How to Plan for Retirement: 9 Steps for a Secure Outcome

Dave Ramsey outlines 7 steps to general financial success. When it comes to retirement — a goal nearly every American shares — we believe it takes 9.

Retirement planning is one of the most important financial tasks you'll ever take on. Whether retirement feels decades away or right around the corner, the decisions you make now shape your future financial security and quality of life. Effective, proactive planning means setting clear goals, building savings, and growing and managing your investments. It also means protecting what you've built, through insurance and estate planning.

Why Retirement Planning Is Vital

Retirement marks a major shift: instead of relying on a steady paycheck to cover your bills and lifestyle, you'll depend on savings, investments, pensions, Social Security, and other benefits. Without adequate preparation, retirees can struggle to maintain the standard of living they're used to. In fact, a recent Ramsey Solutions study found that only 52% of workers have tried to calculate how much money they'll actually need in retirement.

Starting early and avoiding excessive debt gives your savings more time to grow through compound interest — and gives you a stronger financial cushion when life throws unexpected challenges your way.

Step 1: Set Your Retirement Goals

What does "living the dream" look like for you? The first step in retirement planning is defining what retirement actually means to you. Consider questions like:

• At what age would you like to retire?

• Where do you plan to live?

• What lifestyle activities or hobbies do you want to pursue?

• Do you picture frequent travel, occasional local trips, or big international adventures?

• Do you want to work part-time in retirement, or only if necessary?

Clear goals make it much easier to estimate the savings target you'll need for a quality retirement.

Step 2: Build an Estimated Retirement Budget

This step is naturally easier at 60 than at 30, but base your estimate on how you live and spend today. The younger you are, the more you should pad that budget to be safe. Many people assume expenses drop after retirement — that's not always true. Common retirement expenses include:

• Housing costs

• Utilities and household expenses

• Food and transportation

• Healthcare and insurance

• Travel and leisure activities

• Taxes

• Long-term care needs

Some budget categories will shrink in retirement, but assuming entire categories will disappear is a recipe for disappointment. A realistic retirement budget is the foundation for determining how much you actually need to save.

Step 3: Identify Your Fixed Retirement Income

For most people, the biggest source of fixed income is Social Security. Knowing what to expect from it helps you identify what other income sources you'll need to fill the gap. There's growing uncertainty around the future of Social Security, so the younger you are, the more conservative your estimate should be. Other sources to factor into the equation include:

• Employer-sponsored retirement plans

• Personal savings and investments

• Pension benefits

• Government retirement programs

• Rental income or other passive income streams

Projecting your future income against your estimated expenses will show you exactly how big a gap you have — and how much additional savings you'll need to close it.

Step 4: Save 15% of Your Income, Starting Now

Time is one of the most powerful tools in retirement planning. The stock market has historically averaged around 10% annual returns over the decades, and even modest, consistent contributions can grow into substantial retirement savings. For example, a 25-year-old who saves just $159 a month can reach $1 million by age 65. Invest that in a Roth IRA, and every dollar comes out tax-free in retirement.

Starting later than 25 means you'll need to save more each month — but you may also have a higher income to help you catch up, and riding out a bear market or two early on can actually help close the gap faster.

The two best tools for hitting your 15% target are your workplace retirement plan and Individual Retirement Accounts (IRAs). If you're more than a decade from retirement, after-tax Roth accounts are usually the better choice. If you're within a decade of retirement — especially if you're in the 22% tax bracket or higher — pre-tax accounts likely make more sense.

Step 5: Invest Thoughtfully and Rationally

Inflation is nearly a certainty; the only question is how much. At a common estimate of 3%, cash effectively loses value over time, and depending on your time horizon, bonds may not get you far ahead either. That makes stocks the clear choice for long-term retirement investing. Your investment strategy should reflect:

• Age

• Risk tolerance

• Retirement timeline

• Financial goals

A diversified portfolio spread across multiple asset classes helps manage risk while still pursuing growth. Time reduces risk significantly, so if you're more than five years from retirement, don't be afraid to stay 100% in stocks. On the other hand, even aggressive investors should avoid an all-stock approach for money needed within the next year or two.

Step 6: Eliminate Depreciating Debt, Keep Debt Sensible

Ideally, you never carry a revolving credit card balance or take on high-interest debt. A low-interest mortgage is reasonable — even necessary — for younger workers, but carrying that debt into retirement can strain your finances and limit your flexibility. Everyone should aim to be debt-free, freeing up income and improving financial stability heading into retirement.

Step 7: Plan for Healthcare Costs

Most budget categories shrink in retirement, but healthcare usually isn't one of them — in fact, it's often the largest retirement expense. Medical costs tend to rise with age, so it's important to:

• Understand your healthcare coverage options (including Medigap and Medicare Advantage policies)

• Build dedicated savings for medical expenses (using HSAs and other earmarked funds)

• Consider long-term care planning, including whether an LTC policy makes sense

• Periodically review and adjust your healthcare strategy as your needs change

Preparing for healthcare costs now can help you avoid painful financial surprises later.

Step 8: Review and Adjust Your Plan Regularly

Retirement planning isn't a one-time exercise. Life circumstances, financial markets, and personal goals all change over time. Review your plan regularly to:

• Track progress toward your savings goals

• Adjust your investment allocations

• Update your assumptions about retirement age

• Account for major life events

• Check whether tax law changes affect your plan

Periodic reviews keep your plan aligned with your evolving needs and objectives.

Step 9: Address Your Estate Plan

It's smart to start basic estate planning early, and your plan will become more defined as you get older. At its core, estate planning is about avoiding probate court and making sure your wishes for your family and assets are actually carried out. Start by naming beneficiaries on your insurance policies and financial accounts. From there, draft or update your will or trust. Financial and healthcare powers of attorney are also essential, especially once you're in retirement. Lean on trusted financial advisors and attorneys to help you navigate the process.

Common Retirement Planning Mistakes to Avoid

Every situation is different, but the most common mistakes we see include:

• Procrastinating on saving and investing

• Using debt to fund your lifestyle

• Underestimating retirement expenses

• Ignoring inflation

• Taking on excessive investment risk

• Failing to diversify investments

• Neglecting healthcare planning

• Making premature withdrawals that trigger penalties and cost you future growth

Avoiding these pitfalls significantly improves your odds of long-term financial security.

Conclusion

Retirement planning is a marathon, not a sprint — it takes thoughtful preparation and consistent action. By setting clear goals, saving regularly, investing wisely, managing debt, preparing for healthcare costs, and putting an estate plan in place, you can build a strong foundation for a comfortable, financially secure retirement. The earlier you start, the more you benefit from time, compounding growth, and informed financial decisions. The formula isn't complicated — but it does take discipline and consistency to follow through.

If you have questions about your retirement, or want to chat more about it, schedule an appointment with your financial advisor today.