Have you established an adequate estate plan?

estate planning
Tiko Aramyan /

What is your goal for leaving an estate?

Make a list of all the documents you need to create and maintain for an adequate estate plan.

D. How will you optimize housing?

Keys on a counter or table.
Maryia_K /

Where you live — your community and the walls around you — has a profound impact on your well being. Your home is probably also your single greatest expense and, if you own, it’s your most valuable asset.

Therefore, optimizing housing for retirement ranks close to the top in terms of the best retirement plans.

Here are some considerations:

  • Research the best place for retirement (for you)
  • Explore housesharing
  • Downsize — reduce costs and the emotional burden of a large home.
  • Can you be happy in a tiny home?
  • What about retirement abroad?
  • If you already like where you live but need access to money, you might want to explore the pros and cons of a reverse mortgage?
  • Would you ever consider a mobile home park? (Time Magazine calls it the home of the future!)
  • Become a traveling gypsy, live aboard a cruise ship or crisscross the nation in an RV?
  • What about a retirement community?
  • Could you, would you enjoy moving in with family?

Step 8: Keep Your Plan Updated and Continuously Make Adjustments

Happy senior couple saving money and budgeting or doing math for retirement income
aslysun /

The final phase of this retirement planning checklist is all about keeping your plan updated and making the necessary adjustments based on how your situation changes.

You should evaluate and update your whole plan and do a retirement check every time there is a change to any aspect of your health, finances or lifestyle. Small changes can have a big impact over your lifetime.

In addition to assessing your retirement plans when things change, a quarterly retirement check in can be an excellent way to keep your financial future on track.

After all, the economy marches onward. You will want to check to make sure that your:

  • Investments have grown in the way you expected
  • Projections for inflation are tracking as projected
  • Debt is being paid down as anticipated
  • Spending, saving and earning rates are tracking as you planned they would

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