Your 5-Step Plan for a Well-Balanced Retirement

Check out Jeremy’s latest podcast on retirement planning by listening on “Apple Podcasts” or “Google Podcasts” or read below for our 5-Step Plan for a Well-Balanced Retirement.

#86 – Oftentimes, people overly fixate on investments while planning their retirement.

But you can’t control the markets, can you? Instead, focus on things you can control, such as your monthly spending, lifetime income, and ongoing tax planning.

If you don’t know where to begin, you’re not alone. That’s why we have created a simple process to help you achieve your ideal retirement.

In this episode, Jeremy Keil walks you through our 5-step retirement income plan, where each step is designed to help you solve a crucial piece of your retirement puzzle. By focusing on these five steps, you’ll learn how to create a well-balanced retirement plan.

Jeremy discusses:

  • Why a process-driven approach makes retirement planning much easier
  • Key steps you must take before investing your money in the stock market
  • Tips to maximize your retirement income
  • The most often-overlooked area of retirement planning
  • And more

Your 5-Step Plan for a Well-Balanced Retirement

1) Estimate Your Spending

The first step of retirement planning is figuring out how much money you’ll need, and when. Simply saying, “I want to retire with a million dollars” is not enough.

Your goal should be to get a monthly estimate of your retirement spending.

Now, it’s not always a matter of how much money you need. Sometimes, it’s about how much money you can afford.

If you don’t know how to get a monthly spending estimate, take a look at your current take-home pay. If it shows up in your checking account, you probably spend it! That’s a great starting point for how much you’ll need in retirement.

Keep in mind that you’ll also need to consider your taxes and healthcare costs, as those are likely deducted directly from your paychecks.

Once you know your take-home pay, taxes, and healthcare costs, you have your estimate of your monthly spending in retirement.

2) Maximize Your Lifetime Income

Just because you stop working doesn’t mean you won’t make any money in retirement.

Social Security, pension, interest income, dividends…there can be multiple sources of income for a retiree. Your spouse probably has a similar situation.

By taking them at the right age, you can maximize your Social Security and pension benefits. (Note: The optimal age to take these benefits is not necessarily the same as when you retire. For instance, you can retire at 55 and take your pension/Social Security at 65.)

You should retire when you want to, and can afford to. You should take your pension and Social Security when it gives you the best chance for the most lifetime income.

When it comes to pension, all plans might not be the same. Based on how your pension plan is set up, you might have different options. But generally speaking, there are two primary decisions to make:

  1. The timing of your pension
  2. Lump sum vs. monthly payout

Remember, your pension and Social Security decisions can make or break you tens of thousands of dollars, if not hundreds of thousands of dollars!

For more information about Social Security decisions, check out: 5 Steps for Making Smart Social Security Decisions.

If you want to learn more about pension planning, check out: 4 Ways to Maximize Your Pension in the Wisconsin Retirement System. (while it deals with one system the thought process is the same no matter where you get your pension from)

3) Money in the Bank

Markets fluctuate all the time. You can never rely on them to pay your short-term obligations.

That’s where your bank money comes into play. Although it provides lower interest rates, it is often highly liquid and contains relatively lower risk than equity markets.

The big question is: How much money should you have set aside in the bank as your emergency fund?

When you were working it was probably three to six months of- your salary. In retirement, it’s not your income amount, it’s the amount you’re taking out of your investments. And since you’re unlikely to go back to work, think in terms of years, not months.

For example, let’s assume that you might need $10,000 per month and you make $6,000 every month through pension and Social Security. In this case, you’ll only need to take the difference ($4,000) out of your investments.

Once you have your monthly estimate, ask yourself: “How many years’ worth of money do I want to set aside?”

Take this example of $4000 withdrawals per month, and if you decide you’d like 3 years’ worth of money set aside then $4000/month * 12 months * 3 years = $144k you should have set aside in your short-term bucket of funds.

It’s important to have your short-term funds figured out before committing to long-term investments.

4) Long-Term Investments

Finally, the step that a lot of people find to be the “fun stuff.”

This is where you look at investment opportunities to grow your money in the long run.

Here, you can’t control the markets. But you do have control over how you diversify, how much risk you take, and how often you rebalance your portfolio.

You might be wondering why investments are so far down in our five-step process. This is because your spending, income, and short-term fund requirements significantly affect your investment strategy.

For instance, if you choose to wait on Social Security and pension, you’ll likely need to withdraw more from investments upfront. Also, if you want more money set aside in your emergency fund, you might have less to invest for the long-term.

5) Legacy Planning

We’re not done yet! There is one final step to complete your retirement puzzle.

Every great retirement plan needs to account for the things that can go wrong. What if you die too soon? What if you live a long life and start to run out of money? What if your healthcare costs suddenly increase?

When you think about it, it’s possible to plan for these risks to some extent.

Having an estate plan in place, having your beneficiaries and documents up-to-date, planning for survivorship benefits — these are all steps you can take to plan for the possibility of dying too soon.

Insurance can be a great tool to plan for an unexpected spike in healthcare costs.

If you don’t want to run out of money, you can update your retirement plan regularly through dynamic retirement planning.


Do you want to learn more about retirement planning? Check out the resources below!

If you have any questions, feel free to contact us and we’ll be happy to help you plan for your ideal retirement!


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