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Understanding The Phases Of Retirement Planning

Understanding The Phases Of Retirement Planning

May 17, 2021

Your retirement should be some of the happiest, most relaxing years of your life. But it takes decades of saving and strategic decision-making to build the wealth you need for those golden years to truly be golden. Unfortunately, 67% of Americans do not have a comprehensive retirement plan, (1) yet 45% fear they’ll outlive their savings. (2) These individuals may struggle to achieve the blissful retirement most Americans dream of.

If you’re concerned about your own retirement, comprehensive retirement planning may alleviate some of the stress you feel. Retirement planning clarifies how much you need to save, helps you create strategies to work toward that goal, and reveals how likely you are to achieve your retirement vision. In this article, we walk you through the different phases of retirement planning to help you prepare for this comprehensive process.

1. Understand Your Situation

The first step to building a retirement plan is to assess your current financial situation. To get started, you will want to have a full understanding of the following:

  • Your current monthly/annual income
  • Your currently monthly/annual expenses
  • The amount of money you already have saved for retirement
  • Your current savings rate
  • Your current investment allocations and rates of return

Knowing the answers to each of these components provides a baseline for how much you’ll have saved by the time you want to retire. If the resulting number is less than what you think you need to sustain you (based on our findings from step 2), this is an indication of the need for change.

2. Set Your Goals

Next, you will define your short-term and long-term goals. Short-term goals include upcoming expenses in the near future, such as purchasing your dream home, paying for your children’s college education, or planning an anniversary vacation with your spouse. We build these goals into your retirement plan to balance the savings you need sooner in life with the savings you’re building for your long-term future.

To determine your long-term goals, you’ll describe your vision for retirement. Will you spend most of your time relaxing at home with your grandchildren, or will you be taking exotic trips to see the world? Your vision for retirement helps us understand how much annual income you’ll need to fund that lifestyle. 

This becomes our baseline for the retirement savings goal. From there, we’ll also add in the likelihood of other expenses in retirement, including medical and long-term care costs. Of course, you’ll probably have reduced expenses in retirement as well, such as a mortgage that’s paid off.

3. Create Your Plan

When engaging in retirement planning for the first time, many people realize there’s a gap between how much they’re saving now and how much they’ll need in the future. This is the phase where retirement planning becomes proactive. We decide what you need to keep doing and what you need to change in order to pursue your goal.

Your strategies may include finding ways to generate more income, cutting back on unnecessary expenses, or planning to work a few more years than you anticipated. We will also create a plan for your investment allocations. If you’re still decades from retirement, you can typically afford to invest more heavily in riskier options like stocks. As you move closer, we shift to more conservative allocations in your portfolio. Everyone’s tolerance for risk is different, though, and determining your personal risk tolerance is a key part of developing your personal plan.

4. Take Action

For your plan to be successful, you must begin implementing the strategies you created.. If your investments are currently too conservative (or too aggressive) to provide the returns you need, we may shift your investment strategy to better suit your plan. If you need to cut back on expenses to boost your savings rate, it may be time to revisit your budget. We have seen time and again that the number one determinant in hitting your goals is not how much you make or the return on your investments, but how much you save.

It’s never too late to start retirement planning, but the truth is that the earlier you start, the easier it’s going to be. Every dollar invested today has more potential to grow and earn compound interest, so taking action now rather than later is that much more likely to set you up for success.

5. Follow Up Regularly

It’s important to review your retirement plan at least annually, and perhaps more often the closer you get to retirement. Following up regularly allows you to track your progress and make changes to your spending habits, savings rates, or investment allocations as needed. Retirement planning is an ongoing and flexible process that can—and should—adjust to changing life circumstances. Plus, we all know that life happens. Big personal changes can require big changes to your plan.

Create Your Retirement Plan With A Trusted Professional

The good news is that you don’t have to do this alone. A professional financial advisor can help you walk through these steps and use financial planning tools to weigh the impacts of different strategies, decisions, and scenarios. At Colorado West Investments, we approach retirement planning from a values-based perspective so every decision you make aligns with your life goals. Call 970-249-9882 or email to get started. 

About Michael

Michael Murphy is an associate wealth advisor at Colorado West Investments Inc., a wealth management firm committed to providing exceptional, comprehensive financial services to high-net-worth individuals, business owners, and retirees. Michael is known for building strong relationships with his clients, helping them clarify their goals and values, and partnering with them to design a financial road map that will help them aim to achieve their ideal life. He is passionate about walking his clients through the financial planning process and seeing the confidence and relief on his clients’ faces as a result. Michael has a bachelor’s degree in finance from the University of Northern Colorado and an MBA from the University of Colorado Denver. When he’s not in the office, you can find him outside, likely hiking or mountain biking, or digging into a book. Michael and his wife, Becca, have 6 dogs at home, and Becca runs a dog training and boarding facility. 




The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.


All investing involves risk including loss of principal. No strategy assures success or protects against loss.