How to Financially Plan for Retirement

It’s never too early to begin planning for retirement, but it can be too late. Read on to learn how to start financial planning for retirement

January 27, 2023
How to Financially Plan for Retirement

In a recent study1, Americans over the age of 40 were asked about their goals for retirement –– as well as how their existing retirement plan measured up to those goals. Astonishingly, more than half of those surveyed reported less than $50,000 in retirement savings yet felt that they would still be financially prepared for retirement when the day arrived. What’s more: Those that recognized their retirement planning shortcomings had no plans to change their existing retirement saving strategy. 

While the disconnect between many Americans’ financial planning for retirement and their respective retirement goal may seem shocking, not every generation is making the same mistake. Millennial workers are reportedly more attuned to their retirement goal, making greater strides toward turning these goals into reality than those who came before them.2 And while many aspiring retirees may not be on track toward their ideal retirement, diligent financial planning for retirement (apart from winning the lottery) is the only thing that can change that. 

It’s never too early to begin planning for retirement, but it can be too late. Here are some insights on how to financially plan for retirement and why you should begin doing so sooner rather than later. 

What is Retirement Planning? 

When Americans earn a paycheck, be they hourly, salary, contracted, commissioned, or otherwise, they may have the option of diverting a portion of their pre-tax income directly into a retirement fund. This fund is designed to grow steadily over the span of a career, eventually helping workers maintain their day-to-day life when they no longer have consistent revenue streams. But while depositing a percentage of your paycheck straight into a 401(k) or Roth IRA is a retirement strategy, a comprehensive retirement plan requires a bit more involvement.  

See, retirement planning is about more than stuffing money in a metaphorical piggy bank and doing your best to forget it’s there. Rather, effective retirement planning benefits from oversight, and a more hands-on approach to saving. This begins with some number crunching. When do you want to retire? How much are you making now? How much do you reasonably foresee yourself making? What does it cost to live? What does it cost to live how you want to live

The answers to these questions can be a bit of a gut check, but self-honesty is the foundation of your retirement plan. If your annual income is dwarfed by your dreams for retirement, a more aggressive approach to financial planning for retirement –– or embracing a slightly more modest existence –– might be in order. The bottom line when it comes to retirement planning: In order to get where you want to be, you need a clear understanding of where you are

The Importance of Retirement Planning

Like any long-term goal, the achievability of your retirement goals is determined by both your willingness to work for them and your ability to break gargantuan goals down into smaller, more manageable ones. Financial planning for retirement eliminates the guesswork from retirement, ensuring there will be no surprises when you’re ready to trade work for white-sand beaches. In the case of the surveyed workers at the top of this article, the issue wasn’t that these workers weren’t saving –– $50,000 is no small sum of money. The issue was that they weren’t strategizing

In lieu of the aforementioned “piggy bank” approach, retirement planning involves managing your fund (either on your own or with the help of a skilled financial advisor) to ensure it’s growing at the rate you need it to. Whereas some may have a set-it-and-forget-it outlook on retirement, keeping a close (but not obsessive) eye on your retirement fund can allow you to make course corrections in the event that things aren’t going according to your plan. 

For some, the stress of not having a plan in place can be crippling –– hindering work performance, and causing what should be some of the best years of your life to be riddled with anxiety and fear instead. But through proper financial planning for retirement, you can rest assured that you’re doing everything within your power today to be fully prepared for tomorrow. 

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When Should You Retire? 

The short answer to this question is: Whenever you’re ready. But for most working Americans, the answer is far more complex. While a retirement fund should be substantial enough to cover most or all of your day-to-day expenses, this fund is supplementary to social security benefits, which also accrue over the course of your career. But while you can crack the piggy bank at any time to cash out, your full social security benefits do not go into effect until age 65. Medicaid benefits, too, go into effect when you blow out your 65 candles. For this reason, many Americans wait until the social security age to clock out for the final time, as the added security stemming from these benefits can allow for a more serene retirement. 

