Planning for retirement can be an exciting milestone. It’s your chance to turn years of hard work into a future filled with freedom, relaxation, and new adventures. But with so much information about retirement planning, it’s easy to feel unsure about where to start. What are the first steps of retirement planning? It all begins with setting clear goals, estimating how much you’ll need, and building a strategy that sets you up for long-term financial security. In this beginner’s guide, we’ll walk you through the first steps of retirement planning, making the process simple and approachable so you can start preparing for a fulfilling and worry-free retirement.
What Is Retirement Planning and Why Is It Important?
Retirement planning is all about creating the future you’ve worked so hard for where you have the freedom to enjoy life on your own terms. It’s more than just saving money; it’s about making sure you have enough financial security to do what makes you happy. Whether that means traveling, spending time with loved ones, picking up new hobbies, or simply enjoying a stress-free life, a well-thought-out plan ensures that you’re not just getting by in retirement, but thriving.
Why does this matter? Because life is unpredictable, and the last thing you want is to worry about money when you should be enjoying your well-earned retirement years. With people living longer and healthcare costs rising, having a solid retirement plan means you won’t have to rely on family or make tough financial sacrifices later on. And the best part? The earlier you start, the more control you’ll have over your future. Even small steps today, like contributing to a 401(k), paying down debt, or investing, can make a huge difference down the road. No matter where you are in your journey, it’s never too late to start planning for the retirement you deserve. Let’s dive into “what are the first steps of retirement planning” and break down how you can build a secure and fulfilling future one step at a time.
Step 1: Define Your Retirement Goals
Retirement isn’t just about stepping away from work, it’s about stepping into the life you’ve envisioned for yourself. Before you start crunching numbers, take a moment to picture your ideal retirement. Do you see yourself traveling the world, spending more time with family, pursuing lifelong passions, or perhaps starting a small business? Your vision for retirement will shape every financial decision you make. To create a retirement plan that aligns with your aspirations, ask yourself:
- At what age do I want to retire?
- What kind of lifestyle do I envision (i.e. traveling, hobbies, philanthropy)?
- Where do I plan to live? Will I stay in my current home, downsize, or relocate?
- Will I continue working part-time or start a business?
Clearly defining your retirement goals helps you determine how much money you’ll need to save and what steps to take to make those dreams a reality. Your retirement plan should align with your aspirations, ensuring financial security while allowing you to enjoy life on your terms.
Step 2: Estimate Your Retirement Expenses
Once you have a vision for retirement, it’s time to determine how much it will cost. A common rule of thumb is that retirees need 70% to 80% of their pre-retirement income to maintain their lifestyle. However, your actual expenses will vary based on various factors, such as:
- Housing costs: Mortgage, rent, property taxes, and maintenance.
- Healthcare expenses: Medicare, supplemental insurance, and out-of-pocket medical costs.
- Daily living costs: Food, utilities, transportation, and entertainment.
- Travel and leisure: Vacations, hobbies, and recreational activities.
- Inflation: The rising cost of goods and services over time.
Using a retirement calculator or working with a fee-only financial advisor can help you get a more realistic and detailed estimate of your future expenses.
Step 3: Calculate Your Expected Retirement Income
Your retirement income will likely come from multiple sources, such as:
- Social Security Benefits: Determine your estimated benefits using the Social Security Administration’s calculator.
- Employer-Sponsored Plans: 401(k) or 403(b) accounts with employer contributions.
- Individual Retirement Accounts (IRAs): Traditional and Roth IRAs for tax-advantaged savings
- Pension Plans: If applicable, check your employer’s pension benefits
- Personal Savings & Investments: Stocks, bonds, annuities, or real estate holdings
- Part-Time Work or Passive Income: Rental income, freelancing, or small business earnings
If your estimated income falls short of your projected expenses, you may need to adjust your savings strategy.
Step 4: Start Saving and Investing Early
When it comes to retirement planning, time is your greatest asset, and the earlier you start saving, the more powerful your money becomes. Thanks to compound interest, even small contributions made early can grow into significant wealth over time.
For example, if you invest $500 per month starting at age 25, assuming a 7% average annual return, you could have over $1 million by the time you retire at 65. However, if you wait until age 40 to start saving the same amount, your balance at retirement would be less than $400,000, a drastic difference, all because of time in the market. To help increase your savings potential:
- Maximize employer contributions. If your employer offers a 401(k) match, contribute at least enough to get the full match, it’s free money!
- Open an IRA. A Traditional or Roth IRA can provide additional tax advantages for your savings.
- Diversify your investments. A mix of stocks, bonds, and other assets can help balance risk and growth potential.
- Increase savings over time. Whenever you receive a raise or bonus, allocate a portion to your retirement accounts.
Even if you’re starting later than planned, there’s still time to boost your savings through increased contributions and smart investment strategies, like Non-Retirement Investment Accounts. The key is to start now—your future self will thank you!
Step 5: Manage Debt and Control Spending
Reducing debt before retirement is essential to preserving your savings. Focus on paying off high-interest debt like credit cards, eliminating outstanding loans, strategically planning for mortgage payoff or refinancing for lower payments, and avoiding new major debt in the years leading up to retirement. Keeping your expenses in check now allows you to allocate more funds to savings and investments.
