5 steps for retirement planning

Retirement isn't just a change in our stage of life—for most people it also represents a major change in our relationship to money. Most of us will transition from earning a regular income to living off our accumulated savings, which may include pensions, 401(k) plans, Individual Retirement Accounts (IRAs), or other investment accounts.

There's a lot to consider about what your retirement might look like—from how long you'll want (or need) to work to where you might live and how you'll spend your free time. To enjoy an optimal sense of security and financial freedom, it's important to plan ahead.

Before we get into how to plan and the steps to help set you up for success, let's take a look at what retirement planning entails.

What is retirement planning?

What is "retirement planning"? You've probably heard the phrase. Think of it as the ongoing process of setting financial goals and strategies to ensure you have enough savings and income to support yourself comfortably in retirement. Retirement planning involves saving, investing, and regularly adjusting your plans to stay on track, considering factors like inflation, market changes, and personal circumstances.

There are specific account types designed for retirement savings, such as 401(k) and 403(b) plans and IRAs. They allow you to contribute a portion of your income with the goal of growing it over time through investments in stocks, bonds, and other assets. It's worth taking some time to understand different types of retirement savings accounts to see what might work best for you.

As a retirement saver, your goal is to build a substantial nest egg that you can eventually withdraw from to cover your living expenses and maintain your lifestyle in retirement. By starting early and contributing consistently, you can take advantage of compound interest, which can significantly boost your savings over the years and help you attain financial stability and peace of mind when you retire.

Key steps for retirement planning

Retirement isn't just a change in our stage of life—for most people it also represents a major change in our relationship to money. Most of us will transition from earning a regular income to living off our accumulated savings, which may include pensions, 401(k) plans, Individual Retirement Accounts (IRAs), or other investment accounts.

There's a lot to consider about what your retirement might look like—from how long you'll want (or need) to work to where you might live and how you'll spend your free time. To enjoy an optimal sense of security and financial freedom, it's important to plan ahead.

Before we get into how to plan and the steps to help set you up for success, let's take a look at what retirement planning entails.

How to plan for retirement

Whether you're a few decades or a few years away from retirement, having a plan can help you feel confident that you'll be ready when the time comes. Maybe you're considering taking advantage of financial advice to help with your retirement planning or maybe you feel confident handling it on your own. Whatever your situation, we've got a retirement planning checklist to help you prepare.

1. Figure out when you might have enough money to retire.
2. See how your retirement age affects your Social Security benefits.
3.  Make a plan to pay off your debts.
4. Set up your savings to get you to your goal.
5. Select your retirement investments.

1. Figure out when you might have enough money to retire

Deciding when you can retire isn't simple, but running some numbers and calculating your anticipated monthly expenses can give you a good idea of where you stand. Think about how you want to live in retirement—your standard of living. Then look at your current spending. Most people can expect to spend 70%–85% of their pre-retirement income in retirement.¹ And where will your income come from? Likely sources include your savings, investments from your IRA or 401(k) plan, and Social Security.

Most of your day-to-day expenses will be about the same as they are now, but some will change as you move into retirement. Things like commuting costs and dining out, even clothing, may be affected if you're no longer working every day. You'll also need to factor in the cost of your medical care.

Health care in retirement is a concern for most of us because, as we age, we tend to spend more money on medical expenses. Many of us depend on our employer for health insurance coverage, so retiring may involve switching to Medicare, buying coverage on the federal Health Insurance Marketplace, or perhaps enrolling in a spouse's health plan. Whatever you choose, you'll need to account for those premiums, along with any out-of-pocket medical costs.  

Along with practical considerations like medical and housing costs, it's important to consider your post-retirement lifestyle goals (i.e., hobbies, travel, leaving a legacy) when estimating your expenses in retirement.

2. See how your retirement age affects your Social Security benefits

You can start collecting Social Security retirement payments at age 62, but that's not the whole story. You'll only receive 100% of your benefit if you wait until your full retirement age, which is 66 or 67, depending on your year of birth. You can increase your benefit by 8% each year you delay past full retirement age, up to age 70—at which point there is no additional benefit to waiting. It's worth checking the Social Security benefits planner for more guidance around this. 

To maximize your benefits, you should have a strategy to determine when it's best to begin taking payments—considering your health, family, and financial circumstances.

Lots of things can affect your benefits, including your marital status and whether you plan to continue working in retirement. But one thing is true for everyone: The longer you wait to start collecting Social Security benefits, the larger your benefit payment will be.

