Retirement Planning: A Step-by-Step Guide for Every Age

Retirement planning comes down to two numbers: what your life will cost each year once the paychecks stop, and what will pay for it. Everything else on this page is a way of making the second number cover the first.

Step 1: Work out what retirement will cost

You'll see one figure quoted everywhere. The U.S. Department of Labor, in its booklet Top 10 Ways to Prepare for Retirement, says experts estimate you'll need 70 to 90 percent of your preretirement income to keep your standard of living. That's a rule of thumb, and a wide one.

Your own bank statements beat it. Pull the last twelve months and total what you spent. Then adjust for the life you expect:

• Costs that fall away. Payroll taxes, 401(k) contributions, commuting, and maybe a mortgage that's paid off by then.
• Costs that rise. Health care, travel in the early years, and home repairs you've been putting off.
• Costs that arrive once. A roof, a car, a wedding. Spread them across the years so they don't surprise you.

Say your household spends $70,000 a year now, and $12,000 of that is the mortgage you'll finish at 63. A first estimate of $58,000 a year is closer to the truth than any percentage of your salary.

Our retirement calculator lets you put in your own numbers and see how the years play out.

Step 2: Add up your income sources

Social Security

The Social Security Administration says benefits replace about 40% of your annual pre-retirement earnings on average, and that the share varies with your circumstances. Its 2026 fact sheet put the estimated average retired worker's benefit at $2,071 a month as of January 2026.

Your own figure is free to look up. Sign in to a "my Social Security" account at ssa.gov and you'll see an estimate at each claiming age, built from your real earnings record.

When you claim changes the check for life:

Those are the SSA's rules: a 30% cut at 62 when your full retirement age is 67, and 8% more for each year you wait past it, up to 70. Our guide to retirement ages lays out every age that matters and what happens at each.

A pension, if you have one

Ask the plan for a benefit estimate at two or three retirement dates. Find out whether the payment rises with inflation and what your spouse would receive if you died first.

Your savings

This is the piece you control. A common starting point is the "4% rule," which comes from a 1994 study by financial planner William Bengen in the Journal of Financial Planning. He looked at U.S. market history and found that someone who withdrew about 4% of a stock-and-bond portfolio in the first year, then raised that dollar amount with inflation, would not have run out of money over any 30-year stretch in his data.

By that rule of thumb, $500,000 supports about $20,000 in the first year. It describes the past and promises nothing about your 30 years. You'll also see much higher figures passed around, and our guide to the 7 percent rule explains why those deserve a harder look.

Find the gap

Take the spending estimate from step 1 and subtract Social Security and any pension. What's left has to come from savings every year. If that amount is more than your savings can pay out, you have four levers: save more, work longer, spend less, or claim Social Security later. You can pull more than one, a little each.

For a worked case with real numbers, see retiring at 62 with $400,000.

Step 3: Decide how much to save

There's no official savings rate. Fidelity's published guideline is to save at least 15% of your pay each year, counting any employer match, and to have 10 times your salary saved by 67. Fidelity says that assumes you start at 25, retire at 67, and keep more than half your money in stocks over your working life. Start later and the 15% figure won't be enough to reach it.

What the law lets you put in is a separate question. These are the 2026 limits from the IRS announcement and IRS Publication 969:

The 401(k) limit covers what you put in. An employer match sits on top. You don't need to reach these ceilings. Raising your contribution by 1% of pay each year gets you a long way without a painful jump.

Step 4: Choose where to save

Four kinds of account do most of the work. They differ in when you pay tax.

Here's where we'd start: contribute enough to your workplace plan to collect the whole employer match, because that's pay you only get by contributing. After that, the choice between Roth and traditional turns on whether your tax rate is higher now or in retirement. Nobody knows that for certain, which is why having some money of each kind is useful later.

Roth IRAs have an income limit. For 2026, the amount you can contribute phases out between $153,000 and $168,000 of modified adjusted gross income for single filers, and between $242,000 and $252,000 for married couples filing jointly. A Roth 401(k) at work has no income limit.

The account is only the container. What you hold inside it (stock funds, bond funds, cash) decides how the money grows and how much it swings. Our guide to retirement investing covers that side.

Step 5: Round up old accounts

Every job you've left may have an account behind it. Make a list, log in to each one, and confirm your address and beneficiary. If you can't find one, the Labor Department runs a free search tool, and our guides on the Retirement Savings Lost and Found database and finding an old 401(k) show how to use it.

Each old account has the same four choices: leave it, move it to your current employer's plan, roll it to an IRA, or cash it out. We'd rule out cashing out almost every time. The whole amount is taxed as income, and before 59½ a 10% additional tax applies on top unless you meet an exception.

• What to do with an old 401(k) compares the four choices.
• Rolling an old 401(k) into a new employer's plan keeps everything under one login.
• Rollover IRA vs. traditional IRA explains what the label means.
• Rollover vs. transfer shows why a direct move, where the money never passes through your hands, is the safer way.
• Form 1099-R and Form 5498 covers how a rollover shows up on your tax return.

Retirement planning by age

In your 40s

Time is your biggest asset. Get the full match, find the old accounts, and resist cashing out when you change jobs. If you have a high-deductible health plan, an HSA is worth opening. See retirement planning in your 40s.

In your 50s

Catch-up contributions open the year you turn 50. This is also the decade to pull your Social Security estimate, price health coverage for any years before Medicare, and learn the rule of 55 before you move an old 401(k). See retirement planning in your 50s.

