The Essential Roadmap For Retirement (If You’re A Late Starter)

Retirement Roadmap Sign

Why you need a retirement roadmap

I’m so glad you’re here!  Why?  Because it means you are trying to not be part of the 41% of Americans who have no plan for retirement.  And that’s a very good thing (your future self will thank you for it!).

Even if retirement feels closer than you’re prepared for right now, you can still take steps to build the financial security you’ll need in the future.

It’s never too late to start saving and planning for retirement!

There are lots of moving parts in a thorough retirement plan, which is why creating a roadmap for retirement can keep you on track.

Between your investments, social security, estate plan, and healthcare, you could start to feel overwhelmed with keeping everything in order.

The important thing is to consistently take steps that move you toward your big picture.

Having a clear vision for your retirement years will help you stay focused on what’s important, and guide you through each step on your journey towards retirement.

So that’s where we’ll start – your vision for retirement.

1. Create a vision for your retirement

Woman with binoculars

It’s not always a kick to balance your budget or figure out your 401(k) allocations (*yawn*).

But, when those actions are connected to a crystal clear vision that you are excited about, then you have a pretty compelling purpose to motivate you.

When you define your dream retirement, you have your why behind all your whats

This will be your fuel for persistence, delayed gratification, motivation, and hope.  It’s what will keep you moving forward.

If you’re married, you should have a dream meeting with your spouse.  You may be tempted to go solo on this step, but that will just set you up for an unrealistic outcome.  Whether or not your spouse is on board with financial planning, it’s important to know what you both want out of retirement.

Your dream meeting doesn’t have to be anything fancy.  It just needs to be intentional.

  • Plan a time to talk specifically about your dreams for retirement.  Pick a place, set a date, and get a sitter for the kids if necessary.  You want to give each other your undivided attention without distractions and interruptions.
  • Decide ahead of time that you will withhold judgment and be supportive of the other’s ideas.  Go into it being open to whatever your partner shares.  This can be hard, especially for women!  But if you plan to respond this way, you’ll have a better chance of being successful.
  • Write down your questions so you have something to guide your conversation.  Include questions that address your values, ideas and expectations, but also ones that focus on practicalities like when and how.
  • Be sure to record the important parts you talked about.  You’ll want to revisit what you talked about often, and make adjustments as you both work toward your dream retirement together.

The first step in being purposeful about retirement is defining what you want it to look like.  Put a dream meeting date with your spouse on your calendar, and start creating a vision together!

2. Determine a retirement budget

You have a clear idea of what you want to do in retirement.  Now you need to determine a budget that will support your vision.

Woman on calculator

It’s critical that you are as specific and realistic as possible with this step.  If anything, you should overestimate what you will need to support your lifestyle.

You can create a retirement spending plan based on your budget today. 

Keep in mind that most people spend less in retirement than during their working years – usually 70-80% of their previous income.

Include all streams of income, like social security, company pensions, and investment income.  Of course, this depends on factors like where you’re living and how much you have in savings.

Also, don’t forget to account for healthcare expenses and taxes.  These two categories can often be overlooked but can be a significant portion of your budget.

For more details on how to create a retirement budget, here’s a helpful article to guide you.

3. Increase your net worth on your way to retirement

Calculator and graph

Once you know where you’re going and what to expect when you get there, figure out where you’re at now.  This is when you’ll have a face-to-face with cold, hard reality.

Your net worth is basically everything you own minus everything you owe. 

What you’re left with is a snapshot of where you are financially.  More importantly, it’s a helpful reference point to see how close you are to your goals.

What I like about the net worth metric is that it’s an honest measure of every great decision and terrible mistake you’ve ever made with your money. 

It doesn’t just consider how much you make, and it isn’t only focused on what you owe.  Instead, it takes all of the good and bad into account and tells you this is where you’re at.

Your net worth will always be changing, based on your changes in assets and liabilities.  Remember, it’s a snapshot of this point in time.  That means the number itself doesn’t matter nearly as much as how the number is changing.

With net worth, you want that number to go up.  So check it regularly to make sure you’re on track with your goals and heading in the right direction.

For specific instructions on how to figure out your net worth and get a free worksheet, click on over to my post about calculating your net worth.

4. Identify your financial independence number for retirement

You have a vision for the future and you know where you’re at today.  Now you need to identify your target.

Couple using calculator

Your financial independence number is the net worth you’ll need to reach by retirement to attain financial freedom.  In other words, how much money you need to save between now and your retirement date in order to fulfill your vision.

