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5 Steps to Planning Your Retirement Income

It’s never too soon to start planning for retirement. In fact, the sooner that you take a focused and proactive approach to creating a comfortable, post-retirement life, the easier it will be to thrive in your golden years. Whether you’re looking to exit the workforce early or intend to continue working for as long as you possibly can, following are five critical steps to take right now.

1. Establish Excellent Money Management Skills

One of the most common financial terms used to describe post-retirement life is “living on a fixed income”. Once you stop working, what you have is what you get. Whether this includes social security benefits, your retirement savings, or even money from a rental property or other passive income source, your options for acquiring new, regular income will become increasingly limited as you grow older. Things like age discrimination and age-related disabilities often make it hard to “get back in there” after you’ve already stepped out. Thus, it’s important to have excellent money management skills. These include:

  • Identifying and eliminating areas of waste
  • Avoiding redundancies in spending
  • Sidestepping emotional spending
  • Smartly minimizing your tax burden
  • Proactively protecting yourself against identity and financial theft
  • Saving for unplanned expenses
  • Establishing a reasonable budget and sticking to it

Although the retirement years are largely looked at as a time of freedom (afterall, your kids are grown, your home is likely paid off, and your living costs are minimal), haphazard spending at this stage of life can still land you in hot water. Big ticket purchases like speed boats, high-end country club memberships, and recreational vehicles among others have to be carefully assessed and well-planned. 

Despite working hard for their retirement, many people are struck with the false sense that they’re living on “free” money. Checks come in the mail and suddenly, there’s no blaring alarm clock in the morning, taxing commute, or in-office drudgery to justify this cash. It’s easy to forget how much it took to earn a comfortable life in retirement when every day feels like a vacation. If you haven’t trained yourself to be smart about your cash, unplanned and uncareful spending could leave you living in poverty when your end-of-life needs manifest.

The best way to plan for good money management in your retirement years is by starting today. If you manage money wisely now, you’ll develop the very same, well-ingrained habits that you’re guaranteed to need during your golden years. 

2. Determine Your Ideal Retirement Age

There aren’t many people who don’t find the idea of retiring at 50 appealing. There’s the very real fear of retiring at an age where mental and physical health have already greatly declined and the ability to enjoy personal freedom is significantly diminished. However, if you’re hard-pressed to get out of the workforce now, you should know how an early exit can impact your financial future. The Social Security Administration (SSA) defines the normal retirement age as 67, and pays additional benefits for those who delay their retirement to 70. More importantly, the SSA imposes stiff penalties for early retirement and thus, leaving your job too soon could cost you for the rest of your life.

If you’re dead set on stepping out of the workforce before 67, start looking for secondary income sources to make up the difference. This might be a rental property, a reasonable gig that you can maintain for the next ten years or so, or a passive source of online income. Having extra money come in after you retire early will offset your losses in social security.

3. Create Pre-Retirement And Post-Retirement Budgets

Retiring and retiring well mean two very different things. People who lack budgets often wind up living well below their means due to excess spending on non-essentials and generally poor money management. Having a personal finance plan is the first and most important step in good money management. 

Creating your post-retirement budget now will help you identify some of the financial challenges that might otherwise go overlooked. This is an opportunity to account for how inflation will impact your retirement savings and to look for areas where downsizing might be possible. You can use budgeting apps to create, modify, and refine your current and pre-retirement spending plans. 

4. Downsize And Clear Up Your Debt

Don’t wait until you retire to start downsizing. Downsizing now will limit your spending and give you more money to invest in your future. If you have more than one car and don’t often use your second vehicle often, the money that you spend to register it, maintain it, and keep it insured will benefit you more if it’s applied to your retirement savings. This is money that could be earning your money rather than simply exiting your pockets. Start cutting what you really don’t need. Consciously downsizing your lifestyle will also make you less likely to make frivolous, spur-of-the-moment purchases. 

5. Prepare For The Unexpected

There are a number of unavoidable retirement costs that people regularly overlook. There are also a number of unexpected developments that few people factor into their post-retirement budgets.

As retirees grow older, they invariably experience changes in their physical health, memory, and cognition. Although these things won’t happen right away, they will happen at some point in your retirement. You have to be ready to deal with developments like age-related illness, the demise of a life partner, end-of-life medical expenses, and more.

There are even unexpected developments that can occur outside of your personal health such as major home repairs. A well-planned retirement considers all of these possible factors. You want to make sure that both your nest egg and your emergency fund are ready for the very worst. This way, if bad things do happen, you can still maintain a reasonable level of comfort, and you won’t have to make an urgent return to the workforce during your later years, when you really don’t want to and when you may not be able to.


Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author.

He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.

He loves to share his personal finance tips and money management wisdom with others on his website,, to help them find financial freedom.

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