The quality of your retirement will depend largely on how much you save and how well you invest your retirement savings. It is important that you consider the ways that planning for retirement will affect your investment plan. Saving for retirement will likely be one of the largest parts of your plan. The better you plan for retirement, the more likely it is that you will be able to achieve your retirement goals.

You have the responsibility to take care of yourself and your family. No one will assume that responsibility for you. Building an adequate retirement fund will ensure that you will be able to fulfill this responsibility even after you stop working. By planning for the future, you will ensure a better future.

Before you plan for retirement, you should know your budget, your personal goals and your needs. You must also ask yourself several questions: What kind of retirement are you planning for? How much money will you need each year?

You should be aware of which investment vehicles are available to you; these investment vehicles may include Social Security, employer-sponsored plans, small-business plans, and individual plans. Once you know which investment vehicles are available to you, you must decide which financial assets should be included in these investment vehicles to most effectively help you achieve your goals. As you make your retirement plan, select the investment vehicles and financial assets that will give you the highest after-tax returns and therefore allow you to reach your personal and retirement goals.

There are seven steps of successful retirement planning:

1. Set retirement goals and estimate how much money you will need at retirement.
2. Estimate how much income you will have annually at retirement based on your current investments.
3. Estimate your total retirement needs after accounting for inflation.
4. Determine how much you have already saved for retirement.
5. Estimate the value of your home.
6. Determine how much money you still need to save.
7. Determine your optimal investment vehicles and begin saving.

Before deciding on the manner in which you want to receive your retirement payouts, make sure that you understand the tax consequences of your decision. Look at all of your investment payouts and retirement payouts together. Consider the pros and cons of an annuity versus a lump-sum payout. One strategy is to plan your payouts to minimize your taxes.

Retirement planning is not easy, but it is an important and worthwhile objective. When you plan for retirement, you are following President Benson’s counsel when he said the following: “Plan your financial future early; then follow the plan” (“To the Elderly in the Church,” Ensign, Nov. 1989, 4).

On March 25, 2005, an article by Jonathan Clements entitled “Ugly Math: How Soaring Housing Costs Are Jeopardizing Retirement Savings” (p. D1) appeared in the Wall Street Journal. This article proposes an interesting idea. Using guidelines put together by Charles Farrell, Clements proposes that individuals and families can determine how close they are to achieving their retirement goals by looking at three specific factors: the amount saved in their taxable and retirement vehicles, the amount of their overall debt, and the amount of their annual earnings. By looking at the ratios of savings-to-income and debt-to-income, you can see whether or not you are on track to achieve your retirement goals.

Now that you have completed this section, ask yourself the following questions:

1. Can you describe how retirement planning fits into your personal financial plan?
2. Can you apply the principles of successful retirement planning?
3. Can you explain the steps of successful retirement planning?
4. Can you describe payout options available at retirement?
5. Can you understand one method of monitoring your retirement planning progress?