6 Steps to Retirement Planning

Retirement planning definition

What is retirement planning? Among many other things, it is the strategy you put into motion in order to maintain your income and finances after you leave the workforce. Depending on who you ask, this process has six steps: knowing when to start, calculating how much money you’ll need, setting priorities, choosing accounts and choosing investments. (The sixth step is a bonus we will go to in just a bit.)

Generally speaking, most experts will agree that it is best to plan on a much more aggressive approach when you are younger, and then gradually dial back to a more conservative mix of investments as you get closer to your target retirement age. You can either manage this entire process yourself or hire a professional who does this for a living. There are benefits to both but let’s not get ahead of ourselves.

As previously mentioned, this process has several steps. All those steps however, have the same end goal of having enough money to quit the workforce for good and do whatever you want after that. The aim with this guide is to help you achieve that very goal.

Step 1: Know when to start planning for retirement

So when IS the best time to start planning your retirement? In one word, NOW! In more words, as early as possible. The earlier you start planning, the more time your money has to grow. But, with that being said, it’s never too late to start planning your retirement. Even if you haven’t even spent any time considering retirement, please don’t feel like your ship has sailed and gone. Every single little tiny bit that you can scrape together and save now will be much more appreciated down the road. Being smart with your strategy could mean you won’t have to be playing catch-up for very long.

Step 2: Figure out just how much you really need in order to retire

This is always a doozy of a question for several reasons. This is because the amount of funding that you need to retire is a function of both your current income and expenses, as well as how you think those expenses will change in retirement. As you might have guessed, these can vary wildly depending on several different economic factors that are far beyond your control.

• Most experts will suggest to replace 70% to 90% of your annual pre-retirement income through savings and Social Security.

• For example, a retiree who earns an average of $100,000 per year before retirement should expect to need $70,000 to $90,000 per year in retirement. However, with inflation being extremely unpredictable lately, the real amount could be even higher!

Step 3: Prioritize your financial goals with realistic expectations

Let’s be honest with ourselves for a moment and agree that retirement is probably not your only savings goal. That is perfectly fine. Most people have financial goals that they feel are more pressing, such as paying down credit card or student loan debt or even building up an emergency fund. None of those priorities are bad and in fact are encouraged. However, you should aim to save for retirement at the same time you’re building that emergency fund — especially if, for example, you have an employer retirement plan that matches any portion of your contributions. You will be leaving a ton of money on the table otherwise!

Step 4: Choose the best plan for you (NOT what is best for someone else)

A cornerstone of planning any retirement is deciding not only how much to save, but also WHERE to save it. If you have a 401(k) or other employer retirement plan with matching dollars, consider starting there. If you don’t have a workplace retirement plan, you can open your own retirement account.

There is no one size fits all best retirement plan for everybody. There IS however, a best retirement plan — or combination of retirement accounts — for YOU. Generally speaking, the best plans provide tax advantages, and, if available, additional savings incentive as well, such as matching contributions. This is exactly why, in most cases anyway, a 401(k) with an employer match is the best place to start for a lot of people. Some employees are missing out on all that free money.

If you personally do not have access to a workplace plan (or the one you are offered doesn’t come with a match), or you’re already contributing to a 401(k) and you’re looking for the best options for additional supplemental savings, then you may want to consider something known as an IRA. This is a plan that you open yourself with an online broker or other account provider. An IRA is hardly a consolation prize and can be extremely beneficial to just about anybody.

Step 5: Choose your retirement investments

Retirement accounts provide access to a range of investments, including stocks, bonds and mutual funds. Determining the right mix of investments depends on several things. These include variables such as how long you have until you need the money and how comfortable you are with risk. Generally speaking, most experts will agree that it is best to plan on a much more aggressive approach when you are younger, and then gradually dial back to a more conservative mix of investments as you get closer to your target retirement age.  This is because early on you have a lot of time for your money to weather different kinds of market fluctuations (and trust me, there will be plenty!).

Step 6: Talk with a professional

The last point in step number 5 brings us to our sixth and final bonus step. That is talk to a professional. A professional is just that and does this every single day for a living. They know all the ins and outs along with every shortcut there is. No matter how much research you do on your own spare time, you are going to be hard pressed to know as much as someone who eats, sleeps and breathes this stuff on a daily basis because it is their job. TITAN Financial Pros is ready to step in and help you with this herculean task. Give yourself the much deserved confidence that working with a true professional can provide. Many people are surprised by just how affordable this can be when compared to many conventional brick and mortar locations that offer the same service!