7 of the Most Important Steps of Retirement Planning (2024)

Beach chair? Check. Fishing gear? Check. Map of the world with planned travel routes? Check. Retirement should be the reward for a lifetime of hard work and the chance to pursue all the things you’ve always wanted to do. Whether you want to stop working altogether (or just work a little less), you’ll need a plan to get you to the good times and offer shelter from unexpected storms.

If you haven’t begun preparing for retirement or don’t have enough protected lifetime income to cover your essential monthly expenses, you’re not alone. Sixty-three percent of Americans are unprotected for retirement, meaning they have no source of protected lifetime income – such as pensions or annuities – other than Social Security. If you do have a pension, you’re one of only 17% of private sector workers who have access to a pension today.

In 2019, the Alliance for Lifetime Income conducted a survey of more than 3,000 Americans and found that eight in ten say they’re anxious about whether they’ll have enough money to sustain them during retirement. Forty-five percent of non-retired Americans say they’re extremely or moderately anxious that their savings may not provide enough to live on in retirement. And only 18% of non-retired Americans have “very seriously” envisioned their post-work life.

“Planning for retirement is overwhelming for most Americans – which is why all too many shy away from running the numbers, preferring to guess at what they'll need instead,” says Jean Chatzky, educational fellow with the Alliance, Financial Editor of the Today Show, and founder and CEO of HerMoney.

“The key is to start with the tangibles: the type of house you think you'll live in and whether it will be paid off, the car you'll drive, how often you go out to eat, and what you'll need for healthcare above Medicare,” Chatzky says. “Add it up and figure out how much Social Security will or won't cover. Those are the first steps to figuring out how much retirement income you'll need to provide for yourself.”

Ready to tackle the realities of retirement with optimism? Here are seven steps to get you on the right path.

1. First, figure out when you want to retire.

Whether you’ve got 10, 20, or 30 years to plan will have a big impact on how you invest. You’ll need to think about how to preserve your savings and pay your monthly bills while outpacing inflation.

2. Calculate your M.U.G.

Coined by the Alliance, M.U.G. is an easy-to-remember term that’s meant to represent the various essential monthly expenses people need to cover in retirement, including things like a mortgage, medicine, utilities, groceries, and eating out. Tallying these costs helps you create a realistic and concrete budget — especially during times of uncertainty.

3. Think about your monthly income.

You may be retiring with an IRA or a 401(k), but learning about ways to convert your savings into actual income in your retirement is essential. Retirees who receive a check every month for a set amount from a pension or annuity that they’ll have for the rest of their lives say that they’re happier than those who don’t.

Including protected income from an annuity in your portfolio can give you a sense of ease knowing you’ll have money to cover those essential monthly expenses. Just do your research and talk to a financial professional to make sure that what you purchase is right for you and your goals.

4. Learn about your healthcare options — and how much they cost.

Health in retirement is more than just exercising and eating healthy — it’s also a numbers game. It’s never too early to become familiar with your Medicare benefits and costs, and what your premiums may look like when you hit 65 (they may be higher or lower depending on your income bracket).

5. Plan for the good.

So much of planning for retirement seems to revolve around anxiety and fear. With solid, realistic planning, you can start to think about all the things you want to do and how to get there. Will you actually be able to afford to live on a houseboat or see the Pyramids? Including things you dream about doing in your monthly planning and yearly goals will make the process seem like less of a chore and more of a means to an end: joy and freedom.

6. Don’t be afraid to ask for help.

It’s a fact: When it comes to our money, many of us are afraid to raise our hands. Per the aforementioned Alliance survey, 93% of non-retired Americans rely on professionals when making decisions about their health, but just 60% have access to professionals to offer expertise about finances. And, just 26% actually work with a licensed financial professional. A certified planner can answer your questions and help you create a plan with your milestones in mind.

7. Just start.

Knowing retirement could last 20, 30, or more years, the best time to start planning is today. Begin thinking about all the ways you can maximize your savings and supplement retirement options with monthly streams of income to fill the protected income gap that Social Security leaves. Considering an annuity can ensure a more solid monthly footing — and make your retirement years more blissful.