Although 65 might be the minimum age to begin receiving your full social security and Medicaid benefits, there are further incentives to ride it out even longer. Should you decide to retire at 62 –– the youngest age you can currently retire and receive any social security benefits –– you’ll receive a reduced sum as a penalty for your early retirement. 

Conversely, if you wait until 70, you could receive a marginally larger monthly stipend3 as a reward for your patience. We should note that 70 is currently the max age you can receive this so-called “bonus,” and there is no further incentive to retire at, say, 73. With that said, if you’re passionate about your work, in good health, and your retirement goals necessitate it, you can continue working as long as you want with no social security benefits penalty. For a full understanding of your social security benefits and how they may impact your financial planning for retirement, we encourage you to consult the social security administration (SSA) website

How to Plan for Retirement: 6 Steps 

Armed with an understanding of what financial planning for retirement is and why a retirement plan is so valuable, you can begin taking the necessary steps to build your plan. 

1. Get Started

If this step seems deceptively simple, it’s because, for many Americans, it is. Whether you’re just getting your start as a contributing member of the country’s labor force or are a mere decade away from retirement, the act itself can seem so distant that it borders on intangible. 

This can lead some to adopt the “I’ll start tomorrow” approach, which, as many have likely experienced with diets, workout plans, or endlessly procrastinated work projects, means “tomorrow” never comes. So, if you currently have the means to do so, do your future self a favor: Peel yourself off the metaphorical couch, lace up your saving shoes, and get to work on your financial planning for retirement. 

Our subsequent steps can help you take your financial planning for retirement to the next level, but it all starts here. Even if you take no future steps beyond getting a retirement plan started, you’ll be better equipped than you think –– and whether it’s in five years, 15, or 50, future you will be eternally grateful.  

2. Crunch the Numbers

As we mentioned earlier, crunching the numbers regarding both your retirement goals and your current situation is one of the biggest differentiators from aimlessly squirreling away cash and dedicated financial planning for retirement. Therefore, your first step when establishing a plan of attack will be determining exactly how much you’ll need to enjoy a comfortable post-retirement life. 

Generally, financial experts suggest that aspiring retirees be prepared to replace 70-90% of pre-retirement annual income, meaning that someone earning $80,000 annually should have saved between $56,000 and $72,000 per year of retirement. Assuming a person earning $80,000 plans to retire at 65 and live to 100 (what a life!), this figure could range from $1,960,000 to $2,520,000. 

This sum may be eye-watering to many –– but the sooner you begin saving, the easier it becomes to achieve this seemingly gargantuan goal. Our friends at NerdWallet have developed a retirement calculator which is free and easy to use. When you finish this article, head to their site to crunch your own retirement numbers, and see why your dream retirement might be well within reach. 

3. Get Your Priorities Straight

While the above figures offer a rough outline regarding how much you’ll need to have in your retirement fund, getting a more accurate read will require digging deep to uncover your own priorities for retirement. When financially planning for retirement, it will be important to understand your own behavior and needs. 

Is your ideal retirement one where you enjoy a quiet existence, spend time with grandkids, and take up pickleball? Or one where you travel the world and work on your tan –– while also perfecting your pickleball game? Your choice of retirement lifestyle will have a tremendous impact on your day-to-day expenses, and an even bigger impact on your overall retirement fund. 

But knowing how to track spending and recognizing your priorities is equally important today. If, like many Americans, you have student loan plans which you’re hoping to eradicate, you may feel like compartmentalizing is essential in order to knock out a single long-term financial goal at a time. However, you should note that with the right strategies in place, you can tackle several goals simultaneously. Establishing your emergency fund first can be the key to empowering your other long-term saving goals. Why? Because without an emergency plan, your other savings pots become your emergency fund by default. With an emergency savings account in place, you can continue to make strides toward your long-term and short-term financial goals (or at least protect your momentum) no matter the circumstances. 

