Retirement Planning: The Complete Overview

Retirement planning is the process of setting goals for your retirement years and taking actions to achieve them. The earlier you start, the easier it becomes — but it's never too late to start. The key is to make informed decisions about savings, investments, and spending that will support your desired lifestyle in retirement.

The 4% Rule

One of the most widely cited retirement planning guidelines is the 4% rule, which suggests you can safely withdraw 4% of your retirement portfolio each year without running out of money over a 30-year retirement. If you need $60,000 per year, you need $1.5 million saved. If you need $80,000, you need $2 million.

Key Insight: Every $1 you invest at age 25 is worth approximately $21 by age 65 assuming 8% average annual returns. The same $1 invested at age 45 is only worth $4.66 by age 65.

Retirement Account Priority Order

  1. 401(k) up to employer match — free money, always take it first
  2. HSA contributions — triple tax advantage if eligible
  3. Roth IRA to maximum — $7,000/year in 2026
  4. 401(k) to maximum — $23,000/year in 2026
  5. Taxable brokerage account — for additional investing beyond tax-advantaged limits

Asset Allocation in Retirement

As you approach retirement, your asset allocation should gradually shift from growth-focused (mostly stocks) to more conservative (more bonds and stable investments). However, even in retirement, you need growth to outpace inflation over a potentially 30-year retirement period. Many advisors recommend keeping 40-60% in stocks even in early retirement.

Healthcare in Retirement

Healthcare is often the largest unexpected expense in retirement. Medicare eligibility begins at age 65, and costs can still be significant. Fidelity estimates the average couple needs $315,000 saved just for healthcare costs in retirement. Planning for this early through HSA contributions and supplemental insurance is essential.