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4 Basic Steps in Financial Retirement Planning - How to Plan for Retirement

Updated on December 11, 2014

Where Will You Be?

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It's never too soon to think about retirement!

Retirement planning is something that a lot of workers think about throughout their careers, while others don’t seem to put much thought into it at all. Whether you live comfortably or are scraping by from paycheck to paycheck, there are things for you to think about and try to implement as you think about retirement.

Start with small steps, such as cutting back on expenses and putting that savings into an account or retirement fund. Pay at least a little extra on your mortgage (at least most months) to cut the life of your mortgage. Finally, in order to assure a secure financial future after retirement, think about your interests while considering some kind of part-time job you might want to do during your retirement years.

Try not to feel overwhelmed about living life now while planning for the future. Instead, get started with basic steps to give you a boost and on the way to a more secure retirement.

More Ways to Cut Household Expenses

1. Cut Back on Expenses

While most people can find some way to cut back on expenses, however small, there are families who may fall short on their budget some months. If this is the case, you can still look at your situation and see where it is that you and your family can cut back.Look for small ways with which to start.

Look at everyday expenses. Consider replacing meals with cheaper ones each week. Pinto beans, fried potatoes, and cornbread go a long way for a family of six. Believe me, I know, as I was one of those four kids who felt as though she sometimes lived on that meal. That meal combination continued--often with vegetables from the garden--as the family situation turned into a single parent family. My mom cut back in areas such as these in order to put the money elsewhere in things that we needed.

My mom hung clothes out on the line to save dryer energy; I do that, too, and I rarely use laundry softener in the washing machine. Be creative in thinking how you and your family can cut back on common household expenses. Make your own lunches to take to work instead of going out or buying something in the cafeteria. Carpool when you can. Walking is even better. Buy your children’s clothes at garage sales. Children grow up so fast, and you can get nice, inexpensive clothes that are gently used and save a ton of money. Teach your children to be conservative in their usage of everyday household items. Show them how to not be wasteful.

Get out of debt before you invest!

2. Save Money and Invest

I know what many people think when they hear this. How can I save when I have four children and am barely getting by every month? By cutting back a little as discussed above, you can start to save a little. Just a little is something and will make a difference over time.

Maybe adding a part-time job to your full-time work could be the way to make extra money to put away for retirement. If you could find a job to fit your schedule, even if for just a few hours per week, this could make a big difference in putting a chunk of money into your retirement planning. You don't have to do it indefinitely, but a temporary part-time job might be the jump start you need to get you in the habit of putting away something every month for your retirement.

Whatever other ways you can come up with, you can do it! Compare your food budget, clothing budget, gasoline budget, and utility costs with previous months to start seeing the savings add up. Take the money you save each month and put it into a savings account. Save it for a rainy day to prevent using a credit card for an emergency, or save it to put into an individual retirement account (IRA) at the end of the year.

Do pay off all your debt except your mortgage before you choose how to put your money into savings or other investments. Then, learn more about the different types of IRAs. If your employer offers some kind of 401 plan with matching funds, put in the amount at least up to what your employer will match. The employer's contribution--1% or perhaps up to 5%--means that you immediately double your money! That's money you didn't have, so just do it.

Do what you can afford to do. Small steps are important. Remember that pennies turn into dollars over time. These dollars turn into many more dollars. Teach your children this as you teach them to save, too.

Financial Suzie Orman Tells WHY You Should Pay Off Your Mortgage Early

3. Pay off Your Mortgage Early

Having your home paid for by the time you retire will afford you some freedom—and a sigh of relief—in your “golden years.” With your mortgage paid for, you will never have to worry about rent again. You have your place to live. Now you can focus on paying for utilities, food and gas, insurance, and other expenses.

It goes without saying that before paying off your mortgage you should focus on paying off other debts, such as automobiles, student loans, and credit cards. Once you have these debts paid off, don't ever go in debt in any of those areas again. Now you can focus on your last big debt--the house.

