Retirement is a significant milestone, often accompanied by a mix of excitement and apprehension. As we transition into our golden years, it’s crucial to approach retirement with a well-prepared plan to ensure financial stability.
Here are some important aspects of retirement planning to keep in mind:
1. A thorough appraisal of expenses and budgeting
Taking a hard look at your budget now in your working years and creating a future budget are fundamental steps in retirement planning. You must define your current expenses and project the future costs you’ll have when you’re no longer earning a salary. Include your ongoing expenses, such as mortgage payments, car loans, dining and lifestyle needs.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Some retirees find themselves spending more money due to increased leisure activities. As some like to say, “Once you retire, every day is Saturday.” If we think about our spending habits, we tend to spend more on Saturdays, whether that's trips to Home Depot, the grocery store or restaurants. You want to work to create a realistic budget for retirement that accurately reflects your lifestyle.
2. The 4% rule and alternative withdrawal strategies
A commonly discussed guideline in retirement planning is the 4% rule, which suggests that retirees can withdraw 4% of their retirement savings annually without running out of money. There are many nuances to this approach, but in general, it looks at a 60/40 (60% bonds, 40% stocks ratio) portfolio and how it projects over a 30-plus-year retirement.
An alternative to the 4% rules is the “guardrails approach,” which allows for flexible withdrawals based on market performance. This method involves adjusting spending when the market is down and enjoying more spending when the market is up. Both the 4% rule and the guardrails approach aim to ensure financial longevity, but personal preferences and risk tolerance play a significant role in choosing the right approach.
3. Extra sources of retirement income
Social Security and pensions are traditional sources of retirement income, but they may not cover all your expenses. Having additional retirement income sources can be helpful if retirement savings are not enough.
One example is owning rental properties. Renting out a paid-off property can provide a steady income stream and help mitigate inflation’s impact. At the same time, be careful of the risks of a rental property. Make sure you have the proper insurance and that it’s a property that won’t go vacant for long stretches of time.
4. Health care and long-term care planning
Health care costs are a significant concern for retirees. Fidelity reports a married couple should set aside over $300,000 for retirement health expenses. If you are still preparing for retirement, using health savings accounts (HSAs) can be a great way to save for your future health care expenses.
5. Maintaining emergency funds
Maintaining an emergency fund is essential to handle sudden, unexpected expenses. Get a high-yield savings account or a money market fund to ensure that emergency funds are earning interest. This financial cushion can cover sudden costs like home repairs or medical bills, preventing retirees from accumulating high-interest debt.
Also, keep a designated amount for emergencies in your savings account. One rule of thumb is to save three months’ worth of your normal living expenses. Doing so can help you cover one of those unwelcome surprise expenses.
Preparing for retirement requires careful planning and ongoing adjustments. Regularly update your retirement plans and seek professional guidance to navigate the complexities of retirement finances. By understanding your retirement needs well ahead of retirement and planning for them accordingly, you can enjoy your golden years with confidence and financial security.
Dan Dunkin contributed to this article.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Related Content
- How Much Do You Need for a Comfortable Retirement?
- Seven Steps to Plan for Every Aspect of Retirement
- Longevity Illustrator: Find Out How Long You Might Live
- How to Retire at 50 or 55
- Five Things I Wish I’d Known Before I Retired
-
4 Career Moves to Make Now if You're Worried About a RecessionWorried about a recession? These steps to protect your job prospects will help you professionally whether a downturn develops or not.
-
How StoryCorps Works and How You Can Tell Your StoryStoryCorps has recorded conversations between thousands of people, and anyone can participate. National facilitator Alan Jinich explains how to share your story.
-
How StoryCorps Works and How You Can Tell Your Story
StoryCorps has recorded conversations between thousands of people, and anyone can participate. National facilitator Alan Jinich explains how to share your story.
-
I'm a Retirement Psychologist: Here's Why Doing What You 'Ought' in Retirement Beats Doing Whatever You WantTrue retirement freedom isn't about simply doing whatever you want, but about finding purpose and direction through commitments that align with your deepest values and allow you to contribute meaningfully.
-
Tactical Roth Conversions: Why 2025-2028 Is a Critical Window for RetireesThe One Big Beautiful Bill (OBBB) extended today's low tax brackets, but they may not last. Here's how smart planning now can prevent costly tax surprises later.
-
Ready to Retire? It's Not Too Late to Convert to a Roth IRAMillions of Americans are turning 65 this year. If you're retiring soon, don't dismiss the idea of a Roth conversion — it could still be a smart move even now.
-
The Rule of Two Lives in RetirementThe 'rule of two lives in retirement' means accounting for your partner at every decision point, because one life becomes two.
-
Retire in This Asian Country for a Warm Culture and Relaxed LifestyleWith its fabulous beaches, delicious food, and affordability, this Southeast Asian country is a haven for expats from around the world.
-
I'm a Financial Adviser: Three Things You Will Wish You Did Before the Fed Cuts Interest RatesWith potential interest rate cuts on the horizon, you might want to lock in today's higher yields and consider adjusting your asset allocation.
-
Get the Best Car Deal in Retirement: Here's the TrickPlanning on shopping for a new car this Labor Day weekend? Here’s how to haggle for a better price, even though you are retired.
