12 Steps to Financial Wellness – Step 10: Plan for Retirement

Welcome back to our 12 Steps to Financial Wellness series! Over the last few modules, you’ve successfully learned how to carve out guilt-free indulgence room in your budget and build an excellent credit score.

Now, it’s time to look a bit further down the road. Welcome to Step 10: Plan for Retirement.

Here is a fundamental truth: it is never too early—or too late—to start planning for your retirement. This is true no matter your current stage of life! Like all premier long-term savings goals, retirement thrives on runway. The more time you grant your wealth to compound and grow quietly in the background, the larger the nest egg you’ll be rewarded with when it’s finally time to cash in on your funds.

Let’s break down how to map out your retirement launchpad from scratch:

Finding Your Target Retirement Number

Before you can start intentionally squirreling away cash for the future, you need a baseline destination. Financial planners frequently rely on the Rule of 25 to estimate retirement targets.

First, estimate your expected annual living expenses in retirement (such as housing, healthcare, and travel). Next, multiply that annual number by 25.

• The Math in Action: If you determine you need $50,000 a year to live comfortably and independently, multiplying $50,000 by 25 gives you your target baseline: $1.25 million.

This calculation aligns with the industry-standard “4% safe withdrawal rule,” meaning you can comfortably live off your portfolio’s natural growth over time without depleting your core principal.

Selecting Your Retirement Vehicles

Next, you need to choose the tax-advantaged buckets where your savings will live. Here is an updated comparison of the three most common retirement vehicles based on current 2026 IRS regulations:

1. Workplace 401(k) Plans

Sponsored directly by your employer, a 401(k) automatically deducts contributions straight from your regular paychecks and places them into investment accounts. The premier rule of a 401(k) is simple: Always contribute enough to capture your full employer match. If your company offers a dollar-for-dollar match up to 6% of your salary, that is literally free money compounding tax-deferred on your behalf.

2. Traditional vs. Roth Individual Retirement Accounts (IRAs)

If you don’t have access to a workplace 401(k), or if you want to save additional cash outside of your job, you can establish an Individual Retirement Account (IRA) independently.

• Traditional IRA: Your contributions may be tax-deductible today depending on your income level, allowing your capital to grow entirely tax-deferred. You will pay standard income tax on the funds when you make withdrawals in retirement.
• Roth IRA: You contribute using post-tax dollars, meaning you don’t get a tax deduction today. However, your money grows completely tax-free, and all qualified withdrawals you make in retirement are 100% tax-exempt.

Presented in the table below is a brief summary of the pros and cons of each retirement vehicle for easy comparison.

Set a “Target Date Fund” to Automate the Risk

Once you select your tax accounts, you have to decide how that money is actually invested. If the thought of choosing individual stocks or analyzing federal bonds gives you anxiety, look for a Target Date Fund inside your portfolio options.

These funds are named after the approximate calendar year you plan to retire (for example, a Retirement 2055 Fund or Retirement 2060 Fund). You simply pick the date closest to your estimated retirement target, and the fund manages the rest.

Target date funds are incredibly clever because they automatically diversify your money across multiple asset classes—like large-company stocks, international indices, and real estate. Then, as you get older and draw closer to your target retirement year, the fund automatically realigns itself to become more conservative—owning fewer volatile stocks and more stable bonds to protect your wealth right as you reach the finish line.

Secure your future self by taking a few minutes to evaluate your workplace benefits, review your savings allocations, and put your long-term wealth on autopilot today!

Next Step on Your Journey: Ready to keep your momentum going? Move forward now to the next milestone in our series: Step 11: Investing.