Planning for retirement should be approached as a lifelong project. Ideally, you should start early in your working career: the sooner you start saving, the more time your investments have to grow by compounding . But, it is never too late to start planning. Whether you are age 25 or age 60, it will be to your benefit to do some basic retirement planning. The following notes only scratch the surface of what is involved in a comprehensive retirement plan. Use these notes, resources, and links to get started on this important matter.

Financial planning always has to do with quantifying in terms of specific time and specific dollar amounts where you are, where you want to go, and how you propose getting there. For retirement planning, here are the basic steps:

Step A -- Present circumstances: Evaluate and document your present circumstances
Step B -- Goals and assumptions: Set income goals during retirement and assumptions about inflation and investment returns
Step C -- Devise action plan: Determine what actions are required to go from your existing circumstances in step A to the desired goals in step B.
Step D -- Implement action plan: Act, save, invest!
Step E -- Monitor and revise: Periodically review progress and return to step B

1. Personal Budget
2. Personal Net Worth Statement

Click to download the forms shown above to help organize your information. Or, you may want to try Quicken Financial Planner or Microsoft Money. These products are available from Quicken and Microsoft (links below) respectively, and offer a fairly complete system to organize your information.

3. estimate retirement income from Social Security and Pension plan(s)

You will want to collect information on your anticipated retirement income from Social Security, the Pension Plan, and any other pension plans which may apply. Social Security is now sending out annual estimates of your future benefits. You can also click here to get a "quickie" estimate of your Social Security benefit. To get an idea of your benefits under this Pension Plan,email the Plan Office at with a request for an estimate of the benefit you have already earned. You can visit our Pension Walkthrough pages showing how a pension is calculated. With this information, you can estimate your income in retirement from sources other than personal investments and savings.

Step B - Goals and Assumptions presents another difficulty. To set goals realistically, you need to figure:

GOALS:

1. when you want to retire,
2. what your expenses are likely to be (don't forget travel, hobbies, kids, grandkids, medical expenses, and long-term care costs).

Step C - Make a Plan requires a lot of number crunching. In this step you take all the numbers showing where you are, calculate all the savings/investment buildup until retirement, and calculate all the spending during retirement for the length of your assumed lifespan.

It is possible to work out rough estimates with pencil and paper. If you are so inclined, you might make up an Excel spreadsheet. Most people find it is easier to use one of the software packages mentioned above. Or they use an online retirement planner such as is available form Schwab, Vanguard, Fidelity, (links can be found below) and many other financial websites. But beware, the planning software on these sites will often produce widely different results. This is because they ask you to input your information and assumptions in differing ways; each planning software also has its own assumptions which are not always apparent to the user. You may also want to get the help of a financial planning professional, such as a Certified Financial Planner (CFP). Fitting together the probable outcomes based on all this input is an area to which you will want to dedicate some considerable attention.

A simplified "ballpark" estimator for this calculation is provided by the American Savings Education Council. Click here to perform the calculation online, or here to download a printable form in PDF format.

Your calculations should result in a number -- how much to save each month, and an asset allocation -- what investments to put your savings into. That is your action plan.

Step D - Save and Invest is easy!

Start (or continue) saving.
Reallocate your investments and purchase new investments based on the asset allocation you have determined.

Step E - Monitor and Revise

Review your progress towards your goals.
Reevaluate your current circumstances as applicable.
See how well the chosen assumptions fit real life results.
Consider rebalancing you investments to maintain your asset allocation.
Make changes to your assumptions and plans as necessary.

BONUS STEP -- ONGOING EDUCATION

As the world changes, so does the standard thinking regarding retirement planning. From Money and all the other financial magazines, the Wall Street Journal, hundreds of financial websites, and self-help financial books, there are vast resources available to you. As the economy changes, your Pension Plan changes, Social Security and Medicare change, stay informed. This will allow you to take your best shot at arranging for a comfortable retirement.

You can check out this publication, a Financial Warmup, offered by the Department of Labor and the CFP Board as a starting point for your research. Or, start with any of the links shown below.