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Making a Plan for Your Retirement

E&O Retirement January

By Jean C. Setzfand

Do you know what your retirement will look like?

This might sound like an odd question, but stay with it for a minute. When you’re planning a vacation, I’ll bet you can visualize the whole thing – what city or perhaps beach you’ll be visiting, the weather, the events you’re hoping to fit in. Being able to see your goal makes it easier to put money aside to achieve it.

The same holds true for retirement. If you can “see” what your retirement will look like, it’ll make it easier to set a financial goal to get you there. Of course, planning and saving for vacation is a lot different from planning and saving for retirement. Yet we tend to spend more time planning for our one or two week respites than for a retirement that could last 20 or more years!

To help you get on the path to considering the real possibilities of your retirement, start by visiting  The site offers an easy five-step path to help you envision what your retirement will look like.

Step 1 will help you decide what retirement means to you; there are several articles, quizzes and other useful information available to help you think this through. This step will help you get into the mindset of how you’d like your retirement to play out. You may decide that time for social connections and volunteering is what you’re looking for, or that working in some capacity is in the cards. Maybe you want to spend time visiting all those places you never got to see during your working years. I’m hoping for some or all of this, plus spending time with my grandkids (who haven’t actually been born yet!)

Now that you can see it, can you afford it?

The big question when it comes to retirement is whether you’ll be able to afford it. Financial planners typically suggest that you’ll need 80% of your pre-retirement income to maintain your lifestyle in retirement. For most of us, Social Security generally replaces 35%-40% of income. To make sure you get the most of your Social Security benefit, see Step 2 of AARP’s five-step path. This step includes a Social Security calculator, a quiz, articles and a useful question-and-answer tool.

Beyond your Social Security benefit, the rest is up to you. To help you get to a retirement goal with a number attached to it, check out the AARP Retirement Calculator that’s part of Step 3 of the 5-step path. With some simple inputs, you can find out what your savings, pension, if any, and Social Security will add up to, and if it’s going to be enough. Let’s say you contribute to a 401(k) plan but aren’t making the most of it. The AARP 401(k) Savings Calculator, also in Step 3, can help you do so.

And, while many of your expenses may go down in retirement – commuting costs, dry cleaning and the like, some costs, like health care, will likely rise. You’ll be eligible for Medicare at age 65. If you retire before that, you may be able to continue your work-based health benefits through COBRA for up to 18 months. The monthly premium may be significantly higher than what you pay as an employee, however.

To factor in your potential health care costs in retirement, check out the AARP Health Care Costs Calculator, also part of Step 3. Based on your current state of health, the calculator will estimate what savings you’ll need on top of Medicare to pay for your expected health costs.

Once you’ve added up what you’ll have and see what you’ll potentially need income-wise, you may find a gap. Step 4 of AARP’s 5-step process can help you figure out how to plug the holes. This step will help you define a budget, cut costs and learn about lifetime income strategies like immediate annuities. It will also help you think about the possibility of a new career during your retirement years. You can sign up for webinars and virtual career fairs, and get tips for seeking a job as an experienced worker.

Step 5 of the process is support for your retirement planning. It offers links to financial tip sheets, lists upcoming AARP webinars on retirement planning and offers additional tips and tools to help you along the way.

As winter weather chills me to the bone, I can see myself on a warm beach in a tropical paradise. And as I think further out to when I will retire, I can also see myself living the life I choose. Try it for yourself: see yourself in retirement and then take the steps that will get you where you want to be.

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Jean C. Setzfand is Vice President of the Financial Security issues team in the Education and Outreach group at AARP. She leads AARP’s educational and outreach efforts aimed at helping Americans achieve financial ‘peace of mind’ in retirement. She can be reached at .

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