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5 Steps of Retirement Planning

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In this article, I am going to share the 5 steps of retirement planning, which are crucial for the success of your old age security.

“Planning for retirement is harder than I thought. It’s too boring and brain wracking.” Toby said to his old friend Raphael, as he ruffled his hair and took another sip of red wine, “I want to focus on the moment. I have some debts on my neck.”

Coincidence had brought them together, and there was much to discuss. But along the line, Raphael had uttered the word, “retirement.” And Toby had been ranting about his financial challenges and debts, complaining about life not being fair to him.

“So, what about you? How is your retirement plan going for you?” Toby said, resting both hands on the table. 

Raphael smiled. “Well, Toby, I’m already retired.”

Toby reclined on his seat for a while and stared at him.

“If my memory serves me right, you should be 50 now—you’ll run out of money before your body touches the ground.”

“Not in the next 50 years. My money works for me, you know.”

Like Toby, many people think planning for retirement is just too much for them. If you think it is, you should think again, because I assure you that other life circumstances can give you enough headache for a long time. The truth is, life will always be unfair to those who don’t plan for the future and planning for retirement is no different—planning for the future grants you an upper hand against the odds. The pandemic has taught us that. I hope you learnt your lesson too?

To have a successful and comfortable retirement, you need to build a financial foundation that will be strong enough to hold your financial tomorrow. In just five simple steps, you’ll learn how to plan for the retirement you desire and what it takes to get there.

The more your money works for you, the less you have to work for money

Idowu Koyenikan, Wealth for All: Living a Life of Success at the Edge of Your Ability

Determine your prospective age for retirement

This is a crucial step in the planning process. You need to check your present age and then the age you want to retire at. It serves as a foundation for how you’ll work it through. A successful retirement takes time, and no matter how boring it might get, it won’t be as dangerous as growing old without having reliable financial security. 

Young investors who still have a long time span before their set retirement age can take more risks with their investments, while older investors who are nearer to retirement should be more conservative. If you’re young and in your early 30s, you can withstand riskier investments, such as stocks.

You should have a retirement plan if you don’t want to fall behind on your savings.

Estimate your retirement expenses

It’s imperative to set a comprehensive estimate of your retirement expenses because if you don’t, you’re likely to become the erratic spender who might one day look at his financial pocket and say, where has all the money gone?

Having a reasonable estimate of your expenses is essential because it will affect how you invest your account and how much you withdraw. If you under-plan your costs, you outlive your portfolio quickly, and if you over-plan your expenses, you might risk not living the type of lifestyle you want in retirement, but I don’t think you would like that. Either way, to be on the safe side, it’s better to set a good estimate plan for your retirement expenses that fits your needs.

Most people think they will spend 60%-70% of what they are spending now. This theory proved to be wrong. If you haven’t paid off your mortgage and car loans, then it’s near to impossible to reduce your spendings after you retire. In your old age, there will be some unforeseen medical expenses. What about your world trip you were planning to go on after your retirement?

The cost of living is increasing every year. If you are young now and your living expenses are $2000 per month, then 30 years later after your retirement, you will need at least $6000.

Did you count that difference?

As a rule of thumb, you should 110 minus your age is the percentage of the money you should spend in your stocks.

Calculate Tax Return Rates

As much as we hate to hear the word “tax,” we all have to plan with it in mind. A retirement plan without tax rate analysis becomes a handicapped one. It may not look that way now, but later, you discover how lame it becomes when your money is cut drastically.

Depending on the type of retirement account you have, returns on investments are typically taxed. Therefore, you should calculate the specific rate of return on an after-tax basis. However, estimating your tax status when you start to withdraw funds is an essential factor of the retirement-planning process.

Planning The Risks 

It is a very crucial aspect in planning for retirement as you begin the journey. You have to make sure that you are comfortable with taking risks in your portfolio. At least, you should know what you’re doing and not make emotional decisions because you’ve heard the noise from the stock market. You should talk about your choices not only with your financial advisor but also with your family members. 

Don’t just hurry to sell because some funds have a terrible year. Instead, it would help if you considered buying more. Retirement is a long journey, and mutual funds are likely to have their ups and downs from year to year, so don’t be rash in your decisions and don’t take unhealthy risks.

Act your plan and modify along the way 

Setting a retirement plan is just a pseudo-step. Putting the plan to action is the essential step to your successful retirement in the future. And since the journey is a long one, there’ll be the need to modify your retirement plan from time to time so that you can achieve the best retirement experience in the future.

It would help if you acted upon your plan right now. Keep in mind! that it’s never late to start investing your income. You can reduce your grocery bill, stop having dinner at fancy restaurants. Don’t go for an expensive vacation. Each year you can send your saved money into your retirement plans.


Your retirement plan is only the beginning, but it’s a step that can become a giant leap for your financial security. You’re not getting any younger, or are you? So, why not take some now and start planning for your retirement. Financial security only belongs to those who plan and act accordingly.

Read next: 20 ways to make money from home

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