A Five-Step Guide to Retirement Planning

As you grow older, your needs and responsibilities increase. One of those responsibilities is saving enough money to enjoy your golden years.

If you’re starting to think about building up a nest egg and saving for retirement, this guide is for you. Here’s a five-step guide to retirement planning in 2022.

How Much is the Best Amount for Retirement?

Before delving into the five steps to plan for retirement, it’s important to get an idea of how much money you’re actually going to need once you stop working.

Knowing how much you should save for retirement involves thinking about the following factors:

  • Housing costs like mortgage, rent, heating and cooling, and maintenance
  • Health-care costs, including retirement medical expenses and potential long-term care costs
  • Day-to-day needs, such as transportation, clothing, and food
  • Your entertainment, such as movies, theatrical plays, shopping, and restaurants
  • Travel costs, including hotels, flights, or gas for day trips
  • Life insurance (if you have it)

Of course, there’s no right or wrong amount to save for retirement. But, some financial experts revealed that individuals need roughly $1 million to $2 million. Other advisors recommend saving more than 80 to 90 percent of your pre-retirement income.

Just remember that these are only guides. Your particular situation could require more or less cash for your golden years.

The Five Steps to Successful Retirement

No matter how much you decide to save, the end goal is the same: to have enough money to sustain your way of living.

That said, let’s dive deeper into the five essential steps to successful retirement planning.

Step 1: Think About When to Start Saving for Retirement

The first thing to think about when saving for retirement is when to start saving up. Much like with how much to save, there’s no right answer to when you should start saving.

But, the sooner you start, the more time you’ll have to build up a nice nest egg that can get you through your golden years. The power of tax deferred compounding over time argues for an earlier start to your retirement planning efforts.

However, even if you don’t start planning early, it’s never too late to start. The key is to simply find a jumping off point and to make a plan that will help you continually maintain your savings.

Step 2: Think About Your Lifestyle

The exact amount of money you’ll need for retirement depends on your lifestyle, needs, and responsibilities.

The amount you need is the relationship between your expenses and your current income. For instance, let’s say you typically spend $2,000 a month on your current lifestyle. You’re going to want about that same amount in retirement, as well.

Make a clear outline of what your monthly expenses are and how much you’ll need to sustain them. That way, you can come up with a clear plan for what you’ll need in the future.

Step 3: Prioritize Your Financial Goals

It’s normal to have various financial goals aside from setting up retirement funds. If you have more than one, you’ll need to know how to prioritize them even as you save up a nest egg.

Financial goals can include the following:

  • Paying off credit card debt
  • Paying off student loans
  • Setting up emergency funds
  • Paying off a mortgage

Once again, you’ll need to sit down and budget out how much cash you want to put toward each expense. That way, you’ll be able to continue meeting your current financial goals even as you save for your golden years.

Step 4: Research Various Retirement Plans

Another crucial step to retiring is knowing the best retirement plan for your needs. There are tons of different plans out there, and each one works a bit differently.

Choosing the right retirement plan really depends on your situation. For instance, if you have any kind of employer retirement plan such as a 401(k), you can always start there. But if you don’t have one, consider opening a new account for retirement.

As you choose a retirement plan, look for the different advantages and tax incentives. These can help you pick a plan that will help you get the maximum savings.

A few retirement plan options you can check out are:

  • Traditional or self-directed IRA
  • Roth IRA
  • Solo 401 (k)
  • 401k or 403B

Step 5: Create a Varied Portfolio of Retirement Investments

Once you have set up a retirement account, it’s time to choose a good blend of investments. These can include mutual funds, bonds, stocks, real estate, or commodities.

These types of investments can serve as supplemental income to your retirement fund. They can be a great way to help you gather additional funds that survive market fluctuations and inflation, and provide you with a livable income once you retire.

Retirement investments don’t need your constant babysitting. You can always start with low-cost mutual funds when managing your retirement funds. Plus, you can also hire a professional financial planner to make things easier.

Final Thoughts

Planning for retirement at an early age is the best way to enjoy your life as you age. It also makes you more carefree about spending your money and fulfilling your goals. Modern retirements can last for 25-35 years or so. It is important to not underestimate how much money you may need to accumulate for that potentially long retirement period.

With these five steps, you can start setting aside enough cash to support your lifestyle once you’re ready to retire.

Published by Robert Ryerson

A financial professional with more than three decades of experience, Robert Ryerson works closely with clients in the Freehold, New Jersey, area to meet their financial planning needs. As a Certified Financial Planner (CFP) at New Century Planning, he focuses on retirement income planning, as well as estate administration, regularly assisting his clients with legacy and estate planning. He also advises them on health and disability insurance, including Medicare, Medicaid, and Medicare Supplement Plans. Mr. Ryerson’s many years helping his clients navigate the complexities of retirement planning gave him a deeper understanding of the healthcare costs that retirees face. In 2013, he drew upon this knowledge to co-author the book What You Don’t Know About Retirement Will Hurt You. Outside of his work at New Century Planning, Robert M. Ryerson is a regular fixture at workshops and seminars on retirement. He has delivered several keynote speeches on the often-confusing topic of required minimum distributions. Mr. Ryerson continues to share his financial expertise as a facilitator of online courses for Certified Public Accountants through The Society for Financial Awareness. In the early 2010s, Mr. Ryerson became concerned about the threat of identity theft after noting the many cybersecurity breaches suffered by major companies. He became a Certified Identity Theft Risk Management Specialist (CITRMS) in 2014. He has since taught identity theft recovery courses at local community colleges. Mr. Ryerson also wrote a book on the topic entitled What’s the Deal with Identity Theft: A Plain English Look at Our Fastest Growing Crime. A graduate of Rutgers University with a degree in economics, Mr. Ryerson began his career in the financial services industry as a stockbroker. He obtained his CFP designation in 1991 and began working as an independent financial planner a few years later. In addition, he is a notary public.

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