Seven Steps – Retirement Planning Simplified

Planning for retirement is like setting any goal. In order to meet any goal, individuals must determine what required steps will achieve the result. The process may seem tedious, but breaking it down into seven steps will simplify retirement planning.

Determine Net Worth

The first step in retirement planning requires calculating net worth. How much cash accumulates if one sold everything of value? Consider a home, vehicles, recreation vehicles, a business, jewelry, precious metals, collections, etc. Homes are more than likely the most valuable asset people own. Property has multiple means of supplying income.

Besides selling a home, individuals might consider renting a room, renting the basement, buildings on the property, or the entire residence. Use the property to obtain a home equity loan or a reverse mortgage. Consider how anything of value could increase financial status.

Evaluate Hazard Coverage

Individuals should take stock of various insurance policies including homeowner’s, automobile, health, disability and life insurance policies. It is not a pleasant thought to consider, but in the event of illness or disability are there enough assets to cover the costs of medical expenses or long-term care?

Experts suggest individuals accumulating over $2 million dollars will have enough cash flow to afford these expenses. However, persons with a net worth of $200,000 or less, must eliminate assets in order to qualify for government assistance, or individuals could consider long-term care insurance.

Calculate Expenses against Income

Determine the monthly or annual amount of money necessary to live. Usually, persons have eliminated mortgage expenses by retirement, but calculate taxes, insurance and upkeep. Consider food, vehicle upkeep, health insurance and recreational or other out of pocket expenses.

Evaluate the amount of guaranteed income including annuities, pension, social security, and investment accounts. Now look at other sources of income, which may include capital gains, dividends, interest, rentals, and wages.

Compare Amounts Acquired with Amounts Required

Persons desiring retirement at age 65 need enough money to live for 20 to 30 years. Individuals must compare the amount of accumulated assets with the amount of money necessary to sustain living. At this point persons may decide to postpone retirement, continue working full-time or consider working part time. Decide what expenses can be eliminated or devise methods of acquiring other sources of income.

Categorize Income

Divide all the sources of income into three categories: early, middle and late retirement. Early retirement includes immediate liquefied assets or the money individuals can use right away. Middle retirement income should be comprised of assets continuing to grow, which may include bonds, TIPS and various annuities. Likewise, late phase retirement funds might include life insurance, balanced and growth portfolios, and various annuities.


When considering investing, determine the capacity and size of the portfolio. Implement the assistance of an advisor. Never take unnecessary financial risks for quick, large dividends. Avoid venturing into territories unknown or beyond the skill of an advisor.

Maintain a Current Plan

Experts suggest reevaluating a retirement plan annually. Various life-changing experiences may necessitate adjustments or revisions. Unexpectedly caring for dependents, divorce or death of a spouse, economic changes, and illness or injury, may all be reasons to revise retirement goals.