Retirement Planning 101
Learn the fundamentals of retirement planning and how to use our calculators effectively.
Getting Started
Retirement planning doesn't have to be complicated. Start by understanding these key concepts:
Your money grows exponentially over time
A safe withdrawal rate in retirement
401k, IRA, and Roth accounts
Balancing stocks and bonds
Key Retirement Concepts
Compound Interest
The most powerful force in retirement savings. When you invest money, you earn returns. Then those returns earn returns. Over decades, this creates exponential growth.
The 4% Rule
A guideline suggesting you can safely withdraw 4% of your retirement savings each year without running out of money. Based on historical market data over 30-year periods.
401k & Employer Match
Many employers match your 401k contributions (e.g., 50% up to 6% of salary). This is free money! Always contribute enough to capture the full match.
Roth vs Traditional
Traditional IRA/401k: Tax deduction now, pay taxes in retirement.
Roth IRA/401k: No tax deduction now, tax-free withdrawals in retirement.
Retirement Milestones
1x Your Salary Saved
Fidelity recommends having your annual salary saved by age 30
3x Your Salary Saved
Triple your annual income in retirement accounts
6x Your Salary Saved
Six times your annual income
8x Your Salary Saved
Eight times your annual income
10x Your Salary Saved
Ten times your annual income for a comfortable retirement
IRA Conversions & Tax Planning
Roth Conversion Basics
Converting Traditional IRA funds to a Roth IRA means paying taxes now for tax-free growth later. This can be strategic when:
- You're in a lower tax bracket
- You expect higher taxes in retirement
- You want to reduce future RMDs
- You're leaving a tax-free inheritance
Backdoor Roth Strategy
High earners who exceed Roth IRA income limits can contribute to a Traditional IRA (non-deductible) and immediately convert to Roth. This legal workaround allows anyone to benefit from Roth IRA growth.
Required Minimum Distributions (RMDs)
Understanding RMDs
Starting at age 73, the IRS requires minimum withdrawals from Traditional IRAs and 401(k)s annually. Penalty: 25% of the amount not withdrawn.
- Roth IRAs: No RMDs during owner's lifetime
- Roth 401(k)s: RMDs required unless rolled to Roth IRA
- Still working: May delay 401(k) RMDs
RMD Planning Strategies
Consider Roth conversions before RMDs begin. Donate RMDs directly to charity (Qualified Charitable Distribution) to avoid taxable income.
Healthcare in Retirement
Medicare Basics (Age 65+)
- Part A: Hospital insurance (usually premium-free)
- Part B: Medical insurance (~$174/month)
- Part D: Prescription drug coverage
- Medigap: Supplemental insurance (~$150-300/month)
Before Medicare: Ages 62-65
Options include COBRA, ACA marketplace plans, or spouse's coverage. Budget $500-1,500/month per person.
Long-Term Care Planning
Medicare doesn't cover long-term care. Average costs: $60,000-100,000/year. Consider LTC insurance in your 50s or self-insuring.
Estate Planning Basics
Essential Documents
- Will: Asset distribution and guardianship
- Living Trust: Avoids probate, provides privacy
- Power of Attorney: Financial management
- Healthcare Directive: Medical wishes
- Beneficiary Designations: Update regularly
Retirement Account Inheritance
Spousal beneficiaries: Can treat inherited IRA as their own.
Non-spousal: Must withdraw within 10 years (SECURE Act).
Tax tip: Roth IRAs pass tax-free to heirs.
Ready to Plan?
Now that you understand the advanced concepts, use our calculators to create your personalized retirement plan.
Start Planning Your Retirement
Social Security Strategies
When to Claim Social Security
You can claim Social Security as early as age 62, but your benefits are permanently reduced by about 30% if your full retirement age (FRA) is 67. Waiting until 70 increases benefits by 24% compared to claiming at FRA.
Spousal Benefits Strategy
Married couples can coordinate claiming strategies to maximize household benefits. The higher earner delaying to 70 protects the surviving spouse with larger survivor benefits.