Just by paying a few dollars every month on that house payment, you can significantly reduce the principal (what you owe) on the total loan amount. A rule of thumb is to pay the sum of one extra payment per year. Divide the amount by twelve to spread out the extra payments to make it easier. By doing this, you will cut around five to seven years off a thirty year mortgage. Plug in the amount of extra payments in a mortgage amortization calculator to see how many years you can cut off your mortgage.


4. Continue to Work Part-Time after Retirement

Now before you say "Wait a minute! I'm retired! I don't want to work!" let's think about this. What better way to give peace of mind now while you're still working, knowing that you could develop a skill or hobby that could give you extra income in retirement years and might even be fun!

I mention the "w" word (work) here because working part-time during retirement years is a security net that many people don't even think about when planning for retirement. I DO think about it, and it makes me feel more secure, knowing that I can take an active role in my retirement income instead of depending on that social security check always being there.

Think about your interests and what you might enjoy doing in retirement in order to make some extra money. Do you like kids? Maybe you would like to do some substitute teaching at the local elementary or high school? You can schedule the days you work around other plans you may have (family? travel?), so the hours are very flexible.

Do you have the itch to buy and sell things? If you enjoy yard sales and flea markets, think about opening up your own booth at a flea market. Make some money at your yard sale-ing hobby. Many people open up a few booths and actually make a living at it.

Do you have a skill such as sewing or landscaping? If you’re still able to physically handle it, offer your services for mending clothing or doing yardwork. If you can make something with your hands such as quilts, potholders, or other crafts, consider selling your stuff at local craft fairs or online. If you are good at woodworking, that opens up another avenue for income. Consider what you like to do, what you are good at, and what could bring in some extra income in retirement.

Do you need a certain percentage of your working income for retirement?

Planning on a certain percentage of your working income is a common recommendation for those thinking about retirement. For example, I've heard that a person will need 70% of their income in retirement, so someone with a $60,000 salary should plan to have $42,000 per year in retirement to live on, while someone who made only $20,000 could theoretically get by on only $14,000.

I disagree with this. There are years that I have made $20,000 and years I have made $60,000. On whichever salary, I was able to pay my bills as well as put some money into savings. With the “extra” from the higher salary, I didn’t live in more luxury, buying more clothes or furniture or big toys such as boats. Being a frugal person, I would put much of any surplus income onto my mortgage principal after putting a small amount (perhaps ten percent) into savings. Why would I need $42,000 to live on in retirement with no mortgage payment?

In my retirement, I plan to be frugal as I have always been, and thus I don’t need a percentage of the higher salaries I’ve had over the years. With frugality, I do hope it pays off in that I can splurge with a little vacation or something else in retirement if I want. For you, you’ll have to think about what type of retirement you want and what it will take to sustain that lifestyle. Figuring that out is a key part of retirement planning.

This kit really helped me--books, audio, materials . . .

I'm following my own advice!

I have always been a saver, even in low-paying jobs. I put a little away into an IRA every year and am following my own advice to pay off my mortgage early. Another piece of advice I’m using is to consider how I might earn money into retirement. As a freelance writer, I will continue to write to supplement my income in retirement.

There is more you can learn about financial planning and retirement plans. For now, if you will get in the mindset to save where you can, pay more on your mortgage, invest every year, slowly you will make progress toward your goals. In the meantime, too, think about your hobbies and interests that might give you added security (i.e. money), as well as enjoyment, in your retirement years.

Rate your retirement planning:

How have you planned for retirement?

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    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      That's right, Ruchira, we'll only have to write a little bit! LOL. Thanks so much for reading and commenting!

    • Ruchira profile image

      Ruchira 5 years ago from United States

      great tips, Vicki.

      Working part time even after retirement helps the mind and body to stay active and that was good advice.