The simplest way to do this is by using an online retirement calculator.  There are many to choose from, but Forbes recommends these 5.  I’ve personally used Chris Hogan’s R:IQ assessment tool.

Each will have different features so pick the one that suits you best.  One important detail to be aware of is what rate of return the tool is using.  Some will assume a specific percentage, others will ask you to input one you think is realistic.

Look for one that will tell you how much you need to save each month to reach your goal on time.  And, for a more accurate picture, use a calculator that factors in compound interest and inflation.

5. Create a timeline for retirement planning

Calendar and clock

You’ve identified some important information that will help you start putting together a roadmap to get to your dream retirement.  A tool that will help you start breaking things down is a timeline.

Retirement planning is a very personal process.  We all have our own unique circumstances, preferences, and financial situations.  Some of us may be at similar points on the timeline, but the roadmap between getting from here to there will look different for each of us.

That’s why it’s crucial to take things into your own hands and determine your own journey.  You can’t base your future on how much your neighbor has in his 401(k) or when your cousin decides to retire.

You need to figure out for yourself what steps you need to take and when, to ensure you reach your goals on time.

Once you know your why (your vision), where you are today (your current net worth), and where you need to be (your estimated retirement net worth), you can start determining which whats will happen when:

  • When is your retirement date?
  • When will you have your credit cards paid off?
  • When will you have the mortgage paid off?
  • When will you reach certain savings milestones?
  • When will you start taking social security?
  • When will your pensions begin?
  • When will you start 401(k) withdrawals?
  • When will you get long-term care insurance?
  • When will you downsize or move?

These are just a few points on your timeline that you can determine.  And don’t be concerned about being exact.  Your plan will be an ongoing work in process as you get closer to retirement.

The goal is to create a structure that you can refer to so you meet your goals on time and you know what you need to do next.

6. Get on a budget to achieve your retirement goals

Woman using calculator

Chris Hogan calls a budget your roadmap to get to where you want to go.

If you follow a budget that is based on specific financial goals, you will know which steps to take next, what obstacles to avoid, and when you will reach certain milestones.

It’s all about being intentional with your spending and saving, and accounting for every dollar.

You may already be on a budget, so perhaps you just need to make some adjustments based on the financial goals you’ve laid out.  Maybe you need to add more to savings or start attacking debt more aggressively.  Line up these tactics with your timeline so you stay on track.

If you’re really behind on your retirement savings, you may need to have a heart-to-heart with your spouse about making major life adjustments or significant sacrifices.  It might not be enough to just cut out cable or reduce how much you eat out.

If you are committed to reaching your financial goals by the time you retire, you may have to make bigger changes.  These could include selling your home and/or your vehicles, getting second jobs, or even eliminating the contributions you’re making to your kids’ college fund.

A budget will help you see where your money is going, and how you can change its direction in order to increase your net worth.  Remember, increasing your net worth is the goal!

If you’ve never created a budget, you can read my post on how to create a zero-based budget.

7. Make a plan to pay off debt before retirement

Debt Snowball worksheet

As of 2018, 80% of Americans in their 50s have some form of debt.  For those 65 or older and entering retirement, 60% were still carrying debt.

If you are carrying any amount of debt, you have not yet attained financial freedom – no matter what your net worth is.  As long as you owe money to someone else, you are chained to that creditor.  Not only that, you are living under a higher degree of financial risk, which only increases as you get older.

The best way to ensure you have the retirement you dream about is to be completely debt-free by your retirement goal date (and even sooner if possible!).  And yes, that means the house, too.

The idea of being completely debt-free within 10-15 years may seem absolutely impossible to you right now.  Maybe you’ve lived paycheck to paycheck your whole life and you can’t see how this could ever be achieved.

But I want to remind you that this is a limiting belief, based on your past mistakes.  It isn’t a fact and it isn’t the truth.

You have control, you are in the driver’s seat, and you are calling the shots.  You tell your money where to go.

Will it be uncomfortable and difficult?  Probably.  Will you need to make major sacrifices?  Most definitely.

But, you need to decide how important your retirement dreams are to you, and what you’re willing to sacrifice to reach them.

When you start taking full responsibility for your life and you’re not blaming your past or your spouse or your circumstances or anything else, you will find a way.

Commit to paying off your debt.  Reduce your spending and increase your income.  Make it a part of your budget, set a goal date, and put it on your timeline.

If you need some guidance, check out my post on how to get out of debt.

8. Reduce your expenses to save more for retirement

List of expenses

Cutting the “fat” out of your spending now is a great discipline that will prepare you for living on a retirement budget.  You’ll learn to live on less, and you’ll have more to pay off debt and increase savings.

