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7 Steps to Retirement Planning


Retirement planning requires a long-term approach and discipline.  Although the objective is simple, the process is complicated.

The Objective: amass enough funds and assets to live comfortably in retirement

The Process: plan before retirement, stick to the plan pre- and post-retirement, effectively execute the plan during retirement.

Planning for retirement begins with thinking about your retirement goals.  Ask yourself these retirement questions.

Retirement Questions

  • At what age would you like to retire?

  • Where would you like to live?

  • What activities or hobbies would you like to pursue?

  • How much money will you need monthly, or annually, to live the life you want to live?

  • Do you have debt (e.g., credit cards, mortgage, student loans) and will you carry that debt into retirement?

  • Will you retire with a spouse or partner? (If yes, involve them in the planning process.)

  • Will you care for dependents (e.g., children, grandchildren, or parents) during retirement?

  • What healthcare expenses do you expect to have during retirement?

  • Based on life expectancy and heath factors, how long can you expect to be in retirement? (This question sounds morbid but, depending on the age at which you retire and your health status, you may spend 20 or 30+ years in retirement.)

  • How long do you have to meet your financial retirement goals? (The answer to this question will determine whether you need to accelerate your planning process and savings goals.)

You may not have all the answers right now.  Yet, no matter your age, you should start visualizing your ideal retirement life.

After thinking about the questions above (and hopefully answering some of them), you are ready to begin the seven steps of retirement planning.

    1. Start Now

      Whether you are decades from retirement or a few years from retirement, now is the best time to start saving and planning.  If you want those decades of retirement to be relaxing and enjoyable, the last thing you want to stress about is money.

      Younger planners have the advantage of time on their side.  They can take advantage of compound interest and make riskier investments.

      Older planners have the advantage of knowledge and experience on their side.  They can better visualize their retirement futures, answer retirement questions, and verbalize their retirement goals.

      Whether you are a younger planner or an older planner, a plan is essential to charting your retirement course.  If you don’t save and plan for retirement, you may have to work longer than you want.  While in retirement, one financial emergency may put you in debt or force you to downsize to make ends meet.

      If you don’t plan, you are at risk of foregoing your retirement dreams and living a life you don’t want to live. 

        2. Participate in Your Employer’s Matching Program

          If you are fortunate enough to have an employer who matches your retirement contributions, participate in the program to the maximum extent possible.  For example, if an employer matches up to 5% of your contribution, contribute 5%. 

          If you contribute 2%, your employer will match your 2%.  But why settle for 2% when you can have 5%? 

          I’ve heard people say they can’t afford to participate in matching.  The reality is you can’t afford not to participate.  Can you name another time when your employer will give you money because you are investing in yourself and your future? 

          Once you are vested (i.e., you have worked for the company for a specified amount of time and you are eligible to keep all of your employer’s contributions without penalty), that money is yours.  If you leave the company, you can take your contributions and your employer’s contributions with you.  That’s a win-win situation (for you anyway).

          It is your responsibility to plan for your retirement, not your employer’s.  Take advantage of matching.

          Note: Check with your employer to find out when you will become vested.  Vesting periods vary by company.  At some companies, employees are vested on the first day of employment.  At other companies, employees are vested after a few years.

            3. Steadily Increase Your Contributions

              If you are not able to contribute the full matching percentage or amount, steadily increase your contributions every year, every quarter, or whenever you get a raise or bonus.

              If you are able to contribute the full matching percentage or amount, the same rule applies – continually increase your contributions.

              Your employer may even have a system in place whereby your contributions will automatically increase by 1% every year until you reach a specific contribution percentage.  Find out if your employer offers automatic increases and ask how you can activate the process.  An automatic process will make it easier for you to increase your contributions and reach your financial retirement goals.

              Steadily increase your retirement contributions until you have maxed out what you can afford to contribute or until you reach the maximum contribution amount allowed by law. (Yes, there are limits and they may vary from year to year.)

                4. Contribute as Much as You Can

                  Notice I did not say increase your contributions until you reach the maximum percentage your company will match.  Instead, increase your contributions until you are putting as much money towards retirement as you can afford.

                  Can you afford to contribute 6%?  8%?  10%?  If you can, do it.  The interest on your investment should compound and grow as the length of time you are invested increases.

                  What happens if you can’t sustain the contribution percentage or you have a life event that requires you to use those funds for something else?  That’s easy.  Decrease your retirement contributions. 

                  Contribution percentages aren’t set in stone.  You can move them up and down as needed.  Check with your employer to find out if there are restrictions on when or how often you can adjust your contributions.  Also ask how long it takes contribution changes to go into effect.

                  Contributing as much as you can, when you can, will set you on the path to a more comfortable retirement.  You do not have to forsake all leisure and recreation in the present in preparation for your retirement in the future.  However, by building your nest egg now, you will create a cushion for those times when you are not able to contribute as much towards retirement.

                    5. Determine How Much You’ll Need to Live Comfortably

                      Are you looking forward to traveling the world when you retire?  Or are you planning to spend long, tranquil days fishing at the lake near your home?  Your activities during retirement will determine how much money you will need to live comfortably.

