Create a Retirement Plan in 15 Minutes (Free Template)

According to a 2021 survey conducted by the Federal Reserve, approximately 36% of non-retired adults in the United States felt that their retirement savings were on track, while 45% felt they were somewhat or far behind. If you don’t want to enlist in the latter group, plan your retirement strategically.

However, you may find the process procrastinating, and that’s where this 15-minute retirement plan template comes in. This user-friendly template will help you quickly organize your thoughts and set realistic retirement goals. By the end of this post, you’ll have a solid plan in place and be well on your way to achieving your retirement dreams.

Define Your Retirement Goals

Before diving into the nitty-gritty of retirement planning, it’s essential to establish clear goals. First things first, decide when you would like to retire. The average retirement age in the United States is about 65. Remember that life expectancies are increasing. Presently, the average life expectancy in the US is around 79 years. So you may have a longer retirement than previous generations. Consider your health, desired lifestyle, and career satisfaction when choosing your retirement age.

Desired Retirement Income: To maintain your current lifestyle in retirement, financial experts often recommend aiming for an annual retirement income between 70-85% of your pre-retirement salary. However, this is just a guideline, and individual circumstances will vary. The median household income in the United States is approximately $68,700 as of 2019.

To determine your retirement income, consider your current lifestyle costs. This will give you a baseline for estimating your retirement expenses. Next, you need to project future expenses and lifestyle changes. This will help you adjust your projected retirement expenses accordingly.

Retirement Savings Target: Once you’ve determined your desired retirement income, you can set a savings target. You can start estimating your total retirement savings. Leverage a retirement calculator to estimate how much money you’ll need to save to generate your desired retirement income. Consider factors such as inflation, which historically averages around 3% annually, and investment returns, which have averaged around 7% for the S&P 500 index over the long term. In addition, consider potential sources of income in retirement. They may include Social Security, pensions, or a part-time job. Statistics reveal that Social Security provided an average monthly benefit of $1,543 in 2021.

Assess Your Current Financial Situation

Now that you’ve defined your retirement goals, it’s time to take a snapshot of your current financial situation. Start by compiling a list of your current retirement accounts, savings, and investments. This will give you a clearer picture of your progress toward your retirement goals. Your retirement accounts may include employer-sponsored retirement plans (e.g., 401(k), 403(b)) and Individual Retirement Accounts (IRAs).

Understanding risk tolerance is also crucial for making informed investment decisions. You can fill out a risk tolerance questionnaire to assess your investment risk profile. Once you identify your risk tolerance, align your portfolio with it. Consider rebalancing your assets while adjusting your investment strategy when carrying out this task.

Suppose you have high-risk tolerance and wish to take on more risk to achieve higher returns potentially. In this case, you may allocate a higher percentage of your investment portfolio to stocks with higher returns and volatility historically. A possible allocation could be:

• 70% in stocks with higher return potential, capital appreciation, and greater volatility.
• 20% in bonds, which provide income and stability but generally have lower returns than stocks.
• 10% in other investments, such as mutual funds, real estate, or cash, which can diversify the portfolio.

On the other hand, if you have a lower risk tolerance, you might prefer allocating a higher percentage of your portfolio to bonds and other more conservative investments. A possible allocation for someone with low-risk tolerance could be:

• 40% in stocks, to still benefit from potential capital appreciation, albeit with lower exposure to market fluctuations.
• 50% in bonds, which provide income and stability.
• 10% in other investments, such as mutual funds, real estate, or cash, for diversification and additional balance.

Remember that these percentages are just examples, and you should adjust them according to your preferences, financial goals, and time horizons. It is essential to periodically review and rebalance your portfolio to ensure that your asset allocation aligns with your risk tolerance and financial objectives.

