Starting a Retirement Plan: 5 Ways You Can Prepare

Whatever your age, figuring out how to start a retirement plan is an important goal. The sooner you begin preparing, the more flexibility you’ll have regarding what you can likely achieve during your retirement years. You’ll also have a better financial buffer whenever an emergency arises, whether it’s something broad like an economic recession or more personal, such as a major health issue or job loss.

Learn how to start a retirement savings plan by following these recommended five steps. Unfortunately, there’s no magic button to push that suddenly propels you to your retirement goal. Instead, with patience, consistency and some professional help, you can better set yourself up for the retirement you want.

#1: Don’t wait to get started

Retirement planning is not something to put off until the last minute. In an ideal world, you’d start planning for this stage of life as soon as you enter the full-time workforce in your 20s. Even if it’s something as small as paycheck deductions directed into an employer-sponsored 401(k), you have the power of time on your side when it comes to planning. Starting to save for retirement early lets you take advantage of long-term growth, helping even small amounts of money to snowball (i.e., compound) into larger amounts as you grow your income and your portfolio. Plus, you’ll have decades to weather the inevitable ups and downs of the market, which is a natural and important aspect of accumulating a retirement fund.

As sensible as it may sound to start planning for retirement early in life, we know it’s not a reality for everyone. Even if you’re only two to three years away from your retirement age, or even closer to retiring, you can follow the rest of the steps to figure out where you stand today and what you can do over the next while to meet your financial goals. The longer you wait to tackle retirement planning, the more likely you may have to delay your timeline and continue to work on a part-time or even full-time basis.

#2: Create a holistic budget

Before you start preparing specifically for retirement, it’s important to first understand your current finances, commonly identified through a budget. The better you understand your current budget and how you spend your money now, the better prepared you’ll be to do the same in retirement. It can be extremely helpful to identify what expenses are fixed and won’t change much from year to year (i.e., your needs), while also determining what portion of your spending is discretionary and may vary (i.e., your wants). Also think about other financial goals that you’d like to achieve (i.e., your wishes), whether or not they are recurring. By understanding your spending habits at a more granular level, you can plan more effectively for what’s needed once you enter retirement.

This type of budget planning encourages you prioritize your financial goals and develop timelines and funding strategies to help best achieve your spending goals in retirement. In theory, it may sound easy to pay off your mortgage, pay for your kids’ college tuition, buy a second home, go on vacation every year and save for a comfortable retirement. In reality, while all these goals can be attainable, you should understand what your goals mean in terms of dollar amounts, frequency of occurrence and where they fall in the overall prioritization of your goals.

There are many ways to help yourself stay on track with a budget. An old-fashioned spreadsheet that captures your spending and saving categories is an effective way to get into this new habit. If you’re more tech-savvy, you may also wish to try one of the countless mobile apps designed to help you automate the budgeting process.

Finally, budgets are meant to be revisited regularly and tweaked along the way to retirement. At the very least, review it once a year so you can audit and make updates whenever a major life event occurs, such as marriage, having children, divorce, the passing of a spouse or a significant job promotion.

#3: Set a target retirement budget

Once you know where your current budget stands, you can use your current spending habits to develop a projected budget for the type of retirement you desire. As you start (or continue) to set aside retirement funds, it’s helpful to plan for and project the approximate savings and investment growth rates needed to achieve your retirement spending goals.

Exactly how much to set aside depends on several different factors, including your age, broader financial situation and what you hope to do once you retire. If you’re currently in the workforce and have access to an employer plan like a 401(k), check to see if there are any incentives to contribute, such as an employer match where your employer will contribute as much as you do, up to a set percentage of your income. If this employer contribution is available at your workplace, try to take advantage of what is essentially “free money” that can help grow your wealth faster.

#4: Prepare for the unexpected

No matter how much planning you do, life inevitably comes with its own bag of surprises. When learning how to start a retirement plan, it’s important to realize that addressing unexpected emergencies must be part of your plan. At Corient Private Wealth, we’re conservative when preparing our clients for unpredictable events and financial surprises. It’s crucial to consider and prepare for the unexpected during retirement planning, as there’s no certainty in knowing exactly what life will throw at you — and at what cost.

If you’re not prepared, both external and personal events may impact your ability to retire, or what your retirement will look like. Market volatility, for example, can have a huge impact on the value of your investments. What happens if you’re nearing retirement age during a recession, or a market downturn occurs shortly after you’ve retired? Your retirement plan should account for and illustrate the impact that such events could have, so that you can better prepare for the financial flexibility that may be needed when unexpected events occur.

Healthcare costs are also an issue for many retirees, given that medical expenses tend to continue rising as people get older. Since additional medical and other care expenses tend to increase with age, they can be difficult to estimate using your current budget. At Corient, we incorporate best estimates — based on leading retirement healthcare studies — within our retirement plans, to help avoid a funding shortfall for retirement health care spending. Finally, create a plan to protect your retirement savings before you need them. That means having a reasonable amount of liquid (i.e., readily accessible) assets on hand to get you through any financial emergencies that happen before you retire. By establishing and maintaining an emergency fund, you’ll be better able to insulate potential unexpected needs arising from market volatility or potentially unfortunate timing.

#5: Work with a Corient Wealth Advisor

One of the best ways to ensure you’re adequately saving for retirement at any age is to collaborate with a financial advisor throughout the process. A financial advisor works with you to understand your unique goals through the various stages of life, including retirement. Plus, they’ll bring a professional perspective when helping you complete the steps discussed above, all while looking out for your best interests. Although you may start planning for retirement on your own, questions to ask a financial advisor about retirement will likely arise during the process, and collaborating with one gives you a major advantage in several ways.

If you’re running behind on your goals, a financial advisor will help you identify an appropriate savings rate to better achieve them. They’ll also keep tabs and help you plan for your future retirement income streams, including investment income and withdrawals, Social Security, annuities or rental income. This is important to consider not only in the context of how much you have today, but how much you’ll have in the future — and need to have in the future — when taking into consideration the eroding impact of inflation. A financial advisor accounts for these more complex variables when working with you to create a detailed retirement plan. They also craft appropriate strategies for your financial situation to help you better achieve your goals with the wealth you’ve worked so hard to earn. If you’re wondering, “How do I find a financial advisor for retirement?” The answer will vary based on your particular goals, but important criteria include a reputation check, the fees you’ll pay and how their planning process works.

Bottom line

It’s never too late to learn how to create a retirement savings plan. Getting started today with even a simple savings strategy is the first step toward making sure you’re truly prepared for this important stage of life. If you’re ready to collaborate with a dedicated and experienced wealth advisor, please reach out to Corient today and begin preparing for the retirement you’ve always wanted.

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