                      Depending on your retirement goals, you may need a lot of money, or you may need very little money.  For example, travelers and explores, do you plan to travel first class and stay at 5-star hotels?  Or will you take your fully paid for RV on a trip that never ends?  For fishing fans and nature lovers, will you need new equipment and gear every year?  Or will your old equipment do just fine?

                      Write down possible expenses you will incur during retirement.  Create a financial plan that accounts for housing, medical care, insurance, food, utilities, leisure activities, emergency funds, cost of living increases, and any other expected expenses.

                      Use your financial plan as the basis for estimating your living expenses.  This estimate will help you determine how much you need to save for retirement, and how much you will need to withdraw from your investments during retirement.

                      Before retirement, review your plan at least once a year to ensure you are not missing important expense categories.  During retirement, review your plan at least twice a year, or as your situation and needs change.

                        6. Pay Off All Debt

                          Before you hit the I’m officially retired button, pay off all of your debt.  When you retire, your income will likely decrease.  Even if you plan to receive an annuity, social security, or other types of income during retirement, your post-retirement incoming funds probably won’t total 100% of your pre-retirement incoming funds.  Furthermore, depending on the state where you retire, you may have to pay taxes on your retirement income.

                          In preparation for a decreased income, pay off your mortgage, auto loans, student loans, consumer loans, credit cards, and other longstanding or recurring debt.  You may be excited about retiring, but your lenders won’t be concerned about your new status.  They will want their money, and you are honor-bound to pay it.

                          If you decide to retire without paying off your debt, contact your lenders before you retire.  Ask them about payment plans and reduced payment options.  Most lenders will be willing to work with you to ensure you can still pay your bills on time.

                          If you do pay off your debt, put your extra monthly funds (i.e., the money you would have spent on bills) in an interest-bearing account, an emergency fund, or a fun fund that you can dip into during retirement.  If you have extra funds on hand during retirement, you will be able to live more comfortably and worry-free.  Additionally, if there is an emergency, you will have cash reserves, and you may not have to use your retirement funds to cover an emergency situation.

                            7. Call Around and Ask Questions

                              Talk to people from different financial agencies and institutions, even if you don’t plan to invest your retirement funds with them.  Learn what they have to say.  Ask them to send you retirement information.  Prepare a list of questions and compare their answers.

                              Yes, you can call and ask questions without making a commitment.  After your conversation, you may decide to invest with that company.  Or you may decide that company is not right for you.  In either case, the goal is to learn as much as you can, which will enable you to make the right decision for yourself. 

                              During your calls, remember that the agent’s job is to get you to open an account.  Do not let them pressure you into making a decision on the spot.  At the beginning of the conversation, let them know you are calling to learn and get more information.  Be honest and tell them you are not yet ready to make a commitment.  Start your inquires by stating that your goal is to learn; most agents will be kind, courteous, and willing to answer your questions.

                              In addition to calling companies, participate in multiple retirement planning meetings, seminars, and webinars.  These meetings may be hosted by your employer, someone else’s employer, or offered by a retirement or investment company.  Many employers and investment companies offer seminars and webinars that are open to the public.  Some even post online videos and transcripts from their meetings.  If you are not able to attend a meeting in person, search online for free content.  There are a lot of good videos and webinars available from reputable companies.

                              I have learned a lot by attending retirement sessions and webinars.  Each time I attend one, I learn something new (or am reminded of something I have forgotten).  The more I learn about preparing for retirement, the more I want to know.  Plus, most presenters are happy to share their knowledge; they appreciate good questions and will do everything they can to make sure your questions are answered.


                              Watch out for the temptation to withdraw your retirement funds early.  There are consequences associated with early withdrawals. There are fees, taxes, and early withdrawal penalties.  Before withdrawing your funds, consider all of your options and do the math. 

                              What percentage of your funds will go towards fees?  Is it worth withdrawing the money before you meet the withdrawal requirements?  If you have retirement savings at a previous job, can you do a rollover instead of a withdrawal?  (Definitions: With a withdrawal, you remove the money from your retirement plan, which may incur penalties or fees. With a rollover, you move the money from one type of retirement program to another type of retirement program, which usually does not incur penalties or fees.)

                              Talk to a professional (or multiple professionals) to determine the consequences of early withdrawals and whether the option is right for you.  Determine if you should do a rollover instead.


                              There are people who want to work until they are 80.  Good on them for staying active! 

                              In contrast, there are people who have to work until they are 80.  I wonder what they would have done differently, if they could turn back the clock.

                              When you retire should be a choice, not a struggle to hold on for a few more years until you can afford to retire. 

                              Is retirement a choice for you or is it a chore?  If it is the latter, what will you do to expand your choices, retire when you choose, and ensure you live your best life?


                              Disclaimer: The information contained on is for educational purposes and does not take the place of advice from your attorney, financial advisor, accountant, or other parties thereof.  Consult a professional before making any decision or taking any action.


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