Six Steps for Retirement Planning

Retirement planning – why do we put it off?

• We’re too busy with LIFE to worry about retirement.
• Retirement planning sounds so hard.
• It’s boring.
• I don’t want to think about retirement yet.

It doesn’t have to be scary or boring or hard.   I can’t do much about your busy life . . . but priorities, priorities.  Planning is important!

Is there hope?

Yes!!  With just a few steps, you can put a plan in place that will help you prioritize your retirement.  If you put your plan together now, it can be on auto-pilot most of your career.  When you do reach retirement age, you’ll be surprised how much you’ve saved and how easy it was.

Here are six steps that will get you much closer to the retirement YOU want.

1.Decide how YOUR retirement should look

Sit down for a few minutes with a sheet of paper and brainstorm what you want your retirement to look like.  Don’t limit your dream based on what you think you can afford.  Write down what you would really, really like to do.  Your dreams should be the driving force in this exercise.  Some ideas to get you started:

• Travel
• Play golf
• Volunteer
• Go back to school
• Start a new career doing what you REALLY want to do
• Move to a warmer climate/live on the beach
• Move to another country

For more suggestions on how to plan for your dream retirement, check out this article, What Does Your Dream Retirement Look Like?

2.Calculate the cost of your dream retirement

I bet you have experienced “sticker shock” at least once in your life.  Am I right?  You dreamed of taking that Caribbean cruise and saw one of those ads for $299 per person.  Well, finally . . . a cruise you can afford!  You picked up the phone, called the number in the ad and one hour later, you had a booked cruise.  Of course, it wasn’t $299, was it?  By the time you added all the taxes and fees . . . and yes, upgraded to a cabin with a balcony overlooking the ocean . . . oh, and all the shore excursions . . . yep, and the airfare . . . well, let’s just say $2000 barely covered it.

Have you calculated how much some of your dream activities will cost?  Make a list of the things you would like to do and experience in retirement.  For examples (to get you started dreaming) and costs of some of the activities, please check out the article, Calculate Your Dream Retirement Cost .

You will probably need to do some research to get estimates if you haven’t tried any of these things yet.  For example:

• Activities.  How much is a round of golf each week?
• Travel.  Where will you go? How often?  How much will it cost?  Add that to your list.
• Going back to school.

Add the cost of all these things to get the real cost of your dreams.

Now, don’t freak out at the total.  Unless you win the lottery, you probably don’t plan to do all of these things in one year.  More than likely, you will spread them out over 4 – 5 years, maybe even longer if your health is good.  If you retired early, you may be looking at 10, 15, maybe 20 years to complete that bucket list.

3.How will you finance your retirement

Once you know how much your dreams will cost.  How will you pay for them?

• What type of retirement plan do you have a 401k, 403b or 457 plan?  Does your company match your contributions?  (Total win!)  Check out a site like Fidelity, and use their retirement calculator to see what your plan balance (as it is right now) would provide.
• Do you have a pension from where you work now or someplace you’ve worked in the past?  You may have to contact your HR department to get that amount.
• Will Social Security be an option when you retire?  How much do you/will you qualify for?

Add all your retirement sources of income.

Now . . . here are some things to consider:

1. Do you know how much you make now – your current income? Do you have a budget and have you kept it up to date?
2. Looking at your current budget, what – if anything – will change when you retire? Transportation costs? Will you still need two cars?  Will you sell your house and rent? Create a new budget for retirement if there will be big changes from your current budget.  We are just looking for your basic retirement budget.  Do not include your dreams yet.
3. Compare your retirement income to your basic retirement budget. Will you have enough income each month to meet your basic retirement budget?

Check out the more in-depth article, How will you finance your retirement?

Don’t lose hope . . . if you have more expenses than income calculated for retirement, the next step will provide some ideas for increasing or supplementing your retirement income.  Don’t stop now.

4.Put a plan in place

So, now that you know how much your retirement will cost and your sources of income, you must put a retirement plan in place.  Will you have enough income in your retirement? What if you don’t have enough?  What are some options?

• Increase your contributions to make sure you have enough when you need retire – another reason to start saving NOW.
• Work a couple extra years to make the numbers work
• Work until you’re 70 because your Social Security benefits increase about 8% for each year you wait to file between your Full Benefit Age (65, 66, etc. – depending on when you were born) and 70.
• Supplement your retirement income with a “side hustle” (some part-time money-making opportunity)
• Plan to work part-time after you retire.
• Settle for less.  If you have no other options for increasing your income, you may need to scale down your dreams.

Guess what?  There’s a more in-depth article for this topic, too – but it’s in the works right now (coming soon).

5.Live like you’re already retired

If the income you anticipate in retirement is less than the amount you earn now, you really need to see what life would be like on that amount of money.  Open a savings account if you don’t already have one.  Commit to moving anything over the retirement income you expect into the savings account each month. (This is a hard one, especially if you like the lifestyle you have now.)   What will this do for you?

1. It will show if you can live on that amount in the future
2. It will show if you need to make some changes – like pay off credit cards or your house.

If you can tell just by looking at the amounts (pre- and post-retirement) there’s NO WAY you can live on that amount for a year . . . you already know the next steps, right?

You have to make some adjustments.  Do you:

• Still have credit cards?  Pay them off.
• Own your home but still have a balance left?  Pay it off as quickly as you can.
• Spend all your discretionary income (what’s left over after the bills are paid) helping your grown kids?  Stop it.  They are old enough to make it on their own.  You need to think about yourselves now.

Make those changes while you still can – while you are still employed.  Trust me, it’s much harder to do that once you’re retired.

 6.Re-Assess and adjust your plan

Once you’ve tried living on the “retirement” budget, assess and adjust.  Even after you retire, you may still need to re-assess and adjust.  Your retirement plan is a continual process, even after you retire.

You didn’t see that coming, did you?  Things are never stagnant.  Your tax rate changes, health insurance changes and Social Security changes.  Everything seems to have financial-creep.  You have to stay on top of your finances, regardless of your stage of life.

Next steps in your retirement planning process  

What are you waiting for??  Retirement planning isn’t THAT hard, is it?  Start dreaming.  Start planning.  Don’t settle for the retirement that happens to you because you didn’t plan.

Plan the retirement you want – NOW.

It’s never too early . . . and it’s never too late.

Where are you in your retirement planning?  Leave a comment below and let me know.

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