Step 6: Plan for Healthcare Costs
Healthcare is one of the most significant—and often most unpredictable—expenses in retirement. While many retirees assume Medicare will cover all their medical needs, the reality is that out-of-pocket healthcare costs can add up quickly. In fact, according to Fidelity Investments, a 65-year-old that retired in 2024 can expect to spend close to $165,000 on healthcare expenses throughout retirement. Failing to plan for these costs can put serious strain on your savings, making it essential to build healthcare expenses into your retirement strategy early. To stay ahead of rising healthcare costs, consider:
- Medicare enrollment. Understand when and how to sign up to avoid penalties.
- Health Savings Account (HSA). If eligible, an HSA can be a tax-efficient way to save for medical expenses.
- Long-Term Care Insurance. Helps cover costs for assisted living, home care, or nursing facilities.
Planning for healthcare costs now prevents unexpected financial burdens later.
Step 7: Create a Withdrawal Strategy
You’ve spent years building your retirement savings, but how you withdraw those funds is just as important as how you saved them. Without a structured withdrawal plan, you risk running out of money too soon or paying unnecessary taxes that could erode your nest egg. A well-thought-out withdrawal strategy helps ensure your savings last throughout retirement while minimizing tax burdens and maximizing your income. Here are a few key strategies to keep in mind:
- The 4% Rule. A common strategy where you withdraw 4% of your savings annually to sustain a 30-year retirement.
- Tax-Efficient Withdrawals. Prioritize withdrawals from taxable accounts first, then tax-deferred accounts (401(k)/IRA), and finally Roth accounts.
- Required Minimum Distributions (RMDs). Understand the IRS rules on withdrawing from retirement accounts after age 73.
A fee-only financial planner can help tailor a withdrawal strategy based on your income needs and tax situation.
Step 8: Reassess and Adjust Your Plan Regularly
Retirement planning isn’t a one-time task; it requires ongoing adjustments. Review your plan at least once a year to:
- Monitor your investment performance
- Adjust savings contributions as needed
- Update your budget based on life changes
- Review estate planning documents (wills, trusts, beneficiaries)
Life circumstances change, and your retirement strategy should be flexible enough to adapt.
Step 9: Prepare for the Emotional Side of Retirement
Retirement is a major life transition that can bring a mix of excitement and uncertainty. Many retirees struggle with the sudden change in routine, loss of work identity, or feelings of isolation. It’s important to make sure that you’re ready for this transition. To prepare emotionally:
- Visualize your daily life: How will you spend your time? What will give you purpose and fulfillment?
- Stay socially connected: Maintain relationships with friends, join clubs, or engage in community activities.
- Explore new hobbies or passions: Retirement is the perfect time to dive into interests you may have set aside.
- Consider a phased retirement: Some retirees find fulfillment in part-time work, consulting, or volunteering.
Taking time to plan for the emotional side of retirement can help make the transition smoother and more enjoyable.
Step 10: Decide What Retirement Means to You
Retirement isn’t one-size-fits-all. For years, we’ve been sold the idea of a traditional retirement, which included leaving the workforce completely at a certain age and settling into a slower-paced lifestyle. But retirement today can take many different forms, and it’s important to define what it means for you. Here are a few different approaches to retirement:
- Traditional Retirement. This is what most people think of when they hear the word “retirement.” You fully step away from work and rely on your savings, Social Security, and other income sources to sustain your lifestyle.
- Semi-Retirement. Not everyone is ready to stop working entirely, and for many, staying professionally active brings a sense of purpose and social engagement. Semi-retirement might involve part-time work, consulting, or starting a passion project, allowing you to continue earning income while still enjoying more freedom.
- Temporary Retirement (Sabbaticals). Some people take strategic breaks from the workforce to travel, pursue a personal goal, or care for family before resuming their careers. This type of retirement requires careful financial planning but can provide rewarding experiences at different stages of life.
By considering these different retirement styles, you can craft a future that best suits your financial needs, personal goals, and lifestyle aspirations. Retirement is about freedom and flexibility, and the sooner you start planning, the more options you’ll have to create the retirement you envision.
So, what are the first steps of retirement planning? It all starts with setting clear goals, estimating your savings needs, and creating a strategic investment plan. By taking the right steps of retirement planning early, you can secure financial stability and peace of mind for your future.
No matter where you are in your financial journey, the best time to start planning is now. Whether you’re in your 30s and still in the asset accumulation phase or approaching retirement and thinking about what your life after work is going to look like, taking proactive steps today will set you up for long-term success.
If you have any questions or need personalized retirement planning guidance, our team of CERTIFIED FINANCIAL PLANNERTM (CFP®) professionals would be happy to assist. We can show you how our financial planning process can help you stay on track and achieve your financial goals. Please contact us for a complimentary discovery call at 631.218.0077. You can also send us a message directly.
R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, and Beverly, Massachusetts office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary. We have helped clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, explore our detailed overview of services and approach.