      Sure, freelancing even when we are 80 would be good. Our skills would have reached the sky and we would be as polished as a

      aren't you glad you are a writer :))

      many votes as useful and sharing it across

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      I know, monica. I was getting addicted to it, too, watching every month to see how many extra months I could knock off. It's fun to watch to mortgage total go down fast. Keep at it. I can't do it now at the rate I was, but I still pay extra every single month. Thanks for the input!

    • monicamelendez profile image

      monicamelendez 5 years ago from Salt Lake City

      I've been able to pay three years off of my mortgage in the last few months and honestly, I couldn't be happier. I am so addicted to it! Lately I've been picking stuff to sell from around the house just so I have more money to pay down my mortgage hahaha.

      I was amazed at how much paying extra knocked off the end of my mortgage. By paying off $1000 extra (my payment is $1030), it knocks three payments off the end of my mortgage. Incredible!

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Right back at you, TToombs! :-)

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Good thinking, Teaches! Many of us may have to work part-time. But it may be something we enjoy, too. Thanks for the input!

    • TToombs08 profile image

      Terrye Toombs 5 years ago from Somewhere between Heaven and Hell without a road map.

      lol @ Victoria!

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Sounds like a plan, TT! Send me that paycheck! :-)

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Arlene, you're probably right about the traveling. That's not really an issue with me, as I'm pretty much a homebody that doesn't like the idea of traveling much. But for those who do, it seems a shame to wait until they are old and frail. People do have to balance things and enjoy life.

      Thanks for your compliments, Arlene. I do appreciate that!

    • teaches12345 profile image

      Dianna Mendez 5 years ago

      Good food for thought on retirement. We do have this started, but will have to add your other suggestions. Working part time as a teacher is one that I will most likely keep, it keeps me in the loop.

    • TToombs08 profile image

      Terrye Toombs 5 years ago from Somewhere between Heaven and Hell without a road map.

      Victoria, I'll send you my paycheck and my bills and you send me an allowance. :)

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Thanks, TTombs. I know. Follow-through can be the hardest part. I get better as I get used to living more frugally! :-)

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Thanks, Effer. That makes me feel good. My mom taught me a lot about being frugal, and I have continued to learn as I "grow up" (something I will never do is that growing up thing--LOL!). Thanks for the thumbs up!!!!

    • profile image

      Arlene V. Poma 5 years ago

      Victoria, because of your skills in living frugally, PLUS your writing skills, this is why again and again that I feel you will make it as a writer. And I hope you don't have to work once you do decide retire--even if it's part-time. Being a former guard, the job did not pay into Social Security, so I am without it, anyway. Many people I know have planned successfully for their Golden Years. But as a lifelong traveler, my advice is to never put off traveling while you are still healthy and can get around. There are so many retired people who have the money to travel, but they can't do the walking required or navigate the stairs and ramps. Believe me. While traveling, me and my hubby have picked up a lot of elderly people off sidewalks and ramps after they have fallen. And you won't believe (during cruises) how many people don't even leave the ship. They are too old and frail to do anything. Of course, they can well afford the cruises, and that's it. When they return, they can only say that they went here and there. Which is partially true! LOL.

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Humility! Exactly, Bill! I wish we could have all thought like this when we were in our 20's! Would have been a lot better off. What 20 year olds listen, though, Bill? We live and learn, it seems. Thanks for reading!!

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Tammy, I know, it can be scary. I want to be totally debt free well before retirement age. Glad I got your "mental wheels spinning." Retirement planning is an issue we all need to be thinking about.

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Ronna, you're welcome. Starting to plan for retirement doesn't have to be overwhelming if we start with some basic baby steps. We all need to be thinking about it and do what we can. Thanks for reading and commenting!

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Arlene, I don't think I would want to work much either, just a little writing...However, few people get pensions these days and I'm worried about social security eventually going away.... It's hard to know what will be available in the future for retirement, so knowing that I can still work if I need to makes me feel better, especially if it's something I enjoy. I hope my writing will eventually make me much more money! Thanks for your input!