Go through your budget line by line and find those “leaks” that are draining your bank account.

Some examples might be:

  • Subscription fees
  • Impulse buys
  • Dining out
  • Cable TV
  • Cell phone plans

You won’t be able to completely cut out everything, but there are many expenses you can definitely reduce.  The more you need to save, the more ruthless you’ll need to be with this process.

Consider every possibility to cut expenses, even if it hurts!  The comforts we’ve grown accustomed to are just that – they aren’t necessities.

Are you willing to sacrifice some comforts now, so you can someday live out the retirement you dream about later?

Make a commitment to your goals, and do whatever it takes to reach them.  Nobody ever reached old age and regretted canceling cable or using an older cell phone.  It’s a temporary inconvenience that will reap greater rewards in the future – and your future is worth it!

For more ideas on how to reduce wasteful spending, read my post about budget leaks and how to fix them.

9. Amp up your retirement savings

Like how I so casually mention this step?

Yeah, I know.  It’s easier said than done.  Maybe that’s why most of us have blown it off for so long.  We just don’t see where this “increase” is going to come from.  Especially if you’re still working on paying down debt.

Dave Ramsey recommends you pay off debt before saving for retirement.  But, personally, I say … it depends.

I agree with Dave that saving a small emergency fund should be priority numero uno – at least $1,000.  This gives you a little cushion for those unexpected expenses so you’re not going deeper in debt.

But after that, I think you have to weigh your options.

For example, our return on our 401(k) is consistently above 10% (often closer to 13%).  I have no debt with an interest rate higher than this.  In fact, I always try to keep my credit card balance on a 0% promotional rate.  My student loans are less than 6% and our medical bills are interest-free.  We recently refinanced our mortgage and got it lower than 5%.  So, our retirement savings are growing at a rate more than double what we pay for our debt.

For this reason, I’ve chosen to keep adding to our retirement savings while we’re paying down our debt.

It’s your choice.  Dave gives great advice on how to budget and get rid of your debt.  But it’s ultimately up to you how you want to manage your money.  Consider all of your circumstances and come up with a plan that you feel is right for you.

If you want to start adding more to your savings while you’re still paying down your debt (or if you’ve already paid it off), then building a 3-6 month emergency fund and adding to your 401(k) are smart steps.

By automating your savings you are eliminating the choice.  It’s just one more thing off your financial plate, and it’s a great way to stash more away for retirement.

Decide on a monthly or weekly fixed amount, or even a percentage of your monthly income, to put toward savings.  Add this to your budget like it’s an expense and pay yourself every month.  Even if it’s $20 a week!

Get in the habit of saving money.  Once you start seeing your balance increase, you’ll be motivated to find ways to save more.

For more ideas on how to increase your savings, read my post about how to catch up on your retirement savings.

10. Increase your income to save more for retirement

Woman on laptop

Yep, I just did it again.  I saw that eye-roll.  But stay with me.

If you have a hard time imagining a way to increase your income (without winning the lottery), you are probably stuck in a scarcity mindset. 

A scarcity mindset (sometimes called a “fixed” mindset) keeps you stuck in a mental loop of limiting beliefs that prevent you from achieving the goals you’ve set for yourself.

These are just a few symptoms of a scarcity mindset:

  • you have lots of excuses for not reaching your goals
  • you believe your situation is permanent
  • you resist being generous
  • you often say “I can’t afford it”
  • you’re envious of others who seem to be doing better than you

Sound familiar?  I know, it hurts.  And I can totally relate because I’m still struggling to break free from this negative thinking myself.

But here’s the good news:  you can change your thoughts.

In fact, there’s a term for the opposite of a scarcity mentality, and it’s called an abundance mindset.

And, you guessed it, the beliefs are very different:

  • you think “big picture”
  • you believe there are unlimited opportunities
  • you are happy for others’ successes
  • you embrace and accept change
  • you take a proactive approach to life

The mindset you adopt will determine your financial future.

If you believe your circumstances are permanent and there are no other options, you will always be stuck in debt and living paycheck to paycheck.

However, if you think there are many opportunities to change your situation and all you have to do is go find them, you’ll be farther ahead on your journey to financial freedom.

Of course, there are practical steps to increasing your income, like getting a second job or investing in a rental property or starting a side hustle.  But first, you must believe that these opportunities are available to you and that you are fully capable of increasing your income through them.

To learn more about creating a healthier money mindset, read my post about changing your mindset to reach your financial goals.