4. “Shop” for Strategies

Once you make the decision to be more strategic in your approach to retirement or family financial planning, you unlock a world of retirement planning possibilities. Choosing the right pathway for your goals will take extensive time and research, and a deep understanding of what it is you would like to get out of retirement. It’s worth noting that, for a specific retirement plan, there’s no such thing as the wrong strategy. There are strategies. However, that will be in greater service to your goals than others. 

Common employer-sponsored plans, like a 401(k), allow employees to kick pre-tax income directly into their retirement account, sometimes with the added incentive of employer contribution matching. For those under 50, the annual contribution limit is $22,500 ($30,000 for those 50 and over), which few will exceed. 

Those that do, or those who lack an employer-sponsored program, can consider a Roth IRA, which functions similarly to a 401(k) but with a far lower annual limit of $6,000 and with a slightly different taxation structure. 

While a Roth IRA is funded by post-tax contributions and allows account holders to make tax-free withdrawals after the age of 59 ½, a 401(k) is funded by pre-tax contributions –– meaning the IRS gets their cut down the road. There are countless other strategies to consider, and the right one for you will come down to your specific needs.  

5. Iron Out Your Investments

Do you have a concrete investment plan? One of the biggest advantages of retirement savings accounts (like the ones mentioned above) is that they allow you to invest your contributions rather than just letting them collect meager interest. When considering which mutual fund basket to invest in, you’ll be left with a series of decisions. Namely: Are you risk averse, or do you welcome high-risk, high-reward investments? 

If you’re planning for retirement well in advance, time is on your side, and you can likely adopt a more aggressive investment management strategy. Should the market dip, you’ve got the time to recover and reap the benefits. But if you’re doing financial planning for retirement later in life, you’ll most likely want to stick with sure-thing investments which offer steady returns with minimal downside. Your retirement fund might grow more gradually, but this can be one of those circumstances when slow and steady wins the race. 

We should note that we’re not financial advisors, and those seriously weighing their investment options should consult a qualified financial professional. With the help of a skilled and certified financial planner, you’ll be able to better understand the risk of certain mutual funds and decide on the right investment strategy for you. 

6. Reassess As Needed

One of the greatest benefits of taking a more strategic approach to retirement planning or any type of planning (including college financial planning or even financial planning for couples) is that you turn it into a science –– testing and retesting philosophies and adjusting in order to achieve your desired conclusion. And while you shouldn’t obsess over the current state of your retirement plan, keeping a watchful eye on your investment account will ensure that you remain on the right path toward your desired future. 

With that said, if watching your account proves to be too stressful, involved, or tempting, you can turn the responsibility over to a financial professional who will manage your investments, take your goals into consideration, and keep you on track. 

Safeguard Your Financial Future with More Tips from Truehold

With so many Americans behind on retirement, we sincerely hope that the above information has been eye-opening –– and helps you carve a path toward the future you’ve worked for. For more personal finance insights from the team at Truehold and to learn how to set (and accomplish) long-term financial goals like paying off your mortgage, getting rid of your student loans, and, of course, saving for retirement, visit our online resource library


1. CNBC. Workers’ savings just don’t match expected income. 

2. Knowledge at Wharton. How Prepared Are Americans for Retirement? 

3. SSA. You Can Receive Benefits Before Your Full Retirement Age,continue%20to%20delay%20starting%20benefits

Nicolas Cepeda headshot
Written by
Nicolas Cepeda
Financial Analyst at Truehold - A Specialist in Real Estate Finance
Nicolas Cepeda specializes in financial analysis and strategic portfolio management, with a keen focus on innovative residential real estate solutions. He leverages this expertise to cover pertinent topics in the real estate and financial sectors.
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Truehold's blog is committed to delivering timely and pertinent insights in real estate and finance, purely for educational and informational purposes. Crafted by experts, our content is thoroughly reviewed to guarantee its accuracy and dependability. Although designed to enlighten and engage, our articles are not intended as financial advice and should not be the sole basis for financial decisions. Our stringent editorial practices ensure the integrity of our content, empowering our readers with valuable knowledge.

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