The 10 Commandments of Retirement Planning (2024)

Retirement planning starts with something much more basic than managing an investment portfolio. It starts with thinking about where you are now and where you want to be when you retire, and then charting a course to reach that destination. Your plans may evolve as your life progresses, but wherever you are in your life's journey, having a goal will help you determine how to prepare yourself financially.

Here then are the 10 commandments of retirement planning:

1. Know what you have
Do you have a retirement plan at work? Find out how it works and what benefits it provides if you aren't sure. You can estimate your Social Security benefits by using an online calculator. Knowing what you have and what you can expect to receive will help you decide how much you need to set aside in an IRA or other savings or investment account.

2. Budget
Build your retirement savings into your budget. Pay yourself first. Calculate how much you need to save each month. Retirement planning may require you to make some adjustments such as cutting back on some expenses or generating additional income.

3. Start early (or start now)
Time is on your side when it comes to saving, thanks to compound interest and the general trend of the stock market to go up over longer periods of time. But it's never too late to start. If you start saving for retirement later in life, you may need to adjust your priorities to save more.

4. Be consistent
This can be tough during difficult financial times when you're worried about how to pay your bills. But you need to stick to your plan as closely as possible. You may be able to set aside a little more when times are reasonably good to compensate for the lean times.

5. Get the match
If your employer matches your 401(k) contribution, be sure to invest at least enough to get the match. Otherwise you're leaving free money on the table.

6. Diversify
Spread your wealth around. If you invest in stocks, make sure you divide your investments among different companies in different industries. If you invest in mutual funds, consider different types of funds with different investment goals. Keep some of your money in safer investments.

7. Adjust your portfolio according to your age
As you approach retirement age, a larger share of your portfolio should be in more secure investments such as CDs, money market accounts or bonds. When you are younger, you can afford more risk in return for a greater reward by investing a greater portion in equity investments such as stocks or growth funds.

8. Don't touch it
Your retirement savings are for your retirement and shouldn't be used to finance other needs unless you have absolutely no other choice and are facing a true emergency. Taking an early withdrawal from a 401(k) or traditional IRA carries a 10 percent tax penalty, plus tax on the withdrawal.

9. Get help if you need it
You know your own capacity for managing money. If there are certain aspects of retirement planning you don't feel comfortable with, you don't have to go it alone. Do your homework and seek out the right type of help for you.

10. Stay involved
If the financial crisis and recession have taught us anything, it's that there are no guarantees. Keep up to date on news about the economy, the markets, investment options and changes in tax laws that could affect you and your retirement savings, and act proactively.