11. Be proactive with your health to minimize retirement expenses

Older woman exercising

The best way to minimize healthcare expenses in the future is to take care of yourself today.

To be honest, I’m the worst at going to the doctor.  If I don’t feel sick, I assume I’m not.  But we both know this is not the most accurate diagnosis method.

There’s a reason why preventative healthcare is typically fully covered under insurance.  It’s because the insurance companies know that if you stay healthy and catch illnesses early, they will have to pay out less to providers and won’t have to deal with collecting payments from the insured.

So, take advantage of this benefit and get those annual exams!

In addition, make the necessary changes to live a healthy lifestyle.

We all know what that means:

  • eliminate the processed foods
  • get up out of the La-Z-Boy and start moving
  • do things that make you happy

These three things will go a long way in giving you a longer, healthier life – and keep more money in your pocket.

12. Have a plan for insurance in retirement

Umbrella over word RISK

Now, on the flipside of playing offense with your health, you also need to have a defensive strategy.  This is where insurance comes in.

You pay for insurance to reduce risk, and the older you get, the greater the risk of needing good healthcare coverage.

Though many things may change in healthcare policy between now and your retirement date, it’s still wise to start planning now.  Know where your healthcare will come from, how much it might cost, and what coverage will be sufficient.

And, don’t forget to include this expense in your retirement budget.  One study found that the average retiree spends approximately $4,300 per year on out-of-pocket healthcare expenses.  This is over $350 a month!

The bad news is that healthcare costs are only going to continue to rise.  Your dream retirement could literally come off its rails if you don’t account for healthcare costs.

Separate from traditional healthcare insurance is long-term care insurance, which covers services associated with a chronic medical condition, disability, or disorder.  It’s an important part of your long-term financial plan, because you could deplete your savings quickly if you have to pay for these services yourself.

If you’re in your 50s and you don’t yet have a plan for getting long-term care insurance, now is the time.  If you wait until you need it, you won’t qualify for it (I know, harsh!).  Do your research for what it covers, how much it costs and which companies provide it.

Finally, make sure you’re covered in other areas as well, such as your homeowner’s insurance and life insurance.  Read about the eight types of insurance that Dave Ramsey says you can’t live without.

Related post: Financial Peace Week 6: The Role of Insurance

13. Know your social security strategy for retirement

Social Security card and calculator

Although your social security check won’t come close to fully supporting your dream retirement, it’s still a key part of your financial planning.  It’s important to know the rules surrounding withdrawal options and benefit eligibility.

If you were born after 1960, your “full retirement age” is 67.  This is when you will be eligible to receive full social security benefits.

However, you have the option to start withdrawing your benefits before then (as early as 62) or delay your benefits indefinitely.  Both options come with very different consequences:

  • If you start receiving social security checks before the full retirement age of 67, your benefit will be permanently reduced.  This means you will not receive full benefits at 67.  The amount of reduction will depend on how early you start receiving the benefits.
  • If you delay receiving social security checks until after your full retirement age, you will be credited with an increase in benefits.  This increase is permanent, and the amount depends on how long you delay the benefits.  The increase is capped at 70 years of age, even if you continue to delay.

It’s obvious that delaying would be much more beneficial than withdrawing early.  But you may have very legitimate reasons to start receiving your checks before 67.  Don’t discount the significance of having a strategy for your social security benefits, because once you begin there are serious consequences to changing your mind.

Here is a good article about when to withdraw your social security benefits.  However, you should also visit the SSA website to make sure you are getting the most accurate and updated information.

14. Determine your withdrawal rate in retirement

Man calculating withdrawal rate

I have never seen a million dollars in my bank account, but I’m determined to make that a reality by the time I retire.  Yes, one of my financial goals is to become an “everyday millionaire”.

But the more I learn about retirement planning, the more it becomes evident that even a cool million may not get you as far as you think.

Especially these days, when many financial advisors are strongly recommending you be financially prepared to support yourself into your 90s!

With the possibility of having a 25+ year retirement, you’ll need to plan your spending very carefully.  This is when knowing your withdrawal rate comes in handy.

Your withdrawal rate is the percentage you can withdraw annually from your retirement savings without running out of money before you die

There are several factors unique to your situation that will help you determine this rate, such as the total amount of your savings, your projected retirement income, and your annual retirement spending.

Thankfully, someone has already determined a safe withdrawal rate for the general population that would ensure their savings would last 30 years.  In 1994, William Bengen first promoted the “4% rule” as a guideline for withdrawal rates, based on extensive research in historical market behavior.  Since then, this rule has been adjusted to 4.5% for inflation.

