Let’s get one thing out of the way: There’s no right time to start retirement planning. The best time to start is right now, no matter your age. The sooner you start, the more your retirement income will be, this is the power of compound growth.
That said, the exact process of retirement planning isn’t always clear. Here’s a retirement planning guide for beginners that explains the key steps you should take:
Assess Your Retirement Expenses
Start by assessing all major and minor retirement expenses. In other words, it’s about calculating the amount you need to retire comfortably. Note down expected retirement expenditures based on what you spend now. This can include:
- Mortgage
- Utilities
- Commuting
- Kids’ college tuition
- Food
- Entertainment
- Wellness
You’ll have some new expenses in retirement, including:
- Healthcare
- Travel
- Hobbies or projects
You should also assess your current financial position. What are your assets worth? Do you have any liabilities? Experts recommend making a plan to pay down high-interest debt as soon as possible. Carrying debt into retirement can cause financial strain, so make paying it down a priority.
Envision a Lifestyle
Before you get deeper into numbers, determine your ideal life in retirement. Discuss retirement expectations with your spouse or partner. Do you see yourself working part-time? Do you want to travel and pursue hobbies? Or maybe you want to take up official grandparent duties.
Get your partner’s input and understand their preferences. Envisioning an ideal retirement lifestyle will help you determine a realistic income.
Choose a Retirement Plan
Opening a retirement account is one of the best ways to build your savings over time. The best part? Retirement accounts give better return-on-investment compared to savings accounts. There are two types of individual retirement accounts (IRAs) you can open:
Traditional IRAs
A traditional IRA is a tax-deferred retirement account. In other words, you pay taxes when you make withdrawals in retirement. Anyone with earned income to contribute can open a traditional IRA, irrespective of age.
Roth IRAs
Roth IRAs allow you to make contributions with after-tax dollars. You pay taxes while depositing the money. As a result, you can withdraw contributions and earnings without paying taxes, provided you’re age 59½, and the account has been open for at least 5 years.
The contribution limits for both traditional and Roth IRAs are the same. In 2026, those below 50 can contribute $7,500, where account holders age 50 or older can contribute an additional $1,000, bringing the total to $8,600. Choose a reputable IRA provider, such as SoFi.
Look Into Workplace Retirement Plans
A 401(k) is an employer-sponsored retirement plan that can help you build retirement income. You can open a 403(b) plan if you work at a nonprofit, or a 457(b) plan if you work for the government.
Workplace retirement plans are tax-deferred. You don’t pay taxes on the money now. Moreover, your employer can deduct contributions from your paycheck, so the money grows in the background.
Make the Money Last
Choosing sources of retirement income is one thing. The main challenge is growing the money. Invest your IRA contributions in a diverse range of financial instruments, such as stocks, ETFs, and mutual funds.
