Retirement Planning is critical to meeting your post-retirement goals. It involves setting savings targets and estimating expenses.

Your savings plan should be tailored to your circumstances, financial goals, time horizon, and comfort level with risk. It is a good idea to change your savings plan over the years.

One of the most important retirement planning questions is how much income you need to retire. You can get a ballpark figure by plugging your numbers into a retirement calculator, but you will likely feel more confident if you ask yourself key questions about your retirement vision and set specific goals.

You must account for your daily living expenses and any planned activities, such as vacations or home improvements. It would be best if you also considered inflation. Although prices may have been low lately, the average price increase over the past century has been about 2% per year.

Depending on when you want to retire, you may need to save a greater or lesser percentage of your income to reach your goal. For example, Fidelity Investments recommends saving about 15% of your gross income, including any company match in your 401(k) plan. The calculator below uses that benchmark and your desired retirement age to give you an estimate of how much you will need to save by the time you retire.

It is impossible to know exactly how long you will live, but it is wise to assume that you will live longer than the average person. This is why it is also important to have a backup source of income in the event that you outlive your savings. This can include annuities or reverse mortgages, but a well-diversified portfolio is generally your best bet.

How do you want to live in retirement?

The answer to this question can influence how much you need to save. It may also determine how you spend your money during retirement. For example, you might want to travel or take up a new hobby. Alternatively, you might choose to spend more time with family. The choice is yours, but figuring out what you want to do in retirement can help you create a budget and make smart financial decisions.

For many, retiring can be an exciting change. However, for others, the transition can be challenging. It can be difficult to adjust to a life of leisure, especially when your sense of purpose is no longer tied to work. The best way to avoid this is by preparing for retirement well in advance.

This involves setting financial goals, identifying potential risks, and creating contingency plans to deal with them. It also involves determining how to invest your savings and choosing the right retirement accounts.

It is important to pay off debt before you retire, especially student loans. This can save you money in the long run and prevent your Social Security benefits from being garnished. You should also consider the tax consequences of your spending choices. It may be beneficial to consult with a financial professional to discuss these issues. A financial planner can help you plan for the future and set realistic retirement goals. He or she can also guide you on the best ways to spend your money in retirement.

How do you plan to spend your money?

During retirement, it’s important to be realistic about your expected expenses. It can be easy to overestimate your costs, especially in the first few years of retirement. It’s also crucial to plan ahead for unforeseen expenses, such as home repairs or unexpected medical bills. It’s a good idea to maintain readily accessible emergency funds in savings accounts, taxable brokerage accounts and other sources.

Once you’ve settled on a budget, it’s important to stick to it and adjust as needed. As a general rule, you should aim to spend no more than 4% of your initial retirement portfolio per year, adjusted for inflation. This allows you to enjoy the lifestyle you’ve worked so hard to achieve while ensuring your investments last for as long as possible.

The key is to be flexible, particularly during volatile market periods. If the markets decline, be prepared to throttle back spending or even consider working part-time if necessary.

It’s also a good idea to plan for potential health care costs in retirement. Medicare wasn’t designed to cover all of your health care expenses, so you may want to consider buying a private health insurance policy or looking into the Affordable Care Act marketplaces. Finally, if you can reduce your fixed expenses by paying off a mortgage, selling a second home or throttling back support for adult children, that can help your investment dollars stretch.

How do you want to invest your money?

While you may already have retirement-oriented accounts like IRAs and 401(k) plans, it’s important to consider what additional investments you can make. You should also be careful not to take on too much debt as you approach retirement.

It’s a good idea to use any windfalls, such as tax refunds or salary bonuses, to boost your savings. But it’s crucial to understand that not all money is created equal, so it’s a good idea to set aside some for short-term spending and invest the rest in your retirement plan.

Asset allocation plays an important role in retirement planning, and it’s typically recommended that you diversify your investment portfolio among stocks, bonds and cash. This helps to reduce your risk and ensure that you have a source of income during any market downturns.

For people in their 50s and early 60s, a moderate investment portfolio (50% stock, 35% bonds and 25% cash/cash investments) is often appropriate, though this can vary depending on your unique financial situation. Additionally, it’s important to be mindful of the timing of your Social Security benefits, as they can have a significant impact on your overall retirement savings. This is an area where it’s important to work closely with your financial professional. They can help you determine a timeline for when it’s appropriate to begin taking your benefits. They can also help you create a contingency plan for any unexpected expenses that might arise.

How do you want to protect your assets?

When you’re planning for retirement, it’s important to consider how your savings and investments will be protected. This includes protecting your assets from unforeseen threats that can rapidly deplete your savings accounts.

One of the most common risks to a retiree’s financial security is inflation. Inflation can quickly devalue your savings and increase the amount you need to spend during retirement to maintain your lifestyle.

To help protect your savings, retirement planning involves identifying and implementing strategies to reduce costs. This can include reducing expenses, investing in tax-advantaged accounts such as IRAs and 401(k) plans, and lowering the cost of insurance policies that may be needed for long-term care or other needs.

Another way to protect your assets is to avoid debt as much as possible. Paying down student loans and other outstanding debts before retiring can help keep your spending in check and protect your savings.

It’s also important to regularly review and update your retirement plan as you get closer to retirement. This is because markets, unexpected family or personal circumstances and evolving financial goals can all necessitate changes in your asset protection strategy. This includes reviewing your emergency savings, investment allocation, insurance coverage and contribution rates to both tax-advantaged and taxable accounts. It’s a good idea to consult with an experienced professional when making these decisions. He or she can ensure that you’re taking steps to meet your retirement goals and protect your hard-earned assets.

How do you want to pass your assets on to your heirs?

It’s important to think about what you want to leave your heirs. This can influence how much you save, what retirement plans you choose and the distributions you take from those accounts. It also impacts whether or not you want to gift assets during your lifetime and if you are considering setting up an estate plan. An estate plan includes a will, lists of assets and obligations, powers of attorney and healthcare proxies, as well as other legal documents that may affect your family’s future.

The beneficiaries you select on your retirement account, life insurance policies and other investments will impact what happens to these assets after your death. They can avoid probate by passing directly to a designated beneficiary, but these beneficiaries will need to understand required minimum distribution rules (RMDs) and possible federal and state income taxes.

Be sure to review your beneficiaries at least once a year and after any major life event such as marriage, divorce, birth or death. In addition, consider putting assets into a trust so that they can be used for your heirs without being subject to the same taxes as your estate. An experienced advisor can help you set up a trust and create a plan for it to be administered after your death. They can also discuss other strategies for preserving your wealth and legacy for your heirs. This could include adding heirs as joint owners of property, giving them limited power of attorney and using special needs trusts for individuals who might need government benefits such as Medicaid or Supplemental Security Income in the future.