Retirement planning can be both exciting and scary. Finally, you’ll have time to do the things you’ve always wanted to do. But you won’t have the reliable paycheck you had when you were still in the workforce.

Whatever your retirement goals, it’s beneficial to spend time assessing how much income you’ll have, as well as how you’ll spend that income. Setting a retirement budget can help you get a handle on things, but there are still some things that will catch you by surprise. This guide can help you get started on your retirement planning.

Planning for Retirement

Your income will likely drop in retirement. The best retirement plans account for that. Even if you combine Social Security income and a retirement savings plan or two, the end result will probably be less than what you made when you were putting in 40 hours of work every week.

Financial planning for retirement means being honest about this drop in income. Create a budget and pare it down until you have something that lets you enjoy life without blowing more money than you have. Then you can look at your estimated monthly income and make sure you have enough to live comfortably.

How to Set Retirement Goals

It’s never too late, or too early, to start planning for retirement. A good plan can help inform your retirement investment and savings approaches. Here are a few tips to take you through the steps of setting your retirement goals.

Determine Retirement Spending Needs

Any guide on how to retire will mention budgeting. Before retirement, consider paying down as many debts as possible. If your home and car are paid off and your credit card balances are zero, your retirement income will go much farther. Then be realistic about how much you’ll spend on items like food, utilities, travel, and healthcare. In some areas, you’ll be able to scale back in retirement, but expenditures like healthcare and travel may see an increase.

Stay on Track with Your Savings Goal

As you work hard on your retirement investing and saving, make sure you check in every now and then. Your investments may be doing better than you’d anticipated, giving you a little extra breathing room. But it’s also possible things will take a downward turn. If that happens, knowing as far in advance as possible can help you come up with ways to compensate for any shortage.

Assess Risk Tolerance with Your Investments

Once you reach your later working years, your retirement financial planning will need to take a shift. You won’t have time to recoup from a sudden drop in the markets, so your risk tolerance will inevitably change. Take a close look at your portfolio and consider moving to a more conservative approach as you head into retirement. You’ll want investments you can rely on for a small, steady income rather than crossing your fingers for a sudden windfall.

Create and Update Your Estate Plan

In addition to lining up a budget and income, good retirement strategies include solid estate planning. If you haven’t already, create a will and make sure all your assets are accounted for in it. Keep in mind that taxes will come out of that estate and consider whether you’re better off creating a trust or gifting some of the money to your loved ones now.

Consider a Decumulation Strategy When Approaching Retirement

One last thing you can do when considering how to plan for retirement is to start decumulating assets. Decumulation simply means shifting from a saving, or “accumulation,” strategy to one that has you relying on the assets you’ve saved. Many pre-retirees consider downsizing, which may mean moving to a smaller home, consolidating to only driving one car, and selling unused assets rather than continuing to store them. This will also help your loved ones when you eventually pass away and your belongings are distributed or sold.

Final Thoughts

In essence, retirement income planning is no different than the budgeting you do during your working years. It’s a matter of calculating your income and setting spending limits in each category. But a Certified Financial Planner can bring a level of expertise to the process, advising you on how you can maximize your retirement savings so you’ll be better prepared. We recommend working with a financial planner as early as possible to give yourself the best chances at building a sizable retirement savings account.