Planning for retirement feels relatively straightforward in many ways: Save and invest to build wealth, and you’ll have the recipe for a comfortable, secure, and happy retirement. While that is true, there’s a bit more to it.

Even though saving as much as you can and starting early is the go-to advice for preparing for retirement, it’s not quite as simple as that. There are quite a few nuances to the multistep process of retirement planning. Here’s a quick list of 20 things everyone should know as they get serious about setting retirement goals.

Getting started with your retirement planning

  1. Start planning and saving as early as soon as you can. The power of compounding is real.
  2. Beyond saving just to save, the foundation of successful retirement planning starts with knowing your time horizon: how long you’ll be investing in your retirement accounts before you retire and need to access those funds. The more years you have between right now and retirement, the more risk your portfolio can absorb. As you get closer to retirement, you’ll want to focus your portfolio on income and preserving your capital.
  3. Don’t necessarily set your retirement clock by age 65. While retiring on that date may sound like a great idea, there are a number of financial benefits to working beyond that traditional retirement age, if you’re able.
  4. As you calculate what to save, plan for a long retirement. Both men and women in the United States are living longer, and one of the biggest hazards is outliving your savings for retirement.
  5. Women may need more money in retirement than men due to the gender gap in life expectancy. Women live longer than men do in the United States, but statistically speaking, earn less than men during working years.
  6. Don’t let your spouse handle financial planning entirely. Even if one spouse is primarily responsible, both should understand what retirement accounts exist, know how to contact the couple’s financial advisor, and have knowledge of the retirement investments strategy.
  7. In the unlikely scenario you’re counting on social security benefits to provide you with much-needed income during retirement — don’t.

Investment account basics

  1. When you’re of working age and have access to a company-sponsored retirement plan, such as a 401(k), this is one of the best ways to save, especially with company matching.
  2. If you don’t have access to a company-sponsored retirement plan, investing in an IRA also allows you to either get a current tax deduction on contributions (such as a traditional IRA), or tax-deferred growth.
  3. With a Roth IRA, you won’t receive an upfront tax deduction for contributions in a given year, but your withdrawals in retirement will be tax free, so long as you meet age and time requirements.
  4. In any given year, maximize your tax-deferred earnings by making your retirement plan contributions as early in the year as possible.
  5. At age 50 and beyond, make sure to take advantage of catch-up contributions that allow you to contribute additional amounts into your retirement plan each year.

Planning for spending in retirement

  1. It used to be that people anticipated needing somewhere in the neighborhood of 70% to 80% of their pre-retirement income to live comfortably in retirement. However, financial advisors say the ratio should actually be closer to somewhere between 100% and 126%, due to longer life expectancies, healthcare needs in retirement, and increasing costs of living.
  2. Know your withdrawal rate — the estimated percentage of savings you can withdraw from your retirement accounts each year without running out of money. A sustainable rate is thought to be 3% to 5% of your savings for the first year, then adjusting that amount every year thereafter for inflation.
  3. Speaking of inflation: Don’t forget to include it in your planning. Inflation reduces your purchasing power and the rising costs of goods and services eats up your savings faster.
  4. Beyond simply spending on daily living expenses, you may want to spend on a move to another location, a child’s education or wedding, or other large one-time expenses. If you can anticipate these things, you should account for them in your spending estimates.
  5. Include healthcare spending in your estimates. Medical expenses are rising as life expectancies rise.

Understanding tax rules

  1. If you have a traditional IRA, you must start withdrawing funds (called “required minimum distributions,” or “RMDs”) from that account at age 72.
  2. When looking at how much returns you stand to gain from your retirement accounts, you’ll need to calculate your after-tax real rate of return (which is the actual financial benefit of an investment, once inflation and taxes are accounted for). Tax-advantaged investments, including Roth IRAs and municipal bonds, have less discrepancy between your gross returns and your after-tax real rate of return.
  3. If you withdraw from a traditional IRA or 401(k) plan, you’ll be required to pay income taxes. Same goes for investment income on dividends, capital gains, and interest. You may also have to pay taxes on social security benefits, if your income exceeds a certain amount.

Retirement financial planning can be overwhelming, even if you’re already smart about money matters, but you don’t have to do it alone. Get expert, personalized help creating a comprehensive  plan that will assist you in achieving a secure retirement. Contact Ironwood Wealth Management today.