It wasn't so long ago that the average retirement most people envisioned involved saying good riddance to a time clock, moving to a warm retreat, traveling, and spending the rest of the days playing golf and bingo, gardening, chasing grandchildren, and otherwise relaxing.
That retirement dream can still be realized, but it is more difficult with longer life spans, uncertainty around Social Security and Medicare, and volatile markets. Retirement planning is more important than ever in a world of change.
Working through retirement. Your plans for work in retirement will affect how much you need to save and how Social Security benefits fit into your overall income.
Factor in the nature of your job if you plan to keep working. It's generally easier to continue working at your own pace if your current role allows partial retirement or a shift to contract work. Otherwise, you may need to find a different type of job to remain employed.
Prepare for the likelihood that working in retirement will change other plans, including travel and time with family. As you near retirement, consider your health and any conditions that could limit the kind of work you can do.
Paying for retirement. Recent market turbulence reminded many people of two lessons: don’t rely solely on investment returns to fund retirement, and you can rarely save too much.
Increasing savings may require difficult trade-offs, such as saving rather than spending bonuses or inheritances and keeping debt manageable. Verify your full-retirement age and get an estimate of expected benefits from the Social Security Administration so you can decide when to begin collecting benefits and whether to work past that age.
Make sure your money is diversified across allocations and asset classes, and consider working with a planner to align investments with your goals; for practical guidance, see Planning for Retirement: Tips and Insights. You can also contact a planner directly or ask an agent to review your plan.
Be flexible with your retirement plan, budget, and savings—your vision today may change in 10 or 20 years.
Expect obstacles. Other financial responsibilities won't pause while you save for retirement. Plan ahead for likely challenges so a sudden expense doesn't derail your future.
For example, you can reduce the risk of becoming financially responsible for an aging parent's long-term care by discussing whether they have Long-Term Care insurance and the state of their finances; for more on planning around care needs, see The Importance of Retirement Planning and Long-Term Care.
Steps to get started
- Contact a financial planner to run the numbers and estimate how much you'll need to maintain your lifestyle in retirement. The planner will use that estimate plus your age, income, savings, and expected retirement date to set or adjust savings goals.
- Create a savings budget to allocate a consistent amount toward retirement each month, while also funding an emergency reserve and other priorities such as college savings.
- Decide what sacrifices you may need to make now—reduced spending, higher savings rates, or delaying retirement—to meet your long-term goals.
Frequently Asked Questions
When should I start saving for retirement?
Start as early as possible to benefit from compound growth; if you are already saving, increasing contributions gradually can still make a meaningful difference.
Can I work during retirement and still collect Social Security?
Yes, but how working affects Social Security depends on your age and earnings; check with the Social Security Administration for estimates tied to your situation.
How do I estimate how much I’ll need in retirement?
Estimate your expected retirement expenses, factor in inflation and life expectancy, and consider meeting with a financial planner to create a tailored projection.
How should I plan for potential long-term care needs?
Discuss long-term care preferences and coverage with family, review insurance options, and include potential care costs in your retirement budget.