How to Plan for Retirement Without Dreading It (Even If You’re a Pessimist)

As reports abound of retirees outliving their retirement savings, more and more Americans are feeling worried about the amount of money they will have waiting for them when it comes time to retire. 

In fact, a  report from the 33rd annual Retirement Confidence Survey found a decline in the confidence Americans feel in having enough money to live comfortably throughout their retirement years. The report also finds both workers and retirees are very concerned about inflation and its impact on their savings and spending.

Current Economic Climate Erodes Confidence

“The confidence both workers and retirees have in their ability to finance their retirements dropped significantly in 2023. The last time a decline in confidence of this magnitude occurred was in 2008 during the global financial crisis. This shows that the current economic climate, in particular inflation, is eroding the confidence that Americans had in their retirement preparations going into the pandemic,” said Craig Copeland, director of Wealth Benefits Research, EBRI.

Strategic Planning

The best way to gain confidence in your retirement is to plan strategically. 

Starting retirement planning and acting on it early generally results in greater funds for retirement. However, this does not imply it is ever too late to learn how to plan your retirement strategically. These experienced insights from Yieldstreet can help you develop a plan, regardless of where you are on your career path.

What’s Your Time Horizon?

Ideally, you’ll start putting money away when you’re in your 20s. This enables you to maximize the compounding of interest and gives you the ability to invest more aggressively. Preservation of capital should anchor your strategy as you get older. This typically means bonds and other fixed-income securities. Riskier investments such as stocks can offer greater earnings potential when you have a longer time horizon. Learning how to invest in real estate can be beneficial at any age.

The Amount of Money You’ll Need

This will vary based on your current income, your retirement age and the activities you’d like to enjoy in retirement. Some counselors advise saving at least 12 years of your pre-retirement income. However, the exact amount will vary depending on the type of life you’d like to live and the lifestyle to which you are accustomed. A retirement calculator can help you determine your target figure.

When to Claim Social Security Benefits

Waiting until you’ve reached full retirement age to claim your Social Security benefit is a good play. For people born in 1960 or later, this means 67 years of age. Claiming the benefit earlier reduces the amount you’ll receive each month—forever. With that said, there are very few places one can live in the U.S. in which Social Security income will provide all of the funding needed to live a comfortable life. It’s best to look at that benefit as part of the retirement income package rather than the entire package. 

Determine Your Withdrawal Approach

The order in which you withdraw funds from your retirement accounts will have a profound effect on your tax burden. You’ll also want to draw income from your investments before your retirement accounts to afford the latter more time to compound interest.

Plan for Taxes

You’ll need to consider the after-tax return potential of your investment stratagems to get an accurate picture of the amount you’ll need to put away. You’ll also need to have an idea of your tax status when you begin withdrawals. Here again, a good retirement calculator can be an invaluable tool. 

Adequate Estate Planning

Best-case scenario, you’ll build a portfolio that can deliver returns capable of supporting your retirement needs, while preserving its value. You can then pass it on to your beneficiaries. It’s also important to have a succession plan, as well as adequate insurance, to help your descendants avoid unnecessary expenses. 

These insights on how to plan your retirement strategically can help ensure your retirement plan is both workable and effective to maximize the superannuation funding available to you. 

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