Whether you’re just getting serious about your retirement savings or approaching the transition out of the workforce, one thing is clear: having a well-structured retirement plan is essential to long-term financial security.
At Financial Services of America, we help individuals nearing or in retirement build personalized strategies that account for income needs, taxes, healthcare, and legacy goals. Below are the foundational steps to begin — or strengthen — your retirement planning approach.
Step 1: Define What Retirement Means to You
Before choosing accounts or calculating numbers, it’s important to ask:
When would you like to retire?
What kind of lifestyle do you want to maintain?
Will you travel? Downsize? Support family members?
What major expenses do you anticipate (like healthcare or long-term care)?
Your answers will guide your savings target and withdrawal strategies later on.
Step 2: Understand Your Retirement Plan Options
There’s no one-size-fits-all retirement account. Knowing how different plans work can help you build a more tax-efficient strategy.
- 401(k): Offered through many employers, 401(k) plans allow pre-tax contributions and often include employer matching.
- Traditional IRA: You contribute pre-tax dollars and pay taxes on withdrawals later.
- Roth IRA: You contribute after-tax dollars and enjoy tax-free withdrawals in retirement.
- Pension Plan: Less common today, pensions provide a guaranteed income based on years of service and salary history.
- Small Business Plans: If you’re self-employed or own a small business, options like SEP IRAs or SIMPLE IRAs can offer powerful tax advantages.
Step 3: Calculate How Much You’ll Need
A good rule of thumb is to replace about 70%–80% of your pre-retirement income, but your number will vary based on your goals and expenses.
Consider:
Your current monthly expenses — and how they may change.
Your projected life expectancy — planning for 25–30 years in retirement is common.
All income sources — Social Security, pensions, annuities, rental income, or part-time work.
Use these factors to identify your potential income gap — and build a plan to fill it.
Step 4: Build a Tax-Efficient Retirement Plan
Tax planning doesn’t stop once you retire. In fact, your tax exposure could increase depending on your income mix.
Here’s how to think about structuring your strategy:
Assess your current finances: Include savings, income, and debts.
Maximize contributions: Especially if your employer matches part of your 401(k).
Diversify accounts: Use a mix of taxable, tax-deferred, and tax-free vehicles to give you flexibility later.
Manage investment risk: As you near retirement, focus on preserving capital and creating reliable income — not chasing high returns.
Review regularly: Update your plan as life changes. A new job, inheritance, or healthcare event may affect your approach.
Step 5: Choose the Right Types of Plans
There are two broad categories to understand:
Qualified plans: Include 401(k)s, 403(b)s, and traditional IRAs. These offer immediate tax benefits and follow IRS distribution rules.
Non-qualified plans: Funded with after-tax dollars. These don’t offer upfront tax advantages but may allow more flexibility later.
When selecting plans, consider:
Tax treatment: Will you benefit more from deductions now or tax-free income later?
Flexibility: Can you adjust contributions or investment choices?
Employer contributions: Are you getting the full benefit available to you?
Step 6: Have a Strategy for Retirement Income
Saving for retirement is only half the equation. Once you stop working, you need a plan for how to draw income in a way that’s sustainable and tax-smart.
Key components include:
Creating a realistic budget: Know what your spending will look like month-to-month.
Withdrawal strategies: Determine which accounts to draw from first — often based on tax impact.
Social Security timing: Decide when to claim to maximize lifetime benefits.
Annuities or pensions: Consider options that provide guaranteed income if appropriate.
Healthcare coverage: Plan for Medicare, Medigap, long-term care, and out-of-pocket costs.
Step 7: Work With a Trusted Advisor
Retirement planning is complex — especially when taxes, RMDs, investment risk, and healthcare all intersect.
A qualified financial advisor can help you:
Evaluate which retirement accounts fit your goals
Manage investment risk as you approach or enter retirement
Create income streams that last
Optimize for taxes, Social Security, and Medicare
Adjust your plan over time as life unfolds
At FSA, our team uses a proven planning process to help clients approach retirement with clarity and confidence.