In your 60s

The decisions get specific. You'll pick a retirement date, a Social Security claiming age, and a Medicare plan, and you'll decide which accounts to draw from first. Workplace plans allow a larger catch-up for ages 60 to 63. Our checklist for five years before you retire lays out the timeline, and what a market drop near retirement means explains why the years around your last day of work carry extra risk.

In your 70s

Social Security's delayed credits stop at 70, so there's nothing gained by waiting past it. Required withdrawals from traditional accounts start at 73 or 75. See how required minimum distributions work.

Health care and Medicare at 65

Medicare eligibility starts at 65, whether or not you've retired. Your first chance to sign up is the Initial Enrollment Period. Medicare.gov describes it as seven months long: it starts three months before the month you turn 65 and ends three months after it.

Miss it without other qualifying coverage, such as a plan from a current employer, and the Part B premium goes up. Medicare adds 10% for each full year you could have had Part B and didn't, and you pay that for as long as you have Part B.

Medicare isn't free. The standard Part B premium for 2026 is $202.90 a month, according to the Centers for Medicare & Medicaid Services, and people with higher incomes pay more. For 2026 the surcharge starts above $109,000 of income for a single filer and $218,000 for a joint return, based on the tax return from two years earlier. A big withdrawal or a Roth conversion at 63 can raise your premium at 65.

Retiring before 65? You'll need coverage for the years in between: COBRA, a spouse's plan, retiree coverage from your employer, or a Health Insurance Marketplace plan. Get real quotes a year or two ahead, because this can be one of the largest bills of an early retirement.

Taxes and required withdrawals

A dollar in a traditional 401(k) isn't a full dollar of spending money. Withdrawals are taxed as ordinary income. Roth withdrawals that qualify aren't taxed, and neither are HSA withdrawals for medical costs.

Social Security can be taxed too. The IRS adds half your benefits to your other income, and if the total is above $25,000 for a single filer or $32,000 for a joint return, part of the benefit becomes taxable, up to a ceiling of 85% of it.

Then there are required minimum distributions, or RMDs. The IRS makes you start withdrawing from traditional IRAs and workplace plans at a set age:

• Born 1951 through 1958: age 73.
• Born in 1959: age 73 under an IRS proposal that isn't final yet. See RMD age by birth year.
• Born 1960 or later: age 75.

The first one is due by April 1 of the year after you reach that age, and every later one by December 31. Come up short and the IRS charges an excise tax of 25% of the amount you missed, or 10% if you fix it within two years. Roth IRAs and Roth 401(k)s have no RMDs while the owner is alive.

Check your own birth year in our RMD age chart, and if you've already missed one, here's what to do.

Six common retirement planning mistakes

1. Planning from a percentage and never checking your real spending. The rule of thumb is a starting guess.
2. Leaving match money behind. If the plan matches 4% and you put in 2%, you've turned down part of your pay.
3. Cashing out a 401(k) at a job change. Tax, a likely 10% additional tax, and decades of lost growth.
4. Claiming Social Security at 62 without running the numbers. It's the right call for some people. It's also a 30% cut for life if your full retirement age is 67.
5. Forgetting health costs before 65 and Medicare deadlines at 65. Retiring before 65 means arranging your own cover until Medicare starts, and signing up late for Medicare can add a lasting penalty.
6. Ignoring taxes on withdrawals. A $600,000 traditional 401(k) and a $600,000 Roth account won't buy the same retirement.

A one-page retirement planning checklist

1. Total your last twelve months of spending and adjust it for retirement.
2. Get your Social Security estimate at ssa.gov and check your earnings record for missing years.
3. Ask for a pension estimate if you have one coming.
4. List every retirement account, with its balance, its fees, and its beneficiary.
5. Subtract guaranteed income from spending to find your yearly gap.
6. Contribute enough to get the full employer match, then raise your rate by 1% of pay a year.
7. From age 50, use catch-up contributions if you can afford them.
8. Track down old 401(k)s and decide where each one belongs. Use direct rollovers.
9. Review what you're invested in and what each fund costs.
10. Hold a few months of expenses in a regular savings account so a surprise doesn't become a withdrawal.
11. Three months before your 65th birthday month, start your Medicare sign-up.
12. Write down your RMD age and the date your first one is due.
13. Check your beneficiaries once a year.

Limits and thresholds change most Januarys, so confirm the current figures on IRS.gov. This page is general education. For questions that turn on your own income and taxes, a fee-only planner or a tax professional can look at your whole picture. Unfamiliar terms are in our glossary.

Common questions

How do I start planning for retirement?

Begin with two numbers: what you spend in a year, and what Social Security will pay you, which you can look up free at ssa.gov. The difference is what your savings have to cover. Then contribute enough at work to get the full employer match.

How much money do I need to retire?

It depends on your spending. Two published rules of thumb give a rough range: the Labor Department cites 70 to 90 percent of preretirement income, and Fidelity suggests 10 times your salary saved by 67. Your own budget is a better guide than either.

What are the retirement contribution limits for 2026?

$24,500 for a 401(k), 403(b), or governmental 457(b), plus $8,000 from age 50, or $11,250 for ages 60 to 63 if the plan offers it. IRAs allow $7,500, plus $1,100 from age 50.

When do I have to start taking money out of my retirement accounts?

At 73 if you were born from 1951 through 1958, and at 75 if you were born in 1960 or later. If you were born in 1959, the law as written puts you in both groups; the IRS proposed age 73 in July 2024, and as of October 2026 that proposal has not been made final. Our RMD age by birth year chart has the details. That applies to traditional IRAs and workplace plans. Roth IRAs have no required withdrawals during the owner's lifetime.

We base our guides on primary sources such as the IRS, the Department of Labor, and federal regulators. Read our editorial policy. Spot an error? Tell us.