Whether you’re nearing retirement or have already entered this stage in your life, planning out how to live your golden years can be daunting. You want to ensure you will not outlive your money, but you don’t want to scrimp so much that you can’t enjoy your retirement.

The good news is that you can feel more confident in your retirement by establishing a vision for what you want this period of your life to look like and base your plan around that vision. With a clear picture of what you want retirement to be, you can establish corresponding goals in areas such as how much you need to save, how much additional income you need to earn (if any), what types of insurance you should purchase, and more.

More specifically, defining your vision is the start of an eight-step process that we lay out in our complimentary ebook to help you prepare for retirement. We recommend downloading the ebook so you can discover more details on how to make your retirement vision a reality because retirement planning is too nuanced and important to gloss over.

However, to help you get a baseline understanding of what the progression looks like from envisioning your retirement to having a full-fledged retirement plan, we have laid out the eight steps in an abridged format here.


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Read the eight-step process to plan your retirement.
Download Understanding the Ins and Outs of Your Retirement Preparation today.


Step 1: Define Your Vision

A clear vision can set the scene for your retirement planning, so you should take the time to consider your ideal retirement. Include specifics such as:

  • The age you want to retire at

  • How you want to spend your free time, e.g., pursuing hobbies, traveling, volunteering

  • Where you want to live, e.g., in your current home, in a new one in a different part of the country or abroad

  • Whether you’re on the same page as your spouse about your timeline and goals

There’s no one way to retire. The choice is yours, and planning now for what you want can help make attaining that lifestyle more feasible because you’ll have more time to adjust various levers to fit your vision.

For example, if your dream involves traveling around the world, but you don’t necessarily have the savings to do so, perhaps you will decide to make the trade-off of selling your home and downsizing to travel more. But if your dream retirement involves living in your current home, then you’ll need to think about other levers you can adjust, such as working a side job or contributing more to your retirement accounts to attain additional income.

As you work through the remaining steps, you’ll see what you need to account for and how you can plan accordingly for your ideal retirement.


 Step 2: Calculate Your Income

Just as understanding your income throughout your career has helped you plan for events such as getting married, growing your family, and buying a home, knowing what your income will likely be in retirement can help you realize whether you can afford what you envision.


As such, you should consider all sources of income, such as:

  • Retirement savings accounts, e.g., 401(k)s and IRAs
    Your savings accounts can be converted into monthly income. Your income amounts will depend on how much you want to draw down your savings vs. living off the investment gains from these accounts, along with other factors such as how many years you plan to draw from these accounts. Many free online calculators like this one from NerdWallet can help you calculate what your income will be from these accounts based on your unique variables. You can also work with a financial advisor to get detailed projections.

  • Social Security income
    Social Security income alone may not support your retirement vision in full, but it still plays a crucial role for most people. The Social Security Administration provides a calculator for estimating your Social Security benefits so you can know what to anticipate.

  • Pensions
    If you or your spouse has a pension, be sure to calculate what that monthly or annual income will be. If you’re unsure about your pension benefits, talk to the plan administrator to get a better understanding.

As the ebook explains in more detail, you can also consider other sources of income, such as proceeds from selling personal assets or working part-time. These additional income sources can go a long way toward helping you meet your retirement vision.


Find Out Your Retirement Cash Flow

Working with a financial advisor can help give you confidence about cash flow in retirement. Schedule a complimentary, 30-minute call to discuss your situation and how we may be able to help.


Step 3:
Define Your Vision

As with income, one way to know if you will have enough money in retirement is to calculate the other side of the equation—your expenses.

Your retirement vision can help you determine what your expenses will be, based on your goals and needs in areas such as:

  • Housing

  • Transportation

  • Vacation

  • Entertainment

You should also factor in other areas such as health care. Such areas may be difficult to predict precisely, but you should plan for the high end of your projections so that you’re not caught off guard.


Step 4: Tackle Debt

Just as understanding your income throughout your career has helped you plan for events such as getting married, growing your family, and buying a home, knowing what your income will likely be in retirement can help you realize whether your retirement vision is sustainable.

In addition to expenses related to your lifestyle in retirement, you should think about other costs that can arise, such as the interest you’ll pay on any debt. This can include interest from sources such as:

  • Credit cards

  • Personal loans

  • Mortgages

  • Education loans (e.g., college loans that you co-signed for your children)

Depending on your retirement vision, it could be best to pay off these debts before retirement so that you incur the least amount of expenses as possible. In other situations, however, carrying some debt can be helpful, such as when it enables you to purchase a new home. Thus, it’s important to consider debt in the context of your retirement vision.


