Retirement is different for everyone. You might envision yourself sipping coffee each morning with family members, taking trips, volunteering to give back to your community, pursuing passion projects — or all those things at once. Your dream retirement should be built on a solid financial foundation that enables you to fulfill those hopes and plans.
Whether you’re planning to retire in a few years or you’ve been out of the workforce for a while, it’s never too late to reevaluate your financial footing. Let’s dive into financial planning tips you can use no matter your phase of life.
Financial Planning for Retirement Matters Now More Than Ever
Although 63% of surveyed retirees say they have a financial strategy for retirement, the broader picture tells another story. According to the National Council on Aging (NCOA), 80% of older adults’ households are struggling financially or at risk of experiencing economic insecurity. This is a real, personal concern because your retirement should be a time of enjoyment and fulfillment, not financial stress.
A major factor in retirement is the price of health care and the potential need for long-term care. The same NCOA survey found that 60% of older adults would be unable to cover the cost of two years of in-home, long-term services and support. A robust and adaptable financial plan for retirement can mitigate your worries about covering unexpected costs as you age.
5 Financial Planning Tips for the Road Ahead
These tips aren’t about making huge sacrifices or taking big risks; they’re about creating a strategy that works for your lifestyle and goals.
1. Set Clear Financial Goals
When you’re eating cake at your retirement party, you don’t want to worry that you didn’t save enough for the life you envisioned. This experience isn’t uncommon; according to studies, 49% of retirees feel they have not saved a large enough retirement nest egg.
This uncertainty can be the result of unclear financial goals. When you imagine retirement, what do you see? Are you enjoying plenty of time and space to pursue your favorite pastimes? Are you cruising around the world, ticking off bucket list destinations? Are you living independently at home or surrounded by friends in a senior living community? Whatever your vision, it must be translated into a concrete financial plan.
Start by estimating the cost of living in the place where you want to live — whether that’s a beach in Florida or the expansive Wyoming plains — and calculate your necessary monthly retirement income. Research housing costs, health care, utilities, food, and entertainment in your desired location. For example, a Florida beach house may come with a beautiful view and higher insurance premiums due to hurricane risks, and a rural Wyoming cottage will offer more affordable living but less access to medical resources.
After determining where you want to live and how you want to spend your time, calculate your ideal monthly income during retirement.
2. Diversify Your Investments
Diversifying your investments involves spreading your resources across various assets such as stocks, bonds, savings accounts, real estate, and Social Security benefits. This strategy can help decrease risks, maintain monthly expenses, and preserve long-term financial health.
When handling investments, understanding your risk tolerance is essential. Risk tolerance is the personal measure of how much financial risk you’re willing to take while growing your investments, and it should change based on your financial goals and age. Before and in early retirement, you may choose a higher portfolio risk level with more volatile assets, such as stocks, in the mix. Later, a conservative approach that leans into bonds and steadier sources of income might be more sensible.
3. Maximize Your Retirement Savings
While you’re in the workforce, maximizing your retirement savings requires a multi-pronged approach with various retirement plan strategies:
- Contribute to employer-sponsored retirement plans such as a 401(k). If possible, maximize your contributions and take advantage of any employer matching programs on offer.
- If you’re 50 or older, you’re eligible to make annual catch-up contributions, which are additional investments into your employer-sponsored retirement plans. In 2024, that could mean funneling an extra $7,500 into your investment accounts!
- An individual retirement account (IRA) is a savings account that offers long-term tax advantages. Even if your employer already provides a retirement plan, you can still establish an IRA and reap the benefits.
If you’re already retired and looking for ways to maximize savings, start by managing your withdrawals. A common approach is the 4% rule, which involves withdrawing 4% or less of your retirement portfolio per year. This rate should help your savings last for 30 years or so. In addition, consider waiting until age 70 to collect Social Security benefits because you’ll be eligible for a higher monthly payout.
4. Plan for Health Care Costs
Health care can be one of the biggest expenses in retirement. According to a 2024 study, a 65-year-old may need an average of $165,000 to cover health care expenses in retirement — up almost 5% from 2023. As you plan for future health care costs, consider your overall health, family health history, and potential care needs. In addition to covering any existing health concerns or chronic conditions, you’ll need to continue paying for dental care, medications, vision exams, and regular checkups.
Medicare can help with some costs but doesn’t pay for everything. Research supplemental health insurance options (i.e., Medigap) to ensure you maintain an appropriate amount of coverage. If you’re still working and aren’t enrolled in Medicare, take advantage of the tax savings offered by a health savings account (HSA).
The cost of long-term care — assistance with daily activities such as bathing, eating, and dressing — may become a factor as you age and experience health changes. Maintaining your overall well-being through preventive care and exercise can keep you active and independent for longer. Consider investing in a membership program such as WellAhead — A WesleyLife Well-Being Experience that helps you remain independent and healthy in your home with resources for physical well-being, home maintenance, and pet care. Plus, if you need an enhanced level of health care later on, the program covers 100% of all primary costs in a WesleyLife community or via services provided by WesleyLife at Home.
5. Protect Your Assets
A well-crafted estate plan not only protects your financial assets but also decreases stress and provides clarity for your loved ones. Creating an estate plan involves designating beneficiaries who will receive your assets, enacting a will, and even establishing a trust if your estate is more complex.
Another key element is a living will or advance directive to clarify your wishes for end-of-life care, organ donation, and more. A living will provides peace of mind for you and your loved ones in the event you can’t communicate your health care preferences.
Questions to Ask a Financial Advisor About Retirement
Retirement planning can seem overwhelming, but you don’t need to tackle it alone. Consult a Certified Financial Planner (CFP) to break down your goals into actionable steps. Come to the table with specific questions, such as:
- Am I on track to reach my goals? An expert analysis of your retirement savings and income accounts for inflation, life expectancy, and desired lifestyle.
- When is the optimal age for me to retire? The best retirement age is based on your financial situation and accounts for trade-offs between retiring early or working longer.
- When should I begin taking Social Security? You can start withdrawing Social Security as early as 62, but waiting until later may provide higher monthly benefits.
- What tax strategies are the best fit for my retirement plans? Develop tax-efficient strategies for withdrawing funds and converting accounts into tax-advantaged investments.
- What’s the best way to continue giving to charity? Continue to donate in retirement, including making charitable contributions directly from retirement accounts or donating appreciated assets.
- How can I structure my estate to give to my kids and grandkids, now and in the future? Setting up trusts, using annual gift tax exclusions, and making lifetime gifts are a few strategies a financial planner can help you carry out, depending on your situation.
- What costs should I expect for long-term care? Reach out for strategies to help cover the cost of changing health as you age, and consider investing in the peace of mind that comes from a membership program like WellAhead.
Investing in Your Future
Life doesn’t stand still, and your retirement plan should adjust to meet your changing needs. By staying proactive, being flexible, and leaning on a financial professional’s insight, you can feel confident that you’re making the right financial moves in retirement.
Ready to learn more about handling finances as you explore opportunities and weigh your options in this next phase of life? Check out the Cost of Senior Living Calculator to compare the cost of a senior living community versus aging in place.
