How to Plan a Retirement Timeline

Prepare by creating a timeline to help keep your retirement planning on track.

by Nell McShane Wulfhart - January 06, 2020

Retirement planning can be challenging, but creating a timeline can help ensure your savings stay on track. Here are some expert tips for helping to ensure your retirement plans are on schedule at every stage.

1. Set an income goal—and know that it could change. For younger workers, it can be difficult to determine how much income will be needed in retirement and how much their income will increase over their lifetime.

A 30-year-old today making, for example, $45,000 per year would need more than $134,000 per year at age 67 to maintain his or her current lifestyle—assuming a hypothetical 3% annual inflation rate. Of course, if that 30-year-old advances during the course of his or career, that would mean more money and a different lifestyle to maintain when retirement rolls around.

That’s why it’s important to set goals early in your retirement planning process and be prepared to revisit them frequently as you get closer to retirement.

2. Plan to increase your savings rate. If you’re 20 years old, a savings goal of 10% of your current salary per year is a good start. By age 30 you should be putting away at least 15% per year. If you have access to a qualified employer-sponsored retirement plan (QRP), such as a 401(k) or 403(b), start there. If your employer offers matching contributions, consider contributing at least as much as the match. This is free money you don’t want to pass up, and it can help you get to the right percentage. At the same time, consider a Roth IRA or, if available, the designated Roth account option in your 401(k) for their potential tax-free distributions.

Your savings rate should increase as you age; at the same time, you should explore additional investment options so you’re getting the most benefit now and when you’re in retirement.

3. Sketch out how long you could be in retirement. When creating a retirement timeline, one of the most difficult factors is estimating how long you can expect to be in retirement. We suggest planning for 20 to 30 years but strongly recommend a contingency plan in case something forces you into an unexpected early retirement, such as health problems, perhaps, or an unforeseen layoff. One way of thinking that can help you get there: Plan to retire at age 55. This will allow you to be prepared for unanticipated events, and any money you make by working past that age will be a bonus.

4. Set the steps to reach your goals. If you’ve gotten a late start on retirement planning, or if you’re rethinking your timeline around a plan to retire at age 55, there are effective actions you can take now to help pursue your goals. Keeping a budget is essential. As part of that budgeting, be sure to look at your discretionary spending. If you’ve been supporting children through college, once they become independent, it might be tempting to reallocate that money to exotic travel or home renovations—but it’s your retirement fund that should get the first deposit. No matter when you start, planning a retirement timeline is effective only if you budget for saving—and stick with that budget.

Nell McShane Wulfhart is a freelance writer based in Montevideo, Uruguay.

Image by iStock

Additional Resources

Answering these five questions can help you determine if you’re ready for retirement.

See how Wells Fargo Advisors can help you plan for retirement.

This information is provided for educational and illustrative purposes only.