Many people want to know about retirement planning.

They want to get a head start, and they want to know they’ll be comfortable in their golden years. If you’re in the same boat, navigating your retirement planning by life stages can help.

First, let’s start by defining the term “retirement planning.”

What is retirement planning?

Retirement financial planning is the process of determining how much money you will need to live your desired lifestyle when you retire — and then devising a long-term plan to make sure you accumulate this sum before your planned retirement date.

Why is retirement planning important?

Retirement planning is important so that you prevent running out of money in retirement.

Your plan can help you calculate your level of risk, your necessary rate-of-return on investments and your portfolio withdrawal strategy.

What are the three types of retirement?

Retirement can mean different things to different people.

Here are a few ways to look at it:

Traditional retirement: Traditional retirement means you’ve completely left the workforce and are dedicating your time to the activities that you choose.

Semi-retirement: Semi-retirement means that you may still be working part-time in your retirement years. This is a good option if you enjoy your work or would like to continue generating income in retirement.

Temporary retirement: Sometimes called a sabbatical, these short periods of leisure take place between different careers or encore careers. You may take several months or a full year to travel, for example, before heading back into the world of work. This may require more complex financial planning.

What are the steps in retirement planning?

The steps in retirement planning are figuring out your goals, creating a plan with a well-diversified portfolio and contributing consistently to your retirement savings accounts. Below, we’ll cover each of these steps in detail according to your life stage.

1. Determine your desired retirement lifestyle and timeline

The first step in retirement planning is to set goals. Ask yourself several important questions, such as:

• At what age do I want to retire?
• What kind of lifestyle do I want to live in retirement?
• How much money will living this lifestyle require?
• What kinds of retirement savings accounts can best help me accumulate this much money?
• How much money should I contribute to these accounts each month?
• How should I allocate my investments within these accounts?

You can use online financial tools to get you on track. For example, our free and secure Empower Retirement Planner is an interactive tool that can help you with all aspects of retirement financial planning. Millions of people use the tool to see what they can do to help improve their chances of retirement success.

2. Take healthcare expenses into consideration

You should also think about how you will pay for medical and long-term care expenses in retirement. Some people think that Medicare will cover most or even all of their healthcare expenses in retirement. But this usually isn’t the case. There are usually monthly premiums associated with Medicare, and Medicare typically covers very little if any long-term care expenses.

3. Start planning as soon as possible

It’s never too early to start retirement financial planning. For example, some people start putting money away for retirement as soon as they get their very first job.

Read more: Your pre-retirement checklist

But also, don’t get discouraged if you’re preparing for retirement a little later in life – the average age of first-time investors is 33.¹

4. Choose the best retirement savings accounts for you

An employer-sponsored 401(k) plan is the best option for many people, assuming their employer offers one. These make it easy to save for retirement through automatic payroll withdrawals each pay period. Also, many employers offer to match employee contributions. For example, an employer might contribute 50 cents for each dollar employees contribute, up to a certain limit.

Another option is an individual retirement account (IRA), especially if you don’t have access to a 401(k) at work. In 2022, you can contribute up to $6,000 to a traditional or Roth IRA, or $7,000 if you’re 50 years of age or over.² You may qualify for a tax deduction with a traditional IRA, which could lower your current taxes. With a Roth IRA, you can make qualified withdrawals tax-free once you reach retirement.

So how much should you contribute to your retirement savings accounts? We recommend aiming to contribute at least 10% of your pretax income each month to an IRA or 401(k) (up to IRS limits) or a similar type of account. If this isn’t realistic for you right now, that’s OK. Start off by contributing as much as you can and set goals for increasing your monthly contributions over time as your income hopefully rises.

5. Automate your savings

A common retirement planning challenge is balancing competing financial priorities. To help ensure that retirement remains a top priority, automatically contribute a percentage of your pretax income to your retirement savings account each pay period. This way, you’re not tempted to spend the money on other things that might seem like priorities but really aren’t.

6. Consider retirement planning by your life stage

One way to approach retirement financial planning is to plan by life stage. In other words, what retirement planning steps should you be taking at each of the key stages of your life?

Here are a few guidelines to help you with life stage retirement financial planning.

Young adulthood (approximate age: 21-35). While young adults who are just starting their careers may not have a whole lot of money to devote to retirement savings, they do have something else working in their favor: time.

By starting to save for retirement at an early age, young adults can potentially benefit from the power of compounding.³ Those in young adulthood usually have decades to go until they retire, which typically allows them to assume more risk with their retirement investments. For example, a young adult might choose an asset allocation that’s heavily weighted toward riskier investments, such as 80% stocks, 10% bonds and 10% cash alternatives.

Early middle age (approximate age: 36-50). For many people during this life stage, their income is growing as their career advances — but so are their financial responsibilities. For example, they may have started a family and assumed financial obligations like a home mortgage, life insurance, multiple car payments, and all of the expenses involved in raising children and paying for their education. With competing priorities, it’s important to set specific and attainable goals.

Later middle age (approximate age: 51-65). The good news is that these are often the peak earning years for many individuals and couples, giving them an opportunity to make a final strong push toward the retirement finish line by maxing out contributions to retirement savings plans.

So-called “catch-up” retirement plan contributions allow later, middle-age individuals and couples to save even more money in their retirement accounts. Individuals 50 years of age or over can contribute an extra $1,000 per year to an IRA or an extra $6,500 to a 401(k), 403(b) or 457 plan.⁴ With retirement growing closer, those in later middle age should keep a close eye on their asset allocation. There will be less time to make up potential losses in their retirement savings account. It might be smart to begin gradually shifting the asset allocation so there’s less short-term exposure to more volatile investments like stocks and more exposure to investments with less volatility, like bonds and cash equivalents.

7. Utilize technology for retirement planning

Online tools can help you devise a retirement plan for living a financially comfortable retirement. For example, with the Empower Retirement Planner, you can:

• Run different scenarios in a side-by-side comparison.
• Review the impact of large expenses on your retirement.
• Add sources of income to your overall plan.
• See how your retirement plan would have fared in historic crashes.
• Get a spending plan for retirement.