How to Retire: A Three-Step Plan for Getting Started

How to Retire: A Three Step Plan for Getting StartedHow do I retire?

This may seem like a simple question but anyone who has ever gone through the process will tell you that there’s no simple answer. Figuring out how to retire well takes planning, introspection and proper timing. For many people it’s a multi-year, if not multi-decade, process.

Our first piece advice is to talk to as many current retirees as possible. Expert opinions can be useful, but nothing will ever beat hearing about the real experiences of real people. If you can, find someone you trust and pepper them with questions. What did they wish they’d known about retirement? How much money are they actually spending? What are they spending it on? Do they still work at all? If not, do they miss working? What’s been the biggest surprise? The biggest challenge? The biggest reward? What’s their number one piece of advice?

If you don’t know any current retirees, fear not. Go online and read what people are saying on message boards. This page on the City Data website can be a good starting point.

Once you’ve done that, you can begin planning your own retirement. Here are three steps for getting started:

Step 1: Determine What’s Important to You

Before you do anything else, sit down and make two lists:

  • What are the 10 most important things that bring you pleasure right now?

  • What are the 10 things you aren’t doing now that you wish you were?

As you go through the retirement planning process, come back to the lists and make sure your decisions take these items into account.

For example: If you currently love walking to restaurants then perhaps buying a cabin on an isolated mountain isn’t for you. Or, if you wish you were traveling more, then make sure to build lots of airfare and hotels into your retirement budget.

Also, do some thinking on your overall life goals and dreams. This sounds simpler than it actually is, but there are many resources out there that can help. In particular, the What Color Is Your Parachute? for Retirement book (here’s the link) has some extremely useful checklists and exercises.

Step 2: Figure Out Your Finances

This is often the most difficult part of retiring. Determining how much money you’ll need and how long it will last can be daunting. Most investment firms and banks have pretty decent tools, so that can be a good place to start. Here are a few additional ones as well:

Retirement Planners/Calculators: CNN Money | AARP | Smart Money

Retirement Budgets: Microsoft Office Templates | Consumer Reports

These websites can be useful, but again we encourage you to talk to a real person. Many employers and community organizations offer free or discounted access to a financial planner. Take advantage if you can. Often they’ll be able to talk you through the intricacies of your 401(k) or IRA as well as help you with things like portfolio diversification and estate planning. And, as with anything this important, make sure you get a second or third opinion before making any major decisions.

Step 3: Get Smart About the Government

Do you understand what Medicare Part D is? Have thought about how the Required Minimum Distribution (RMD) will affect your budgeting?

If you answered no to either of those questions, don’t worry — you’re not alone. Any current retiree will tell you that one of the biggest challenges of retirement is sorting through the tangle of government plans, agencies and acronyms.

Understanding every little intricacy of the system is almost impossible, but having a good grasp of the basics can be invaluable. As you start to get closer to retirement spend some time familiarizing yourself with how major programs like Social Security and Medicare work.

This is a long-term project, but the government itself has some pretty useful sites to get you started. In particular take a look at,,, and

Photo by MoneyBlogNewz via Flickr.