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Retirement Planning: Guide to Financially Preparing for Retirement

By Mike Zaccardi, CMT, CFA · September 20, 2022 · 6 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Retirement Planning: Guide to Financially Preparing for Retirement

Retirement planning might seem like a daunting task. There are many facets, including investments, cash flow planning, insurance, Social Security, taxes, and estate planning. Securing a successful retirement requires thoughtful planning and a step-by-step approach. It all starts by considering your goals and values and then making progress toward meeting them through a financial retirement plan.

Knowing when to start financial planning for retirement is important, but often today is the ideal time. Determining what age you want to call it quits from the nine-to-five grind and what your retirement lifestyle might look like are parts of retirement income planning, too.

Why Is Financial Planning for Retirement Important?

Financial planning for retirement is important because you want to genuinely enjoy your life after work. Comfort and peace of mind are vital. Different types of retirement plans can help you secure a successful retirement. A financial plan for retirement is an evolving document that details your goals and objectives. An investment policy statement includes your time horizon, taxes, liquidity needs, legal matters; and unique aspects of your life are often included.

Each person’s situation is different. That’s why it is critical to customize a retirement plan for each individual; a cookie-cutter approach is rarely the optimal solution. Often it takes working with a fiduciary advisor to build, maintain, and execute a financial retirement plan.

Can Investing Be Included in Your Financial Plan For Retiring?

Investing is a major component of retirement income planning. After choosing a retirement plan, you must go about investing to reach your goals. In general, younger people likely would take on more aggressive investment portfolios, as they have more time to endure inevitable market dips over the years. As you age, it’s common to reduce stock market exposure and increase allocations to safer investments like bonds.

The good news is that investing for retirement is easier than ever with accounts like a 401(k) through your employer and individual retirement accounts (IRAs). Knowing the difference between those accounts can help you figure out the right way to go about investing for the long term.

💡 Recommended: Differences Between a 401(k) and an IRA, Explained

Starting Your Financial Planning for Retirement

Saving for retirement should begin as soon as you hit the workforce. Many people don’t accomplish that, though. That’s ok. The best time to start your financial plan for retirement is today. Just like the old Chinese proverb: “The best time to plant a tree was 20 years ago. The second-best time is now.”

If you are in the middle of your career, it’s not too late. Consider that each dollar you set aside for your golden years can still compound to a significant amount. Beginning your financial plan now versus later means you won’t have to scramble last-minute to prepare for life after work.

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Creating a Financial Plan for Retirement

Financial planning for retirement can seem like a challenging endeavor, but it starts with small steps. Simply investing up to the company match in your 401(k) plan and contributing to a Roth IRA are powerful first moves. As you accumulate wealth and as your life grows more complex, then reaching out to a certified financial planner (CFP)™ can go a long way toward crafting a solid financial plan for retirement.

Retirement income planning early in your financial journey is all about balancing realistic return expectations with the kind of lifestyle you want to live out during your golden years. It’s more than just investing, though. Ensuring that you have proper insurance and an estate plan in place is critical. Then as you near retirement, developing a Social Security and retirement account distribution strategy mindful of tax impacts is key.

Determining Retirement Age

Figuring out what age you want to retire is not that complicated, but retirement income planning based on that age can be complex. That’s why maintaining a financial plan for retirement is paramount. Age 65 used to be considered the typical retirement age, but in the future, 67 or 70 might be the standard. Right now, Social Security starts paying out benefits as early as age 62. Required Minimum Distributions from qualified retirement plans now begin at age 72.

That’s a lot of ages to think about. Ultimately, however, it comes down to your values and desired retirement lifestyle. If you want to retire early, then increasing your savings rate today and earning more income might be important priorities for you.

Determining Retirement Lifestyle

As with so many aspects of personal finance and financial planning, your retirement lifestyle is unique to you. Some individuals and couples want to travel the world and spend extravagantly. Others seek a more subdued and peaceful retirement. Determining what kind of life you want during retirement is the first step toward figuring out how much money you might need to be prepared well for retirement.

Consider that the median income of retirees (those age 65 and older) is slightly less than $50,000 as of 2021, according to the U.S. Census Bureau and Annuity.org. That might not afford you a very elaborate retirement. Saving more today can help you beef up your total retirement portfolio later in life. Moreover, the financial needs retirees face can change during retirement. The early years might be pricey with travel and dining out, while the latter years could see significant health-related costs.

Setting Financial Goals for Retirement

Working with a financial planner could help you outline how much money you’ll need to retire. You might first seek to pay down student loan debt and build an emergency fund before contributing large sums to retirement. Still, you should get in the habit of saving at least a small amount in your retirement accounts and then increasing that rate so that you can reach your financial goals for retirement.

You might determine that you want a lifestyle that costs, say, $80,000 per year in retirement. A financial planner can calculate how much you will need to have accumulated in your retirement accounts to ensure you can live that life. Any Social Security distribution should also be taken into consideration.

Also realize that investing in retirement still might have a time horizon of decades as people live longer. Your financial goals in retirement should always consider the appropriate time horizon and longevity risk.

Setting up Retirement Invest Account

Setting up retirement investing accounts is simpler than ever through a 401(k) or IRA. It’s also often free. With a few clicks, it can be done within minutes and without paperwork. Even for those late to the retirement income planning game, you can invest at any age today to reach your financial goals by age 65 or 70.

Financial Planning for Retirement With SoFi

You can start building your financial plan today by opening and investing in an IRA with SoFi. A Traditional IRA and Roth IRA are great tools to help grow your nest egg whether you are 25 or 55. Even a regular SoFi Invest brokerage account can be used for retirement investing.

SoFi members also have access to financial planners to help you along your retirement journey.


How can you begin financial planning for retirement?

A long journey begins with the first step, and that applies to making a financial plan for retirement. A good rule of thumb is to set aside at least 15% of your income each year toward retirement accounts like your 401(k) or IRA. Once you start building a nest egg, then you can consider other important parts of long-term planning.

Can you include investing in a financial plan for retirement?

Yes, investments are a key piece of planning retirement income. In general, the younger you are, the more risk you can take on so that your retirement portfolio can grow larger as the market increases. Young investors have time on their side to weather the natural market swings year by year.

How soon should you begin financial planning for retirement?

You should begin financial planning for retirement as soon as possible. Areas such as investments, insurance, retirement income planning, tax management, and even personal finance topics should be managed throughout your working years in order to build a strong financial plan for retirement.

Photo credit: iStock/pixelfit

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
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