Step 5: Prepare Your Savings

Calculating your income and expenses and gaining a clear picture of your debt can help you realize whether you’ll have a positive or negative balance sheet if you try to meet your retirement vision.


In other words, if you’ll likely spend less each month than your monthly retirement income amount, you’re probably in good shape. If you’re spending more than you take in, however, you may need to add to your savings to reach your goals.

In addition to considering how much you’ll need to save, you should also think about how you want to structure your savings. Consulting with a financial advisor can help ensure your savings are set up in a way that aligns with your retirement vision and your needs.

For example, if you already have sufficient savings and can meet your retirement goals, you may be best served by opening high-yield savings accounts, certificates of deposit, or conservative bond investments.

Conversely, if you need more income, you may want to ramp up your savings in investment accounts that invest in index stock funds that may have more volatility but could earn higher returns.


Have You Saved Enough for Retirement?

Our fee-only advisory firm can help you understand whether you are on track for retirement. Schedule a complimentary, 30-minute call to discuss your situation and how we may be able to help.


Step 6: Consider Insurance

While working, you may receive various forms of insurance through your employer, but once you retire, such decisions will largely be in your hands. Even if you receive health coverage through programs such as Medicare, you may want to purchase supplemental insurance, as well as long-term-care insurance (see the next section for more details). These policies could reduce the risk of paying for significant expenses that deplete your savings and hurt your retirement.

In addition, you may want to consider life insurance if you will have dependents in retirement. You may also consider a policy to reduce the possibility of leaving your heirs without an inheritance before you’re able to position your finances accordingly.

Your decision should be made in the context of your overall goals, so it may be helpful to talk with a financial advisor for recommendations. By making sure your advisor is a fiduciary and fee-only, you’ll be able to trust that their advice is made with your best interests in mind, rather than being based on earning commissions from insurance companies.


Step 7:
Plan for Long-Term Care

As you age, your health care needs may change, such as needing help from a part- or full-time health aide. While it may be unpleasant to consider such scenarios, it’s important to plan for them, as such coverage is expensive and can quickly deplete your nest egg. You should have a plan for potential long-term-care services, even if you feel like you will never need them. Since Medicare will not cover long-term care except in very limited instances, you may want to consider long-term-care insurance.

In addition to having a plan to pay for long-term care, you should also consider what type of care you’d like to receive if the need arises, such as remaining in your home with the help of an aide or residing in an assisted-living facility. Of course, such decisions will be shaped by future circumstances, but having conversations with your family now can be helpful and make any future care less stressful on everyone.


Download the Ebook!

Get a detailed eight-step process for preparing for your ideal retirement. Download Understanding the Ins and Outs of Your Retirement Preparation today.


Step 8: Engage in Estate Planning


A key component to retirement planning is making sure your estate planning documents are in order so that your wishes are carried out as you intended. This extends not only to the inheritance you want to leave but also to the people you would want to make financial or medical decisions on your behalf should you become unable to do so yourself.

As a first step, think about how your legacy connects to your retirement vision. For example, if your retirement vision involves spending more time with your family and passing on a legacy of helping others, consider establishing charitable trusts that your children or grandchildren can manage after you pass, based on the values and experiences you’ve shared.

Next, set up your will or trust with the help of an experienced estate planning attorney, and make sure you carry out all steps such as titling. Work with your attorney to set up documents for medical and financial powers of attorney, as well as advance directives. If you are working with a financial advisor, they may coordinate with your attorney on the details, making the process easier for you.


Bonus Step: Work with a Financial Advisor


By following these eight steps, you can be on your way to an enjoyable retirement. The key is diligently looking into each of these areas. That’s why we recommend downloading our ebook to gain more detailed insights into retirement planning.

It is also why we recommend consulting with a financial advisor. Retirement has a lot of moving parts, and the right financial planner can pull together all the areas of your finances into a roadmap for retirement.

We recommend you work with a fee-only, fiduciary financial advisor. Fee-only advisors are paid only by clients and never accept commissions, which helps eliminate potential conflicts of interest. A fiduciary advisor has a legal obligation to put your best interests first in all of their recommendations. That means that together you can create a retirement plan that best suits your needs, not the advisor’s.

At HC Financial Advisors, we serve as trail guides for retirement and other transitions. Based in Lafayette, California, we are a fee-only, fiduciary Registered Investment Advisor serving the Bay Area. We are committed to financial planning and investment management that helps our clients find their way through the various transitions and stages of their life, including retirement.