Develop a Retirement Savings Strategy

You should select your investment vehicles smartly. The standard options you will come across may include the following –

• Employer-sponsored retirement plans: Take advantage of your employer’s retirement plan, such as a 401(k) or 403(b). These plans often come with valuable benefits, such as employer-matching contributions. In 2022, the maximum employee contribution limit to a 401(k) or 403(b) plan is $22,500, with an additional catch-up contribution of $7,500 allowed for individuals aged 50 or older.
• Individual Retirement Accounts (IRAs): Traditional and Roth IRAs offer tax advantages to help you save for retirement. A Traditional IRA allows you to contribute pre-tax dollars to your retirement account, potentially lowering your taxable income. On the other hand, A Roth IRA is funded with after-tax dollars, meaning you don’t receive an upfront tax deduction on your contributions. However, the investment earnings within the account grow tax-free, and qualified withdrawals in retirement are also tax-free. Determine which IRA type is most appropriate for your financial situation and contribute as much as possible within the annual limits.
• Taxable investment accounts: While taxable investment accounts don’t offer the same tax benefits as retirement accounts, they can provide additional savings opportunities and greater flexibility in accessing your funds.

Determine Your Savings Rate

Your savings rate is essential to your retirement strategy. It represents the percentage of your income that you save for retirement. To determine your optimal savings rate, consider the following example:

Your annual income is $60,000, and your goal is to retire with an annual income of $45,000 (75% of your pre-retirement income) at age 65. Assuming you’re currently 30, you have 35 years to save for retirement. You’ll need approximately $1.2 million in retirement savings to generate $45,000 annually, accounting for inflation and an average annual return of 7% on your investments.

If you’re starting with no retirement savings and plan to save consistently for the next 35 years, you’ll need to save around $7,200 per year, or $600 per month, which translates to a 12% savings rate ($7,200/$60,000*100).

Health & Life Insurance 

Health issues come unannounced. Therefore, always keep your healthcare fund handy. You can invest in a high-deductible health savings account as it offers fantastic tax benefits and covers qualified medical expenses. In addition, you should invest in long-term care insurance, which will pay the cost of in-facility or hospice care.

Besides health insurance, you should consider life insurance. Everyone wants to spend their retirement with their loved ones, but life is unpredictable. In the unfortunate event of your sudden demise, your loved ones shouldn’t suffer adverse financial consequences. Thus, calculate your life insurance needs to determine the coverage you need to replace your income, cover debts, and fulfill your family’s financial requirements.

To make an intelligent decision, always compare term and whole life insurance. While term insurances offer coverage for a stipulated period, the whole life ones ensure lifelong coverage followed by a cash value component.

Optimize Social Security Benefits

The role of Social Security in a retirement plan can vary depending on individual circumstances, such as age, work history, and financial goals. These benefits are designed to replace a portion of your pre-retirement income, providing a financial safety net to help cover expenses during retirement. Besides, Social Security benefits are adjusted for inflation, which can help maintain your living expenses in retirement.

Maximizing your Social Security benefits can significantly impact your retirement income. Understanding your options and making informed decisions can ensure you get the most out of this valuable resource. Furthermore, pay attention to determining your Full Retirement Age (FRA). This refers to when you become eligible for 100% of your Social Security benefits.

Strategies for Claiming Social Security Benefits

There are several strategies to consider when claiming your Social Security benefits.

Claiming early: You can start claiming benefits as early as age 62. However, in that case, your benefits will be reduced for each month you claim before your FRA. To clarify, If your FRA is 66 (for those born between 1943 and 1954), your benefits will be reduced by 25%. If your FRA is 67 (for those born in 1960 or later), your benefits will be reduced by 30%. For those with an FRA between 66 and 67 (born between 1955 and 1959), the reduction will fall within the 25% to 30% range. However, claiming early may be viable if you’re in poor health or have vigorous financial needs.

Claiming at FRA: Claiming at your FRA ensures you’ll receive 100% of your benefits. This is a good option if you’re otherwise healthy and have enough retirement savings to cover your expenses until your FRA.