3. Make a plan to pay off your debts

Assessing your current financial status is a crucial step in planning for retirement because it gives you a clear picture of where you stand. By understanding your current savings, existing debts, and planned future expenses, you can better gauge how much you need to save and how to allocate your resources effectively. It will help you identify any gaps in your savings and allow you to make informed decisions about how to bridge those gaps, ensuring you're on track for a financially secure retirement.

If you want to retire before paying off all your debts—mortgage, student loans, credit cards, etc.—that's okay. Consider the interest rates you're paying, how they compare to long-term market averages—and whether you could potentially earn more by investing any extra money, rather than paying down a low-interest mortgage, for example. But be sure to prioritize paying your higher-interest debts—personal loans, credit cards, and auto loans—first because they can eat into your savings and reduce your standard of living.

No matter what outstanding debts you have as you approach retirement, be sure you understand the implications and have a plan to pay down your debt.

4. Set up your savings to get you to your goal

By now you likely have a goal in mind for the amount of savings you'll need to cover your retirement expenses comfortably. The best way to approach reaching your goal is to break it down into small increments. Thanks to the power of compound interest, even modest monthly contributions to your retirement savings can add up significantly over time.

Setting up automatic contributions to your retirement accounts is a game changer. It takes the guesswork and the temptation to skip contributions out of the equation. By automating your savings, you ensure that a portion of your income is consistently allocated to your retirement fund. This not only helps you stay on track but also makes the process of saving for retirement less stressful and more manageable.

Choosing the right kind of account is another key decision. Different types of retirement accounts, like 401(k)s and IRAs (including traditional and Roth IRAs), have their own benefits and drawbacks. For example, a 401(k) often comes with employer matching, which is essentially free money, while a Roth IRA allows you to make tax-free withdrawals in retirement.²

Explore IRAs

If you're age 50 or older and you're not where you want to be, consider making catch-up contributions as well. The closer you are to retirement, the more important it is to make sure your savings are working as hard as possible for you.

As of 2025, there's a new "super" catch-up option available to people who are 60–63 years old during the taxable year. It allows them to contribute an additional $11,250 (150% of the standard catch-up contribution) to their employer-based retirement plan. It means savers in this group could potentially contribute $34,750 per year.

Consider your current tax situation, your expected income in retirement, and any employer-sponsored plans you have access to. Consulting with a financial advisor can also provide valuable insights and help you make the best choice for your unique goals and circumstances.

5. Select and monitor your retirement investments

Choosing the right retirement investments is a key part of building a secure financial future. Start by diversifying your portfolio to spread out your risk.

In terms of asset classes, stocks can offer higher returns but come with greater volatility, while bonds are generally more stable but may offer lower returns. Some people choose to hold individual stocks and bonds, but for most investors, mutual funds or ETFs (exchange-traded funds)—which let you own a slice of an entire market, rather than trying to pick individual winners and losers—offer the simplest and most effective path to increase your chances of long-term success.

Mutual funds and ETFs make it easier to achieve the benefits of portfolio diversification because both investments are professionally managed collections (or "baskets") of individual stocks or bonds. Both are designed to give you access to a broad range of asset classes, sectors, and geographies. As an investor, you can simply buy shares of the fund and, in turn, gain instant diversification.

It's important to check on the performance of your retirement investments regularly, but not too often. A good rule of thumb is to review your investments at least once a year, or a few times a year if you're nearing retirement. This allows you to stay informed about how your investments are performing and make any necessary adjustments to keep you aligned with your goals. However, avoid the temptation to make impulsive changes based on short-term market fluctuations.

Life is full of unexpected turns, and major life events can significantly impact your retirement plan. For instance, having a baby, getting married, or buying a house can all affect your financial goals and the amount you need to save. Whenever you experience a significant life change, take the time to revisit your retirement plan. Adjust your contributions, reassess your risk tolerance, and consider any new financial obligations. By staying proactive and flexible, you can ensure that your retirement plan remains on track, no matter what life throws your way.

See how you could benefit from expert retirement planning advice

With so many factors to consider, many people find it helpful to consult a financial advisor about their retirement savings plan. A professional advisor can help you navigate complex investment options, tailor a strategy to your specific goals and risk tolerance and provide valuable insights to maximize your savings. With their guidance and support, you can make more informed decisions and feel confident that you're on the right path to a secure and comfortable retirement.