Planning your retirement comes down to three things: saving consistently in the right accounts, knowing when to claim your benefits, and building an income strategy that lasts 30 years or more. The specifics vary depending on your age and income, but the core framework applies to nearly everyone. Here’s how to build a plan that actually works.
Start With How Much You’ll Need
Most financial planners suggest replacing 70% to 80% of your pre-retirement income to maintain a similar lifestyle. If you earn $80,000 a year, that means generating roughly $56,000 to $64,000 annually in retirement from all sources combined: Social Security, retirement accounts, pensions, and any other savings.
To figure out your personal number, add up your expected monthly expenses in retirement, including housing, food, transportation, insurance premiums, and discretionary spending. Then multiply by 12 to get your annual need. Subtract your expected Social Security benefit (you can check your estimate at ssa.gov) and any pension income. The gap is what your savings need to cover.
A common benchmark for that savings target: multiply your annual spending gap by 25. If you need $30,000 a year from your portfolio, you’d aim for roughly $750,000 in invested assets by the time you retire. That figure is rooted in withdrawal rate research, which we’ll cover below.
Use Tax-Advantaged Accounts First
The most powerful tool in retirement planning is contributing to accounts that reduce your tax bill now or in the future. For 2026, here are the limits that matter:
- 401(k), 403(b), and similar workplace plans: You can contribute up to $24,500 per year. If you’re 50 or older, you can add an extra $8,000 in catch-up contributions, bringing your total to $32,500. Workers aged 60 through 63 get an even higher catch-up limit of $11,250, for a total of $35,750.
- Traditional and Roth IRAs: The annual limit is $7,500. If you’re 50 or older, you can add another $1,100, for a total of $8,600.
- SIMPLE plans: The base limit is $17,000, with a $4,000 catch-up for those 50 and older.
If your employer offers a 401(k) match, contribute at least enough to capture the full match before directing money elsewhere. That match is an immediate 50% or 100% return on your contribution, depending on the formula, and no other investment can guarantee that.
Traditional vs. Roth Contributions
Traditional 401(k) and IRA contributions reduce your taxable income now, but you’ll pay income tax on every dollar you withdraw in retirement. Roth contributions don’t give you a tax break today, but withdrawals in retirement are completely tax-free. The choice depends largely on whether you expect your tax rate to be higher or lower in retirement than it is now.
Roth IRA contributions have income limits. For 2026, single filers begin losing eligibility at $153,000 of modified adjusted gross income and are fully phased out at $168,000. Married couples filing jointly phase out between $242,000 and $252,000. If you earn too much for a direct Roth IRA contribution, Roth 401(k) contributions through your employer have no income cap.
Traditional IRA deductions also have phase-out ranges if you or your spouse are covered by a workplace plan. For single filers with workplace coverage, the deduction phases out between $81,000 and $91,000 in 2026. For married couples filing jointly, it phases out between $129,000 and $149,000 when the contributing spouse has workplace coverage.
Key Age Milestones to Know
Retirement planning is full of age-triggered rules that affect your taxes, benefits, and required actions. Missing one can cost you thousands.
- Age 50: Catch-up contributions become available for 401(k)s, IRAs, and other retirement accounts, letting you accelerate your savings in the final stretch.
- Age 59½: You can withdraw from 401(k)s and IRAs without the 10% early withdrawal penalty. The money is still taxed as ordinary income if it’s in a traditional account, but the penalty disappears.
- Age 62: The earliest you can claim Social Security retirement benefits, though doing so permanently reduces your monthly check.
- Age 65: You become eligible for Medicare. Sign up during the enrollment window that starts three months before your 65th birthday. Missing it can result in late-enrollment penalties that increase your premiums permanently.
- Full retirement age (66 to 67, depending on birth year): You receive 100% of your earned Social Security benefit. For anyone born in 1960 or later, full retirement age is 67.
- Age 70: Social Security benefits max out. There’s no advantage to delaying past this age.
- Age 72: Required minimum distributions (RMDs) kick in for most traditional retirement accounts. If you don’t withdraw at least the required amount, the IRS imposes steep penalties.