Delaying your claim: Each year you delay claiming your benefits past your FRA (up to age 70), your benefits increase by 8%. Suppose your FRA is 66, and your monthly benefit at FRA is $2,000. If you delay claiming your benefits until you hit 70, your benefits will increase by 8% annually for four years. Here’s how the calculation works:

• Year 1 (age 66 to 67): $2,000 x 1.08 = $2,160
• Year 2 (age 67 to 68): $2,160 x 1.08 = $2,332.80
• Year 3 (age 68 to 69): $2,332.80 x 1.08 = $2,519.42
• Year 4 (age 69 to 70): $2,519.42 x 1.08 = $2,721.98

By waiting until age 70 to claim your benefits, your monthly benefit will increase by 36% – from $2,000 to $2,721.98. This higher monthly benefit will continue for the rest of your life, and it could result in a higher lifetime benefit if you have a longer life expectancy.

Spousal and Survivor Benefits

Understanding spousal and survivor benefits can help you and your spouse optimize your combined Social Security benefits.

Spousal benefits: If you’re married or were previously married for at least 10 years, you may be eligible for spousal benefits. These benefits are equal to half of your spouse’s or ex-spouse’s benefits, provided they’re higher than yours. For example,  you and your spouse are 66, and your Full Retirement Age (FRA) is 66. Your spouse’s monthly Social Security benefit at FRA is $2,400, while your own benefit is $800. As a spouse, you may be eligible for a spousal benefit equal to 50% of your spouse’s benefit, which would be $1,200 ($2,400 x 0.5) in this case. Since the spousal benefit of $1,200 is higher than your $800, you would receive the spousal benefit instead of your own.

Survivor benefits: If your spouse passes away, you may be eligible for survivor benefits. These benefits allow you to receive the higher of your or your deceased spouse’s benefits. Suppose you and your spouse are 68, and your Full Retirement Age (FRA) is 68. Your spouse’s monthly Social Security benefit at FRA is $2,500, while your own benefit is $1,500. Unfortunately, your spouse passes away. As a surviving spouse, you would be eligible for survivor benefits. In this case, since your deceased spouse’s benefit of $2,500 is higher than your own benefit of $1,500, you would receive the higher amount of $2,500 as your survivor benefit.

It’s important to note that the benefit amount will be reduced if you claim survivor benefits before your FRA. For example, if you claim survivor benefits at age 62 and your FRA is 66, you would receive about 71.5% of your deceased spouse’s benefit, approximately $1,787.50 in this scenario.

Seek Professional Advice When Needed

Retirement planning may seem intimidating; however, investing a little time in wrapping up this daunting job is crucial for securing your financial future. You can create a foolproof retirement plan using the above-mentioned strategies and recommendations. Remember, the key elements of a smart retirement strategy include clear goals, consistent savings, and a committed approach toward your planning.

If you find it extremely challenging to plan your retirement, contact a professional financial planner. You should look for someone with a fiduciary duty. This will help you choose someone legitimate and qualified. You should also consider their fees to ensure their services fit well with your budget.

Frequently Asked Questions

1. How can you catch up on retirement savings if you start late?

Don’t panic if you’re starting your retirement savings journey later in life, don’t panic. You can leverage simple strategies like increasing your savings rate,  reducing expenses, and boosting income. Besides, You should harness catch-up contributions for retirement accounts like 401(k)s and IRAs if you’re 50 or older. Finally, you can retire a little late to save more time.

2. What is the best way to withdraw money from my retirement accounts?

You should design a strategic withdrawal plan to minimize taxes and preserve savings. For example, you can start by withdrawing from taxable accounts and then move to tax-deferred accounts (traditional IRA) and tax-free accounts (Roth IRA).  Moreover, you should abide by the IRA’s specific minimum distribution guidelines (Required Minimum Distribution or RMD). If you find everything pretty daunting, consider contacting a professional advisor.

3. Can you still retire comfortably if you have debt?

While carrying debt into retirement isn’t ideal, it’s still possible to retire comfortably with proper planning and management. You should always prioritize paying off high-interest debts, such as credit cards. Once you manage them efficiently, close your lower-interest credits like student loans, mortgages, etc. In addition, consider creating a detailed debt repayment plan and adjust your retirement savings strategy to accommodate debt payments.

4. How can you minimize taxes in retirement?

To minimize taxes in retirement, you should always choose tax-efficient investment accounts. Besides, consider managing your withdrawal strategically. If you are open to relocation, move to a state with lower income tax.

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