6 tips for retirement planning

Whether retirement’s right around the corner or still years away, it’s wise to plan ahead. While you can’t predict exactly how your retirement will shape up, you can live the way you want with some planning in advance. Here are a few tips to help you plan for your retirement.

1. Plan for more than your financials in retirement

You’ll spend 10, 20, or 30 years saving for your retirement. It’s likely one of the largest financial endeavors of your life. But don’t let your financial concerns overshadow the personal planning that needs to take place as well. When you picture your ideal retirement, what does it look like? Do you want to travel, stick close to home, or spend more time with loved ones? Do you want to volunteer or master a new skill?

It’s also just as important to plan for managing your relationships with others. If you’re married, you’ll have more time than ever before with your spouse. If you’re leaving a career with high levels of personal interaction, you may want avenues for new relationships in retirement, such as volunteering or mentoring. Once you have an idea of what you want your future to look like, you’ll be in a better spot to plan financially for your desired lifestyle. Your savings may help shape your retirement plan, but you decide how to fill your time.

2. Find a retirement style that suits you

Retirement isn’t an all-or-nothing game. You don’t have to trade your career for 24/7 rest and relaxation. If you choose to continue working in some form throughout your retirement, you’re not alone. As of February 2023, 20% of current retirees are considering returning to work.¹ And while needing more money is the top reason, how much money you’ll actually need in retirement depends on how you want to live. If you plan to travel or assist adult children financially, for example, you may need more income. But financials aren’t the only reason to continue working — many retirees work for social interaction or the opportunity to pursue a new interest. Full-time, part-time, and consulting roles are all options.

3. Budget for more than you think you’ll need

The average retiree can expect to spend around 20 years or more in retirement.² It’s easy to assume that you’ll have the diligence to live within a budget in these golden years. But the truth is, there may be just as many interests competing for your attention and spending power. Our research shows that 51% of Americans’ top financial concern in retirement was having their savings last as long as they need to.³

Even in retirement, you’ll face trade-offs on how to spend your money. Will you dole out generous birthday gifts to grandchildren? What if there’s a medical emergency? And don’t forget to factor in inflation: what $1,000 can buy in the first year of your retirement may be a lot more than what it can buy 20 years later. So, take the time now to look at your monthly expenses and itemize the essentials to get a baseline idea of how much money you’ll need to have set aside to meet your average monthly costs in retirement.

4. Consider investments as a source of income

If you’re looking for a source of income without working, you might’ve thought you could depend on Social Security. Today, Social Security accounts for about 40% of the income the average elderly American receives in retirement.⁴ For many, this may not even be enough to cover basic living expenses.⁵ Even if it was enough, the Social Security system’s trust fund is estimated to run out by 2033.⁶ So in addition to Social Security, consider investments as a source of income.

Your investments may become more conservative as you get closer to retirement, but keeping a diversified investment portfolio can help your money grow at a rate that outpaces inflation. Consider the five main sources of guaranteed income: pensions, bonds, CDs, annuities, and whole life insurance.⁷ Our studies have shown that annuity ownership is correlated with higher financial confidence.⁸ If your employer offers a 401(k) plan (especially one that matches some of your contributions), you should consider contributing a percentage or fixed dollar amount of your salary into the plan. Alternatively, if you don’t have a company-sponsored 401(k), you can save through a traditional or Roth IRA. And depending on your risk tolerance, you can even consider investing in stocks.

5. Budget for your health

Your health is a primary determinant of how much you’ll enjoy your retirement years. And you can start preparing for a healthy retirement now — both in terms of fitness and savings. Fidelity estimated that couples who retired in 2021 may need $300,000 to pay medical expenses throughout retirement.⁹ Yes, Medicare coverage kicks in at age 65, but, on average, it pays less than half of your medical bills. So don’t wait to prioritize your health and when you’re making your retirement budget, be sure to account for health care costs to set you up for a more enjoyable retirement.

6. Work with a financial professional

Your relationship with a financial professional should extend well beyond your target retirement date. They can continue to work with you throughout your retirement years, giving you recommendations for maintaining healthy spending habits and identifying your income needs and investment risk tolerance. A financial professional can continue to evaluate and rebalance your investments to ensure they’re fit for your situation at every stage.