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Way to go, Real! You did well. I guess the time to work hard is when we're really young and energetic. I've heard a lot about Suzy Orman. Cool that you and I are the same age! I'm hoping I can make a living from home and never go back into the "real" world again!

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Thanks, Josh! I appreciate that so much!

    • TToombs08 profile image

      Terrye Toombs 5 years ago from Somewhere between Heaven and Hell without a road map.

      Victoria, you are so right on with all the information in this hub. I think the hardest part for most is the sticking to it part. The good intention is there, it's the follow through that needs work. This I know from personal experience. :) Excellent information and presentation is just as good. VUMS!

    • fpherj48 profile image

      Paula 5 years ago from Beautiful Upstate New York

      Vee.. You are definitely a very financially-wise young lady! I am proud of you. Can't tell you a thing you don't already know!! UP+++

    • billybuc profile image

      Bill Holland 5 years ago from Olympia, WA

      Where was this hub about forty years ago when it would have done me some good? LOL Oh well, I learn humility being poor so that's a good thing, right?

      Great hub Vicki!

    • tammyswallow profile image

      Tammy 5 years ago from North Carolina

      Excellent tips on how to save for retirement. It is such a difficult economy to predict how things will be in years to come when those our age retire. I know so many seniors now who are struggling to pay a mortgage or a car payment on a fixed income and they just can't make it. This is a serious issue for people of all ages. We can't really count on social security or the government. Thanks for getting my mental wheels spinning on this issue.

    • Victoria Lynn profile image

      Victoria Lynn 5 years ago from Arkansas, USA

      Thundermama--I think you're right. That pension or social security check may not always be around. Part-time work gives added security. Thanks for the comments!

    • Ronna Pennington profile image

      Ronna Pennington 5 years ago from Arkansas

      Thanks for tips that I can actually do!!

    • profile image

      Arlene V. Poma 5 years ago

      My retirement was due to an on-the-job injury, but my combined years working has given me a pension with health, dental and death benefits that allows me to live comfortably because other than travel, I find ways to cheaply live as well as entertain myself. As for that part-time job in retirement, that would not work for me because I don't want to work. I write and earn occasional pay, but I don't consider that work. Each day is mine, and I don't want to waste it working part-time for the sake of money. Not when I had spent years working jobs that I absolutely hated. But, retirement is a future goal, and there will be a time when you will need to quit working. And even with the best planning, I've had family and friends die before they could see that retirement money. It is nice to save along the way, but it depends on the person. I've had some close calls with death, so I live in the present. But for anyone who is living with this shaky economy and has years to go before retiring? YES. You have to save.

    • RealHousewife profile image

      Kelly Umphenour 5 years ago from St. Louis, MO

      Vicki - this is awesome!

      I worked for a stockbroker and financial planner when I was like 22. I hated the job but I was poor and needed to figure it out so I guessed if I worked for a broker then he'd have to pay me to learn:)

      I learned first that I was right into my "good earning years" and so I figured I better work real hard then so I don't have to now. I always worked about 3 jobs at a time. For many, many years. My parents would watch my daughter in the evening.

      And I did read a few Suzy Orman books! I can't remember which one but I had an offer to join TD Ameritrade and as a female if I deposited 50 dollars a month each month for one year - they gave me a 100 bucks! Ha! I ended up using my years worth of savings to buy some stocks when the market plunged - I made a nice little chunck of change.

      So while I absolutely hated working SO much...I'm only 45 and I don't have to any more!!! Yay!

      Great hub...I think I am right on track with everything you've said! And so now, I just write hubs for extra residual income! Cha Ching!

    • josh3418 profile image

      Joshua Zerbini 5 years ago from Pennsylvania


      These are some very informative tips! Excellent job and I love the layout and style of this hub! Great work here for sure Vicki!

    • Thundermama profile image

      Catherine Taylor 5 years ago from Canada

      Great hub! Having a plan helps and you are so right about considering a part-time job for your later years. Long gone are the days that any of us can rely on a nice company pension. You're off to a great start your part-time writing career.


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