Studies have shown that you’re much more likely to achieve the retirement you want by setting retirement goals and taking steps to achieve them. Without goals or plans, you’re apt to experience the retirement that shows up rather than the retirement you’ve hoped for and dreamed about.
What Is A Retirement Goal?
A retirement goal is a focused action step that helps you build retirement security and achieve the retirement you want. Each goal can be part of your overall retirement plan. For people who are a few decades away from retirement, you don’t need to set goals that are very complex, as you’ll see later in this post.
As you age into your 40s and beyond, however, retirement starts becoming less of an abstract concept. At this point, you should set more specific goals that reflect your unique desires and circumstances.
How Should You Set Retirement Goals?
When you’re a few decades away from retirement, you might just focus on saving and investing for retirement as part of your overall financial plans. Once you reach your 40s or later, it’s time to discuss your goals with your spouse or partner, if you have one. You might also want to work with a financial advisor to help refine your goals and define your action steps.
Let’s explore five retirement goals that can help workers and their spouses or partners keep on track for a secure and fulfilling retirement. Whether they’re appropriate for you depends on your age: The older you are, the more goals there are that might apply to you.
Goal #1: Figure How Much To Save And Invest For Retirement
Workers of all ages should be contributing to their retirement savings as much as they can afford, given their other life necessities.
If you’re under age 45, you can take shortcuts to determine the appropriate amount to save—you don’t need to spend hours calculating a precise number. Possibilities for determining the right amount to contribute include:
- the most that your employer matches in your 401(k) plan,
- a total of 10% of pay including your employer match, or
- as much as you can afford after you’ve already budgeted for your day-to-day expenditures.
What’s most important is that you start saving as early as you can, stay invested, and don’t take early withdrawals.
Once you reach your mid-40s or older, consider setting a target age to retire and projecting how much you need to save to retire at that age. This calculation should consider the amount you’ve saved so far and all your other financial resources.
Once you reach your mid-50s or older, you’ll want to consider how you should save to meet the common-sense formula for retirement security at your targeted retirement age, which is Goal #3 below.
There are many online retirement calculators that will estimate how much you should save for retirement; many are offered by 401(k) plans and major financial institutions.
If you’re not sure what type of investments to make, a low-cost target date fund from a reputable financial firm is a great place to start. These funds have been designed to work for a broad group of workers and retirees. As you accumulate more money, you may want to work with a financial advisor to develop a more refined investment strategy.
Goal #2: Take Steps To Improve Your Health
“Good health” is a frequent answer when retirees are asked about their source of happiness in retirement. But don’t wait until you retire to take steps to improve your health. Consider investing in your health, just as you would invest money in your retirement savings. Good health habits accumulate over time, just as your savings accumulate for retirement.
Workers of all ages can take steps to increase their exercise levels, improve their nutrition, get enough sleep, and reduce their stress. These steps can be a tall order, but nevertheless they’re just as important as saving for retirement. Your employer might offer a health wellness plan that can give you tips.
Goal #3: Estimate If You Meet The Common-Sense Formula For Retirement Security
Once you reach your 50s, you should be considering how you’ll meet the common-sense formula for retirement security:
I > E, or income greater than living expenses.
A good step is to estimate your living expenses in retirement and reflect them when estimating how much to save when working on Goal #1. Most online calculators plug in a guess for your living expenses, which most likely doesn’t accurately reflect the retirement you want. If you choose to use a calculator, be sure to adjust this number appropriately.
Goal #4: Decide What Type Of Retirement You Want
Once again, workers in their 50s should start thinking whether they’ll retire full time/full stop or work part time for a while. This decision will significantly influence when you can retire and your standard of living in retirement. It will also influence how much you need to save for retirement and when you’ll meet the common-sense formula for retirement security—Goal #3.
Goal #5: Consider The “Who-What-When-Where-Why” Of Retirement
When retirement starts coming into sharper focus in your mid-50s or later, you can start focusing on the “who-what-when-where-why” of retirement.
- Who do you want to spend time with?
- What will you do in retirement?
- When can you afford to retire?
- Where will you live?
- Why do you want to retire?
The purpose of these questions is to consider how retirement will improve your life.
How Can You Achieve Your Goals?
Working on your retirement goals can feel like a time-consuming task, particularly for older workers. It helps to consider ways to increase your motivation. One motivating tip is to learn from the stories of your relatives and friends, particularly those who have already retired and have hard-won experience.
Another tip is to ask yourself tough questions about your retirement and discuss them with your spouse or partner. Examples include how to survive stock market crashes and how you’ll pay for medical insurance and expenses in retirement. By figuring out the answers, you’ll feel better about making and setting retirement goals that can help you achieve the retirement you want.
Your future self will thank you for setting and acting on your goals. I planned ahead, and at age 70, I’m now benefiting significantly by the action steps I took a few decades ago.