How to Plan for Retirement?

Does planning for retirement stress you out? You are not alone. According to a recent gallup survey America’s outlook on retirement has been on the decline. Only 43% of non-retirees believe they will have enough money for retirement. But planning is free and doesn’t have to be hard. 

Retirement is a major life event that requires careful planning and starting early. Plenty of advice is out there, but the most critical factor is to plan for what you personally want out of retirement! 

Our site uses affiliate links, where we can earn a small commission. If you chose to utilize them, you are helping support this blog!

Why should you plan for retirement?

Notice here, the word “plan.”  Just saving some money isn’t enough, you need to plan for your expenses in retirement. Don’t run out of money!

If you do not have enough, you may have to start cutting back on spending in your golden years.  Even happy, active grandmas break a hip! So it is always better to be prepared for day-to-day costs as well as emergencies!

What do you want your retirement to look like?

When will you retire? And where will the funds come from?

When/What age you will retire is critical. It determines how long your money needs to last and what finances will be available.  Accounts like 401(K)s and IRAs have penalties for withdrawals before you are 59 ½ years old. Social Security and access to Medicare insurance benefits also have age restrictions. Most information out there will focus on “traditional” retirement accounts. But don’t fall into this trap if you will retire early. Plan for enough non-age restrictive funds to cover costs until you can access these traditional retirement systems. This could be cash-flowing real estate, a personal investment account, or even alternative passive income streams.

In the beginning of my journey, I struggled to manage all my accounts and secure passwords for them. This is so important to protect your financial information and money. After a lot of research, I found LastPass. They make this super easy and it gives access across multiple platforms, devices, and apps. I have been using them for almost 10 years and cannot recommend them enough. If managing all your accounts has been a challenge in the past, try them out! They have a free 30-day trial and if you like it, a Premium subscription is only $3/month after that.

What will you do?

Do you want to sit on a beach and sip coconuts? Have you always wanted to volunteer more? Are your plans to travel across the US? The World? Or do you want to settle down on a quiet homestead and watch the cows roam? 

Where do you want to be in retirement?

Do you already have a home? Will you move to be closer to family? Do I want to retire abroad? Or will you be a nomad traveler?  Housing is typically the largest expense in budgets, this may also be true in retirement!

How much does your vision for retirement really cost?

Now that you have a Where-What-When vision for retirement, you can start to build a budget! If you need help building one, check out my post 10 Steps to Build Your Budget, it even has a quick excel tool to get you started. You can build your current budget and then just duplicate the tab to tweak it for retirement budgeting. 

Personally, I do a retirement check-in each year and it usually starts with a gut check – When can I retire, if I keep my current lifestyle? While your plans in retirement may be different, mine certainly are, it helps me level set. With this perspective you can go through the exercises – if you don’t change anything, can you retire? Do you think you could live on less? Do you think you need more? This is really important, especially if you have a growing family, your original needs and plans may be different from your plans today or tomorrow.

An early retirement abroad with kids may get more expensive just in plane tickets home for the holidays! So always be checking and adjusting.

How much money do you need to make it happen!? 

Now that you have a budget and know how much money you need every month/year, calculate how much money you need to make it happen. You can follow the 4% rule, and see how much in stock dividends you will need. Or if you will spend the principal, many financial sites, like Forbes Advisor, have calculators to help model for retirement.  The default settings are usually “typical” retirement assumptions like 80% of pre-retirement income to maintain your lifestyle and retiring at 65. 

Becoming a Millionaire or Multimillionaire is a goal of many and may even be needed for some retirement plans. You can also check out the math for becoming a millionaire in this post.

Especially, if you want to look at something outside the box, look for the settings/assumption drop down. These are usually a bit hidden to keep the visual simple, but they can help you test multiple scenarios – different ages, retirement income, etc. to meet your needs.

I know I have mentioned this before, but the calculator from the authors of “How To Retire Early” has helped me tremendously in estimating the growth of my stock portfolio. It can be found here (look in the upper right, under the menu).

I have modified it, including choosing a more conservative growth of 7%, and combined it with my budget sheet, and an annual investment tracking sheet. This makes my “Life Planning” spreadsheet a 1-stop shop. My investment tracking sheet holds me accountable to myself – did I save what I said I would save? And at the end of each year, I lock-in the actual annual performance of my investments, to make sure the future projections are up to date.