When to Claim Social Security
This is one of the highest-stakes decisions in retirement planning because it’s largely irreversible and affects your income for the rest of your life.
If your full retirement age is 67 and you claim at 62, your monthly benefit drops to 70% of what you’d receive at 67. That reduction is permanent. On a $2,000 full-retirement benefit, claiming at 62 means getting $1,400 per month instead.
Delaying past your full retirement age earns you delayed retirement credits, which increase your benefit for every month you wait, up to age 70. The increase works out to roughly 8% per year. So if your benefit at 67 is $2,000, waiting until 70 could push it to about $2,480 per month.
The right age to claim depends on your health, other income sources, and whether you have a spouse who might rely on survivor benefits. If you’re in good health and have other savings to bridge the gap, delaying generally puts more money in your pocket over a long retirement. If you need the income immediately or have health concerns that suggest a shorter retirement, claiming earlier can make sense.
Build a Withdrawal Strategy That Lasts
Once you’ve saved, you need a plan for spending it down without running out. The most well-known approach is the “4% rule,” which says you can withdraw 4% of your portfolio in the first year of retirement, then adjust that dollar amount for inflation each year, and have a high probability of not running out over 30 years.
Updated research from Morningstar suggests a slightly more conservative starting rate of 3.9% for new retirees, assuming a portfolio with 30% to 50% in stocks and a 90% probability of having money left after 30 years. On a $750,000 portfolio, that translates to about $29,250 in year-one withdrawals.
Rigid withdrawal rates have a downside: they don’t adapt to market conditions. If your portfolio drops 25% in a bear market and you keep pulling the same dollar amount, you’re selling a larger share of your shrinking portfolio. Flexible strategies solve this problem. Two common approaches:
- Constant percentage method: Withdraw a fixed percentage of your current portfolio balance each year. Your income fluctuates with the market, but you never overdraw during downturns.
- Guardrails method: Set upper and lower spending boundaries. When your portfolio grows beyond a certain threshold, you give yourself a raise. When it drops below another threshold, you cut spending temporarily.
Both flexible approaches support higher initial withdrawal rates because they naturally reduce spending when markets struggle. Pairing either strategy with a reliable income floor from Social Security or an annuity makes the system even more resilient. Enlarging your guaranteed income, such as by delaying Social Security, pairs especially well with flexible portfolio withdrawals, though it reduces the amount available to leave to heirs.
Plan for Healthcare Costs
Healthcare is the expense most retirees underestimate. Fidelity’s 2025 estimate puts total out-of-pocket healthcare costs for an average retired couple at $345,000 or more over the course of retirement, even with Medicare coverage. Medicare covers roughly two-thirds of total healthcare expenses, leaving the rest to you through premiums, copays, deductibles, and services Medicare doesn’t cover, like dental, vision, and most long-term care.
If you retire before 65, you’ll need to bridge the gap before Medicare eligibility. Options include COBRA coverage from a former employer (typically limited to 18 months), a spouse’s plan, or purchasing insurance through the health insurance marketplace.
Long-term care is a separate and significant risk. Medicare doesn’t cover extended nursing home stays or most in-home care. A private room in a nursing facility can cost six figures per year. Long-term care insurance, hybrid life insurance policies with long-term care riders, and dedicated savings earmarked for this purpose are all ways to address this risk, and they’re less expensive the earlier you start.
Put Your Plan on Paper
A retirement plan isn’t useful if it lives only in your head. Write down your target retirement age, your estimated annual expenses, your expected income sources, and the gap your savings need to fill. Then set specific contribution targets for each account you use.
Review the plan at least once a year. Update it when your income changes, when you hit a milestone age, or when life throws a curveball like a job loss, inheritance, or health event. The numbers will shift over time, but having a written framework keeps you from guessing.
If you’re decades away from retirement, the most important thing is simply to start. A 25-year-old contributing $300 a month to a diversified portfolio averaging 7% annual returns would have over $700,000 by age 65. A 40-year-old starting the same contributions would have roughly $230,000. Time in the market matters more than the size of any single contribution, so starting early, even with small amounts, is the most reliable advantage you can give yourself.