This is a good place to start, but don’t stop there.  Remember, you know your financial situation better than anyone else.

Having your own personal withdrawal rate in mind as you build your retirement fund will help you know that you’re on track to having enough to support you throughout your life.

Also, this rate will most likely change throughout your retirement years, depending on how your investments are doing and your annual spending.

The best thing to do is meet with a financial advisor and get their advice on a sustainable withdrawal rate based on the future savings you plan to have.

15. Create an estate plan before retirement

Estate plan documents and gavel

So much of retirement planning is figuring out how to take care of yourself in your golden years.  Sometimes we need to make boundaries that others won’t like, such as limiting college funds or moving to another part of the country.

This isn’t being selfish, it’s being smart.

Part of why you make these decisions is so you can be self-supporting until the end of your life and you don’t become a burden to someone else.

But estate planning is more about taking care of your loved ones after you’re gone, and it should be an important piece of your financial plan.  You want to be the one to control who gets what after you’re no longer there, and to voice your wishes yourself.

Having a will or family trust in place will ensure that your loved ones will receive what you have intended for them.

By creating a solid estate plan, you’ll also be minimizing probate and taxes for your heirs.  Making this an intentional piece of your financial strategy will either greatly reduce or even eliminate the tax bill on your estate after you’re gone.

Another benefit to your family is having very clear directives to guide them.  This will prevent unnecessary conflict and decision-making in an already difficult time.

As you plan how you want to live out the remainder of your years in retirement, don’t forget to also care for your loved ones after you’re gone.  There are steps you can take today that will shield them from hardships after your death and also bless them with financial stability.

Putting together an estate plan is a complex undertaking that has serious consequences if done incorrectly, so make sure you meet with an estate planning attorney to help you put all the pieces together.

You can learn more about estate planning by reading How To Set Up An Estate Plan.

16. Educate yourself in retirement planning

According to Robert Kiyosaki (the author of Rich Dad, Poor Dad), the number one thing you should do to increase wealth is to educate yourself.

Woman reading book

The great news is you don’t have to look far to find content.  Blogs, podcasts and the public library provide free education at your convenience.  There’s no excuse for saying “I didn’t know”.

A big part of gaining control of your financial future is taking complete responsibility for every area of your life.

This means you acknowledge that nobody and nothing else is to blame for your situation.  You walk in the belief that you are ultimately the one who determines if you reach your goals or not.

This may be a mindshift for you, but it’s crucial to fulfilling your retirement dreams.

One way of taking control is being proactive with learning about money management.

Commit time weekly (or daily!) to learn about investing, budgeting, real estate, retirement plans, increasing income, and anything else you will encounter on your path to financial freedom.  If you don’t know, find out!

Websites and books can take you pretty far, but probably the best thing you could do is find a financial advisor that will walk you through some of the complicated parts.  You don’t want to leave your future completely up to your own knowledge.  It’s important to get the advice of a professional to make sure you’re fully aware of all the details that go into retirement planning.

If you prefer to learn online, read my post on 21 FREE Online Personal Finance Courses.

17. Review your retirement plan regularly

Couple reviewing retirement plan

Once you’ve hit all of these points in your retirement plan, you will be in a great position to retire on time and live out the retirement you’ve dreamt about.

However … life happens and things will inevitably change.  You’ll need to be flexible with new circumstances as they arise (good or bad) which means making adjustments to your plan when necessary.

Maybe you’ll come into a windfall of money, which greatly increases your savings, and your retirement date and withdrawal rate will change.

Or maybe you’ll be dealt some unexpected blows and you’ll need to make some course corrections.

Either way, it’s important to revisit your plan regularly as you move forward on your journey towards financial freedom.

During your 50s, annually is probably enough.  But as you get closer to retirement age you’ll want to keep a closer eye on your plan.

Even small course corrections in the last few years before retirement can make a big difference in the long run.

Create your own roadmap to retirement

There’s so much that goes into planning your retirement.  Don’t leave it to chance, and don’t wait for the last minute.

Be intentional about these last 10-20 years before you retire so you give yourself time to reach your financial goals and live out the rest of your years doing what you dream about.  I know – two decades sounds like so long from now, and it might be tempting to procrastinate a little.

But the time you have left is the most important asset in the whole plan!  When you maximize your time, you maximize your wealth – which will maximize your life!

So don’t squander it, because you will never get it back.  Be purposeful about your present so you can create the most fulfilling future you can dream of.

It’s not too late!  Today is the best day to get started, so take control and start planning!

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The Essential Roadmap For Retirement (If You’re A Late Starter)

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