What Is Retirement Planning?

Retirement planning involves determining retirement income goals and what's needed to achieve those goals. Retirement planning includes identifying income sources, sizing up expenses, implementing a savings program, and managing assets and risk. Future cash flows are estimated to gauge whether the retirement income goal is possible.

You can start at any time, but it works best if you factor it into your financial planning as early as possible. That’s the best way to ensure a safe, secure—and fun—retirement. The fun part is why it makes sense to pay attention to the serious and perhaps boring part: planning how you’ll get there.

In the simplest sense, retirement planning is what one does to be prepared for life after paid work ends. This isn't just financially but in all aspects of life.

The non-financial aspects include lifestyle choices such as how to spend time in retirement, where to live, and when to quit working altogether, among other things. A holistic approach to retirement planning considers all these areas.

  • It is never too early or too late to start retirement planning.
  • Retirement planning refers to financial strategies of saving, investing, and ultimately distributing money meant to sustain oneself during retirement.
  • Many popular investment vehicles, such as individual retirement accounts and 401(k)s, allow retirement savers to grow their money with certain tax advantages.
  • Retirement planning takes into account not only assets and income but also future expenses, liabilities, and life expectancy.
  • If you are under 50, you can contribute a maximum of $22,500 in 2023 and $23,000 in 2024 to a $401(k).1Internal Revenue Service. "401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000."

What are the stages?

Early in a person’s working life, retirement planning is about setting aside enough money for retirement.  During the middle of your career, it might also include setting specific income or asset targets and taking steps to achieve them.  Once you reach retirement age, you go from accumulating assets to what planners call the distribution phase. You’re no longer paying into your retirement account(s). Instead, your decades of savings begin paying you out.

How much do I need?

Remember that retirement planning starts long before you retire. The general rule is the sooner you start, the better. Your magic number, which is the amount you need to retire comfortably, is highly personalized. But there are numerous rules of thumb that can give you an idea of how much to save.

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