A basic principle to begin retirement planning is: It’s never too early to start. That said, there is no reason to be intimidated when thinking about saving for the future.
Start at the Beginning
Before planning for retirement, take an honest assessment of your current financial situation. Are you meeting your current expense needs while also putting money aside for long term savings? The earlier you begin saving for retirement, the better. It’s recommended to start retirement planning early in your professional life.
For 2026, you can contribute up to $24,500 to your 401(k) if you’re under 50. If you’re 50 or older, catch-up contributions allow an additional $8,000 (or $11,250 if you’re ages 60-63). IRA contributions are capped at $7,500, with an additional $1,100 catch-up for those 50 and older. Taking full advantage of these limits early in your career can impact your retirement readiness.
Determining Your Retirement Timeline
It’s never too early to think about your retirement date. While it’s fun to dream about early retirement and the positive aspects of that decision, it’s best to look at the full picture and determine what timeline works better for you.
Early retirement offers the benefits of more leisure time, the ability to travel, and the chance to be with family and friends. It can also lead to less stress and allow you more time to pursue healthy activities that might have been tougher to fit into your daily work life. Plus, retiring from your career job doesn’t mean you have to relinquish your earning power. Many early retirees start small businesses or move into part-time consulting roles. These plans help mitigate the biggest potential downside of early retirement: loss of regular income.
If you’re considering early retirement, understand how claiming Social Security impacts your benefits. For those born in 1960 or later, full retirement age is 67. Claiming at age 62 results in a 30% reduction in benefits, while delaying until age 70 can increase your benefit by 24% beyond your full retirement age through delayed retirement credits.
Starting December 29, 2025, you can take penalty-free withdrawals of up to $2,500 per year from retirement accounts to pay for long-term care insurance premiums, providing additional flexibility for early retirees planning for healthcare needs.
Understanding Future Expenses After Retirement
The best way to map out how to afford a comfortable lifestyle in retirement is to figure what expenses you will have after retiring. What will be your living expenses? What are your goals? There are several trustworthy online retirement tools that can help you make that determination. It also makes sense to sit down with a trusted financial professional.
Don’t underestimate healthcare expenses in retirement. According to Fidelity’s 2025 estimate, the average 65-year-old retired couple can expect to spend approximately $315,000 on healthcare costs throughout retirement, not including long-term care. This makes healthcare one of the bigger expenses to plan for. Consider maximizing Health Savings Account (HSA) contribution, $4,400 for individuals or $8,750 for families in 2026, as HSAs offer triple tax advantages and can serve as a powerful retirement healthcare savings vehicle.
What is Your Tax Situation?
Retirement account withdrawals may impact your tax bracket. It’s often determined by what type of account is being withdrawn from. Roth IRAs and Roth 401(k)s have qualified withdrawals that are tax-free. Withdrawals from traditional IRA and 401(k) accounts are taxable and treated as ordinary income. Therefore, it’s possible to end up in a higher tax bracket while in retirement.
It’s important to know that traditional IRAs and employee-sponsored 401(k) accounts are funded with pre-tax dollars. This allows contributions and earnings to build on a tax-deferred basis over time. That means you don’t have to pay tax on the money until you withdraw it during retirement. It’s also critical to ensure you don’t outlive your assets. This is all information to keep in mind when planning for post-retirement taxes.
An important consideration in retirement tax planning is RMDs, mandatory withdrawals from traditional IRAs and 401(k)s. For those born between 1951 and 1959, RMDs begin at age 73. For those born in 1960 or later, the RMD age increases to 75 (effective 2033). Note that Roth IRAs are now exempt from RMDs during the owner’s lifetime, and Roth 401(k)s and 403(b)s are also RMD-exempt. Failure to take RMDs results in a penalty of 25% of the amount not withdrawn (reduced to 10% if corrected within two years). Strategic planning around RMDs can help minimize your tax burden in retirement.
If you’re 65 or older, you may benefit from the new $6,000 senior deduction available for tax years 2025-2028, which is in addition to the existing standard deduction for seniors.
Risk vs. Goals
Every retirement strategy is different, and each investor must assess their tolerance for risk. Often, risk tolerance can be measured by age. Younger investors may be more willing to absorb risks with the knowledge that, while the payoff may be greater, there would be more time to recover from financial losses suffered. Older investors may be more interested in protecting what they have, happy with their minimal returns. This goes back to analyzing your retirement goals and planning a strategy that allows you to realistically reach those goals.
Estate Planning
Of course, part of retirement planning is making sure those you care about are taken care of when you’re gone. A valid estate plan allows you to make decisions on how you want your assets distributed after you pass away. It’s important to understand that a legacy plan should be reviewed on a regular basis and updated as needed, based on life changes. You can work with a financial professional to determine how you want your money dispersed. It’s also important to include life insurance as part of your estate planning. It can provide death benefits to beneficiaries and help loved ones deal with expenses after your passing.
Finally…
Patience and planning are important. Planning for retirement is a multi-step process. Understanding each step and its importance will allow you to feel more comfortable and secure that your retirement will be a time of peace, security, and enjoyment.
