If you don’t have much experience with financial planning for retirement, getting started can seem daunting. However, taking first steps doesn’t need to be intimidating. A good starting point is to think about some important questions: Where do you stand in terms of your income and future financial needs? What are your financial and lifetime goals? And how long do you have to reach them?

Destination: Retirement

Retirement is typically one of the top financial goals you’ll be working toward. It may be the furthest out, but any good financial plan starts with figuring out how much you’ll need to live on during your retirement years, putting a strategy in place to get there, and then addressing your shorter term needs.

Many Financial Professionals believe you’ll need approximately 80 percent of your peak pre-retirement income to maintain your current lifestyle in retirement1. If your peak income is, for simplicity, let’s say $100,000, then you may need $80,000 or more each year. Multiply that annual figure by your expected years in retirement and that’s your target. Given today’s longer life expectancies, you could be nearing the $1.5–$2 million range. Don’t let those numbers scare you. Again, everyone is different. Maybe you’re accustomed to living on $40,000 per year, in which case your goal is roughly $32,000 times your retirement years. That’s a big difference.

Envision the Retirement You Want

Another factor in figuring out how much income you will need in retirement is envisioning how you want to spend your retirement years. Do you want to travel? Own a second home? Leave a legacy to your family, charity or alma mater? Or maybe you just want to live a simple lifestyle with the primary goal being to cover your basic expenses. Now’s your time to think through the world of possibilities, because the sooner you start planning — and saving — the better able you are to reach your goal.

Time Is Your Friend

Setting aside even a small amount each month can add up over time. One common and effective strategy is to use traditional retirement vehicles, such as an employee-sponsored 401(k) or Individual Retirement Account (IRA), and set up automatic contributions. While each of these types of retirement accounts has unique rules, all offer tax benefits that can add up over the long-term. Even if you’re behind the eight ball and nearing retirement, it’s not too late. If you are 50 or older, “catch-up contributions” help pre-retirees stash even more into their 401(k) or IRA than the basic contribution limits each year.

How Should You Allocate Your Money?

How you decide to allocate the money you’ve accumulated — and the goal-related products you choose — are probably the most critical factors when it comes to creating a retirement plan. As mentioned, there are IRAs for retirement goals, as well as guaranteed lifetime income products, but depending on your life stage you may want to consider other solutions as well. Maybe that means cash value life insurance to help protect your family’s financial security and as an effective estate planning tool.

Diversification Helps Balance Risk

Diversification can be summed up in one phrase: Don’t put all of your eggs in one basket. Regardless of what types of retirement product solutions you choose to buy, don’t bet your retirement nest egg on just one. The types of products you select will vary depending on several factors, including your risk tolerance and retirement time horizon. These two factors work hand in hand. The more years you have left until retirement, the higher your risk tolerance may be.

When it’s time to determine the products and financial strategy that’s best for you, you may want to consult with a Financial Professional who can help you map out a sound plan.  In the meantime, make sure you have a clear vision for your goals so you’ll be better prepared to plan your financial future.



1 2014 TIAA-CREF “Making the most of your retirement” brochure.

Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual) (Springfield, MA 01111-0001) and its subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company (Enfield, CT 06082).