Older couple flipping through travel brochure after planning ahead for retirement.

8 minute read

Why should estate planning be a part of retirement planning?

Let's take a closer look at how to plan for retirement, which includes setting up an estate plan. Keep reading for helpful tips and resources on retirement planning.

Lyle Solomon

Lyle Solomon, @lyle-solomon

Principal Attorney, Oak View Law Group

Your financial planning should have retirement planning for providing complete financial security. The need for retirement planning grows as the average life expectancy rises. In addition to providing financial security after retirement, an additional source of income is essential. 

Retirement planning paves the way for achieving life goals, managing medical emergencies, and becoming financially independent. Imagining life at 70 or older is one of the most challenging aspects of retiring. 

Many become so overwhelmed by the idea of saving for the future that they don't hold anything. Thankfully, retirement planning is relatively easy, but you will need a road map to keep you on track. 

What is Retirement Planning?

Retirement planning is making arrangements for your life after quitting your job at a certain age. While making a holistic retirement plan, you might include not only financial planning but also consider essential lifestyle habits. You need to figure out where to start and where to stop working. Retirement planning includes:

  • Identifying income resources.

  • Calculating expenses.

  • Initiating a savings program.

  • Managing assets and risks.

You'll be estimating future cash flows to analyze if it is possible to fulfill the retirement income goals.

Retirement planning starts with establishing your retirement goals. Retirement planning is focused on saving enough money for retirement from your checking account. During your mid-career, you may also set specific income or asset targets and take the initiative to achieve them. Once you are about to retire, you may shift to the distribution phase. Now you can enjoy the constant cash flow from your accumulated savings and alternate income resources.

Why is retirement planning important?

Many people need to understand the importance of retirement planning and regret it later. Some think retirement means living a poor life, but saving money is invalid. One can live the best time of their life during retirement with the help of planning.

To beat medical emergencies

Medical issues are a common factor in retirement life. So, you should have enough money to beat medical expenses unless you may blow away your post-retirement savings or are forced to use a credit card to meet them. Having enough savings for medical costs and insurance coverage will help you avoid medical debt. So, you must think about your post-retirement medical issues.

Keeping cash flow after retirement

It's possible to manage income quickly and effectively through financial planning. You can increase cash flows by tracking your spending patterns and analyzing expenses. An increase in cash flow can lead to an increase in wealth.

Having enough money for emergency

Retirement planning can save you from a suddenly rainy day. But if you face such issues for a long time, it may still throw you off track. It is good to have some investments with high liquidity. These investments can be helpful in times of emergency or for educational purposes.

You can avoid debt

If you plan your retirement and save enough money, you don't have to take out loans to meet expenses. This way, you can avoid debt. However, you should reply to all your obligations before entering retirement. If you have multiple debts, debt consolidation can be a great choice. Especially if you have numerous payday loans, you should try consolidating them to eliminate them. Remember, your debt can destroy your retirement life. So, get out of debt and save money to avoid debt in the future.

Social security benefits are not enough these days

Social security benefits are good, but more is needed to meet all expenses in your post-retirement life. So, if you entirely rely on these benefits, then you're certainly making blunders. You should consider a substantial retirement fund and other savings cushions that will provide you with the necessary financial protection in retirement. 

Why estate planning is equally crucial as retirement planning

A key component of retirement preparation is estate planning. In addition to investing, estate planning is a crucial component of your retirement planning. Many people ignore succession planning or put it off until the last minute. Both are developing an estate plan, and a retirement plan is crucial. Your retirement plan will enable you to establish a sizable corpus for your stress-free retirement life.

In contrast, a correctly crafted estate plan will safeguard the interests of your loved ones. Setting goals for your retirement income, taking the necessary steps, and making the decisions to get there is the process of retirement planning. All components of retirement planning include identifying income sources, estimating expenses, implementing a savings plan, and managing assets and risks. Learn more about retirement planning vs estate planning.

