Why Retirement Planning Matters

When you start thinking early about retirement planning, it’s exciting to dream about life after your career, with more time to relax, travel, and spend with loved ones.

Getting retirement ready isn’t just about quitting your job – it’s about gaining financial freedom and peace of mind as you turn the corner into your golden years. However, if you don’t build retirement funds well in advance, you might suffer from financial stress, reduced quality of life, and the risk of outliving your savings.

In this Tower Loan guide, we’ll walk you through the steps to retirement to help you approach financial planning for retirement with confidence. 

1. Picture Your Ideal Retirement

Our very first of the 10 steps to retirement is to start with a vision and think about what you want your retirement years to look like. It’s helpful to tackle the essential retirement steps by age, and this step is one to start thinking about already in your 20s and 30s.

When you are preparing for retirement, consider whether you want to travel, pursue hobbies, move to a new place, volunteer or pick up a part-time job. As you begin thinking about retirement planning, factor in your health expectations, family support, and housing preferences.

2. Calculate How Much You’ll Need

As you start building up retirement funds, you’ll need to understand the real costs of retirement expenses and estimate how much you’ll need to get by and be comfortable.

Use a retirement calculator or consult a financial advisor to estimate these expenses. A good rule of thumb for retirement planning is to replace 70% to 90% of your pre-retirement income annually.

Although you will need a large portion of your retirement funds for daily living, you should devote between 10% and 15% of your current salary toward your retirement. Whether it’s in a 401(k) or a mutual fund, the sooner you start, the faster you can achieve your retirement goal.

Remember that retirement financial planning requires you to factor in rising healthcare costs, longer average lifespans, and inflation.

3. Track Your Spending and Cut Debt

Another important step in how to start the retirement process is to track your current spending and look for areas where you can cut back.

To start, track three to six months of your spending, and find ways to eliminate high-interest debts, like credit cards that you don’t pay off each month. Pre-retirement planning may involve refinancing your mortgage or downsizing your home to start saving money now where you can.

Some people find it helpful to consolidate high-interest debt by taking out a personal loan with a better rate and a fixed repayment process and terms.

4. Choose Accounts with Tax-Advantaged Savings

At this point in retirement preparation, it’s time to choose the best retirement accounts to maximize your tax savings.

Consider prioritizing your 401(k) and other retirement accounts in which your employer matches your contributions. If your employer doesn’t offer a workplace retirement plan, you can open a Roth or traditional IRA to save for retirement. Another suggestion is to open a health savings account (HSA) to cover future medical costs as part of your financial planning for retirement.

The earlier you start saving in an account, the more it will grow due to compounding interest. A helpful tip for starting the retirement process is to buy into a mutual fund, which is a portfolio of several stocks that you hire a firm to oversee so you don’t have to keep up with consistent market fluctuations.

5. Take Advantage of Age-Based Savings Perks

Based on your age, you may be able to maximize your contributions and catch up from past years of not saving as much as you would have liked to.

Understand the annual contribution limits for your accounts and maximize them if possible. If you’re over age 50, you may be able to make catch-up contributions to your 401(k)s and IRAs. As of 2025, people between the ages of 60 and 63 can contribute even more to their 401(k)s.

Although it may be tempting to cash out a retirement account when you hit tough financial times or you notice market volatility, avoid doing so at all costs. The worst thing you can do is pull your money out of a retirement account and lose all the hard work you’ve already put into retirement planning. The best approach is to leave the money in until you retire to maximize your initial investment.

6. Plan Ahead for Future Medical Expenses

A critical step in how to prepare for retirement is to anticipate healthcare costs that you may encounter in the future. Learn about what Medicare does and does not cover because many older adults need supplemental health insurance to cover costs after Medicare pays its portion.

You can build a tax-advantaged HSA to help with future medical expenses and look into long-term care insurance. This type of insurance helps pay for nursing homes, assisted living facilities, and home care, offering peace of mind that you will be cared for if you cannot remain in your home without help.

7. Adjust Your Investments As You Age

Preparing for retirement is a fluid, ongoing process that changes as you age. In your 20s, 30s, and 40s, you can take more risks with your investments in hopes of higher returns over time. For example, those in their early-career stage may invest aggressively in stocks poised for growth.

However, as you age, you’ll likely want to shift your portfolio toward stability and more conservative assets, like bonds and CDs. Your retirement planning strategy should also include income-producing investments like annuities and dividends during your retirement.

8. Strategically Delay Social Security Benefits

Financial planning and retirement planning experts often recommend delaying Social Security benefits and bridging strategies to make the delay financially feasible.

Your monthly benefits will increase significantly if you want until age 70 to receive Social Security benefits. Even if you retire at age 66 or 67, it may be worth waiting until you turn 70 to cash in on these benefits for larger payments when you need them most.

9. Explore Ways to Keep Earning During Retirement

Although many retirees quit their full-time careers when they reach their 60s, they don’t necessarily stop working entirely.

You can continue adding income to your retirement funds by finding part-time work that’s more of a “fun job” instead of a high-pressure career or one that involves physically strenuous tasks. Consider turning one of your favorite hobbies into a side gig to make money during retirement. Alternatively, use your professional expertise to become a consultant and guide younger industry workers in your chosen field.

You can contribute to your retirement savings plan by renting out real estate properties that you own. Another idea is to pursue passive income streams, such as teaching online courses, selling your photography online, or starting a YouTube channel.

Some retirees get reverse mortgages on their homes as part of their steps to retirement. However, this approach should only be used as a last resort because of the potentially high upfront costs and fees, the risk of foreclosure, and the future financial impacts on your heirs.

10. Consult a Professional Financial Advisor

If you feel overwhelmed or confused by pre-retirement planning, you’re certainly not alone. Fortunately, certified financial planners are available to help you customize your retirement savings plan and optimize your retirement tax strategies.

A trusted advisor can guide you toward beneficial retirement accounts, hold you accountable to your saving goals, and help you avoid emotional decisions that will not benefit your future financial situation. Reviewing your retirement planning strategy at least once a year or after major life events is a smart idea because life often changes alters we must live, save, and plan for the future.

Tower Loan Can Help During Retirement Planning

Even with solid retirement preparation in progress, unexpected emergencies can throw even the most financially responsible people off their game. When an urgent situation falls outside your budget, it can be challenging to concentrate on how to plan for retirement until you can resolve those stressful circumstances.

Thankfully, you can access a safe and reliable method of obtaining money now without derailing your retirement savings plan.

Tower Loan makes it easy to apply for a versatile personal loan in 10 minutes or less through our online loan process. If approved, you’ll pay your loan back in affordable monthly installments and be right back to getting retirement ready once you’ve handled your emergency.

Apply online today, or visit a local branch near you to learn more or get help completing your application.