Important Tasks & Decisions for Each Phase of Retirement Planning

Important Tasks & Decisions for Each Phase of Retirement Planning

September 19, 2022

Retirement planning is a process that maintains your finances throughout the course of your post-career years. This process essentially has 5 steps, knowing where to start, seeing how much money you'll need, setting your priorities, choosing accounts and choosing investments.

The retirement process begins ideally when you’re young, and when you can invest as aggressively as your budget allows. Over the course of time - as you get older - you dial back to a mix of investments.  

We know this process can be stressful and often overwhelming. That’s why we’ve put together a road map for you. Read on to learn five key steps that will help you stay on track as you approach retirement.

When Can You Retire?

This boils down to when you want to retire, and when you'll have enough saved to do so. The earliest age you can begin claiming social security benefits is 62 and full retirement age is recognized at 67.

Most people choose to retire early either because they can afford to do so or because they might have to. This generally applies  for people who decide to retire later in life. Many people have found that it’s ideal to ease into retirement and opt for a phased retirement, which is also an option you can discuss with your financial advisor. Ultimately, it all comes down to what makes the most sense for you, as there is no one size fits all plan.

Step 1: Knowing When to Begin Retirement Planning

When you first enter the workforce you're most likely to be in your early twenties. This is when you want to start your retirement planning. The earlier you begin, the more time your money has to grow and the more risks you can take with those investments

That being said, it's never too late to start planning for retirement. Even if you haven't given much thought to how old you'll be when you retire or what kind of lifestyle you want for yourself at that point, now is the time to start thinking about it—and taking action! Every dollar that goes into a retirement account now will be much appreciated when that day comes.

Step 2: Figure out How Much Money You Need to Retire

To determine how much money you'll need to retire, you need to consider two factors: your current income and expenses, and how those expenses will change once you're retired.

The typical advice is that retirees should expect to replace 70% to 90% of their annual pre-retirement income through savings and Social Security. For example, a retiree who earns an average of $63,000 per year before retirement should plan for $44,000 to $57,000 per year in retirement.

Step 3: Prioritize Your Financial Goals

Your needs will likely change depending where you fall in this roadmap. If you're just getting started on saving for retirement, it can be tempting to focus your efforts on the short term. However, if you're nearing retirement, retirement is not your only savings goal. Many people have financial goals they feel are more pressing, such as paying down various forms of debt, or building up an emergency fund.

Generally, you should aim to save for retirement at the same time you're building your emergency fund — especially if you have an employer retirement plan that matches any portion of your contributions.

Step 4: Choose a Retirement Plan Catered to You

Retirement planning is equal parts how much money you save, and where you save it. If you have a 401k or employer retirement plan, start by utilizing the company matching policy. If you don't have a workplace plan in place, you can open your own. 

There is no single best retirement plan, but there is likely a good combination of retirement accounts for you. In general, the best plans provide tax advantages, and, if available, an additional savings incentive, such as matching contributions. That's why, in many cases, a 401(k) with an employer match is the best place to start for many people.

Here are some examples of retirement plans that might work for you:

  • 401k
  • Roth 401k
  • Traditional IRA
  • Self-Directed IRA
  • Simple IRA
  • Solo 401k

Step 5: Choose Your Retirement Investments

Retirement is a time for celebration and reflection, but it's also a time when you'll have to make some big decisions about your investments. The two most important questions to ask yourself are:

  1.  How long do I have until I need the money?
  2.  How comfortable am I with risk?

Again, depending where you find yourself on this road map, you will have different choices to make in terms of investing strategies. If you're young and have a long way to go until retirement, you can afford to invest aggressively. This is because there's plenty of time for those assets to recover if the market goes down. However, as you get older, your retirement savings begin to account for a larger part of your total net worth, so even small losses could be devastating. In that case, it's wise to review your investment portfolio and sit down with a fiduciary advisor to discuss all of your investment options.

As you move through life and gain more experience managing your finances, it's important that your investments evolve alongside you—especially as you start thinking about what kind of lifestyle you want after retirement. This means making sure that when the time comes for drawing down on those savings you're able to live comfortably without having to constantly make compromises.

Work With Agemy Financial Strategies

At Agemy Financial Strategies, we value the opportunity to get to know you and your situation so that we can create a plan specifically tailored to you. Our purpose is to educate our clients - whether that be planning for retirement, legacy planning, wealth management, or being by your side when it's time to leap into retirement. 

We want you to know that we’re here to help you navigate any questions you have regarding investments, retirement and anything else that comes up during your retirement process. As Fiduciary advisors, it's our duty to act on your behalf in finding the right solutions for your individual wants and needs. 

For more information on our investing, retirement and financial planning services, contact us here today.