Different stages of retirement planning

Ages 21-35 (Young Adulthood) - It is better to start investing as early as possible. Compound interest will allow people to earn more interest. The earlier you will invest, the more interest you will gain. You should take advantage of employer-sponsored 401(k) or 403(b) plans from the beginning of your career. 401(k) plans are exempt from income tax until the person withdraws them. The contributions toward 401(k) will be deducted from your gross income, giving you an immediate income-tax break.

Ages 36-50 (Early Midlife) - Early Midlife usually brings several financial burdens, such as credit card debt, mortgages, student loans, insurance premiums, and medical bills. So, it is challenging to save as much as before at this stage of retirement planning. You may use aggressive savings to gather more money.

Ages 50-65 (Later Midlife) - Time will run out of your hands in later Midlife. But there are a few advantages of later Midlife. The wages will be high and potentially have some of the expenses above paid off by this time. People may experience difficulty paying off credit cards or making monthly mortgage payments, student loans, etc.

Types of retirement plans:

  • 401(k) Plans

  • Individual Retirement Accounts (IRAs)

  • Roth IRAs

  • Roth 401(k)



You may accumulate multiple retirement plans in different stages of your life. An employer's 401(k) is the first and best option to get tax-deferred growth while saving for retirement. But, a Roth IRA is also effective for saving some extra money for retirement. A 401(k) and a Roth IRA can be ideal.

Creating a retirement plan: step-by-step guide

To put yourself on the road to success when it comes to creating an ideal retirement plan, follow the steps below.

1. Calculate net worth

If you want to learn your current net worth, then make a list of all of the following:

  • Assets: Your home and a car, cash in the bank, money invested in your 401(k) plan, and others.

  • Liabilities: Consider credit card debt, student loans, outstanding mortgages, car loans, etc.

The surplus of your total assets over your total liabilities should be your current net worth.

2. Determine the cash flow

You can only create a proper financial plan by tracking your money. So, you need to start documenting to see how much you need every month for basic expenses and how much you can save and invest.

You can do this by analyzing your checking account and credit card statements. You'll get a well-documented history of your spending from there. You should check each cost category, count them, and divide by 12 to get your average monthly expenditure. 

Add all the expenses, secured and unsecured debt payments, luxuries, and others to get the exact estimation. By adding up all these numbers for a year, you'll know your cash flow.

3. Consider the priorities while setting up the goals

The motive behind creating a financial plan is to complete your prime objectives. The goals may include:

  • Your student loan.

  • Buying a larger home.

  • Investing in a business.

  • Retirement planning.

  • Simply enjoying life.

If you have issues prioritizing your goals, you can seek help from a professional financial planner. The following elements must be considered and revised as and when required.

  • Risk management plan - You must review your life and disability insurance, property and casualty coverage, personal liability coverage, and catastrophic coverage.

  • Retirement strategy - No matter your priorities, you must consider creating a retirement plan. You might face a money crisis without a proper retirement plan when you retire and live without any direct income.

  • Long-term investment plan - You should plan your long-term investments. Remember, you are keeping your money with another person. So, ensure you do research before investing in any long-term investments. Analyze how much return you get from the investment.

  • Tax reduction strategy - You should form a plan for minimizing your taxes.

  • Estate plan - Remember to make arrangements for the benefit and protection of your heirs. 

  • Debt payoff strategy - You can't grow your finances well if you have multiple high-interest unsecured debts. So, it would help if you prepare a debt reduction plan to eliminate these debts and lower the interest payments. The majority of Americans suffer from credit card debts. Through a credit card consolidation program, they can reduce credit card debts and cut off interest payments.

For additional help creating your retirement plan, be sure to check out our retirement planning checklist!

With an extensive financial plan, you can have a good retirement plan. You can effectively accomplish short-term, medium-term, and long-term goals with a financial plan. A comprehensive financial plan must include a retirement strategy.

It would be beneficial if you kept your retirement strategies current. The method can be used based on calculations and analysis of your current situation, including income, expenses, goals, investments, and tax rates. It would be beneficial if you adjusted your plans as soon as these variables changed.

Want to get started on your estate plan, a crucial aspect of your retirement plan? Here at Trust & Will, we’re here to help keep things simple. You can create a fully customizable, state-specific estate plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning and settlement options today!

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