How to Create Your Retirement Planning Checklist: A Step-by-Step Guide for 2025

Did you know that you'll need 70% to 90% of your current income to maintain your lifestyle in retirement?

For perspective, if you're earning $63,000 today, you should plan for $44,000 to $57,000 annually during retirement. However, reaching these numbers isn't as straightforward as it might seem. In fact, creating a comprehensive retirement planning checklist is crucial for ensuring you're on track to meet your financial goals.

The good news is that it's never too early or too late to start planning. Whether you're just beginning your career or approaching retirement age, a well-structured financial planning retirement strategy can help secure your future.

That's why we've created this retirement planning guide for 2025. We'll walk you through every essential step to build a solid retirement plan, from calculating your needs to maximizing your Social Security benefits. Let's get started on mapping out your path to a comfortable retirement.

Understanding Your Retirement Goals

Planning for retirement goes beyond just saving money. Studies show that while 74% of people plan financially for retirement, only 35% prepare emotionally for this significant life change. Let's explore how to set meaningful retirement goals that align with both your financial needs and lifestyle aspirations.

Defining Your Ideal Retirement Lifestyle

Creating a clear vision of your retirement lifestyle serves as the foundation for effective planning. Start by asking yourself these essential questions:

Where will you live? Consider downsizing or relocating for better weather or to be closer to family

What activities will bring fulfillment? This might include traveling, volunteering, pursuing hobbies, or connecting with family

Will you continue working part-time or pursue entrepreneurial ventures?

Your retirement lifestyle directly influences your overall well-being, happiness, and sense of fulfillment. Additionally, experts estimate that you'll need between 70% to 90% of your pre-retirement income to maintain your standard of living when you stop working.

Setting Clear Financial Targets

Once you've outlined your ideal lifestyle, it's time to establish specific financial goals. For most people starting their retirement planning journey, aiming for a nest egg of about 15 times your current salary provides a practical starting point. This approach allows for sustainable withdrawals throughout retirement.

Here's a strategic framework for setting your financial targets:

Calculate Your Basic Needs: Begin by estimating your monthly expenses, including housing, healthcare, and daily necessities

Account for Healthcare Costs: Plan for medical expenses, as healthcare costs typically rise faster than general inflation

Consider Inflation Impact: Your savings must keep pace with or exceed inflation to maintain purchasing power over time

Build Emergency Funds: Set aside money for unexpected expenses

Factor in Social Security: Remember that Social Security benefits typically replace about 40% of pre-retirement income

To ensure your goals are achievable, make them SMART (Specific, Measurable, Achievable, Relevant, and Time-bound). Furthermore, coordinate your retirement vision with your spouse or partner, as many couples overlook this crucial step.

The key to successful retirement planning lies in starting early. The sooner you begin contributing to retirement accounts, the more time your money has to grow through compound interest. Moreover, your investment mix may change over time depending on factors such as your age, goals, and financial circumstances.

Calculating Your Retirement Numbers

Mapping out your retirement numbers requires careful consideration of various financial elements. Let's break down the essential calculations needed for your retirement planning checklist.

Estimating Monthly Expenses

Start by listing your anticipated monthly costs. A typical 65-year-old couple spends approximately $40,000 annually, which represents about 6.68% of their last year's income. For accurate planning, categorize your expenses into:

Housing (mortgage/rent, property taxes, insurance, utilities)

Transportation (vehicle maintenance, fuel, insurance)

Personal care and family obligations

Entertainment and leisure activities

Adding Healthcare Costs

Healthcare expenses demand special attention in retirement planning. A 65-year-old couple should prepare for roughly $12,800 in medical costs during their first year of retirement. These expenses typically include:

Medicare Part A and B premiums

Prescription drug coverage (Medicare Part D)

Out-of-pocket medical costs

Supplemental insurance premiums

Planning for Inflation

Inflation significantly impacts retirement savings through multiple channels. Consider these key factors:

Investment Strategy: Stocks and real estate generally keep pace with inflation, unlike fixed-rate securities

Income Adjustments: Social Security benefits include cost-of-living adjustments, yet most private pensions don't adjust for inflation

Healthcare Inflation: Medical costs often rise faster than general inflation, requiring additional planning

Creating Emergency Funds

Building an emergency fund serves as your financial safety net. Financial experts recommend setting aside enough to cover both spending and income shocks. Specifically:

For spending shocks: Save half a month's expenses or $2,000, whichever is greater

For income shocks: Maintain 3-6 months of living expenses

Store your emergency funds in easily accessible accounts, particularly the portion designated for spending shocks. Consider high-yield savings accounts or cash investments that offer better returns than traditional savings accounts. Nevertheless, ensure the investment strategy aligns with your broader retirement goals and risk tolerance.

Building Your Income Sources

Securing reliable income streams forms the backbone of a robust retirement planning checklist. Let's explore two primary sources that can provide steady financial support throughout your retirement years.

Social Security Benefits

Social Security serves as a cornerstone of retirement income, with nine out of ten people aged 65 and above receiving monthly benefits. As of November 2023, the average monthly benefit payment equaled $1,710.78. For those planning to maximize their benefits in 2025, the maximum monthly payment varies based on retirement age:

At age 62: $2,831

At full retirement age: $4,018

At age 70: $5,108

To optimize your Social Security benefits, consider these essential factors:

Working for at least 35 years improves your benefit calculation, since zeros are added for missing years

Waiting until full retirement age (between 66-67) prevents benefit reductions

Delaying benefits until age 70 increases your monthly payments through delayed retirement credits

Pension Plans

Although less common now, pension plans remain a valuable retirement income source, especially in the public sector. Presently, about 80% of public sector employees participate in these plans. Pension benefits typically range from 50% to 85% of your working income.

Two main types of pension plans exist:

Defined Benefit Plans: These traditional pensions guarantee specific monthly payments for life, funded primarily by employers

Defined Contribution Plans: Including 401(k)s and 403(b)s, these plans rely on employee contributions with potential employer matches

For those with pension access, understanding vesting schedules becomes crucial. Cliff vesting requires complete service time before receiving benefits, whereas graded vesting allows partial benefit access based on years served. Furthermore, pension benefits may be protected by the Pension Benefit Guaranty Corporation if your employer faces financial difficulties.

Accordingly, both Social Security and pensions can provide substantial retirement income. Yet, since pension availability has decreased significantly in the private sector, creating a comprehensive retirement strategy becomes even more essential for financial security.

Creating Your Investment Strategy

Building a robust investment strategy stands as a cornerstone of your retirement planning checklist. A well-structured approach ensures your savings grow steadily while managing potential risks.

Choosing Investment Accounts

The foundation of retirement investing begins with selecting appropriate accounts. Traditional IRAs offer tax-deferred growth, with contribution limits of $7,000 for those under 50 and $8,000 for those above 50 in 2025. Alternatively, Roth IRAs provide tax-free withdrawals in retirement, making them valuable for tax diversification.

For employer-sponsored plans, 401(k)s allow contributions up to $23,500 annually, with an additional $7,500 catch-up contribution for those over 50. Those aged 60-63 can make extra "super catch-up contributions" of $11,250 in 2025.

Setting Asset Allocation

Your retirement investment decisions should align with your time horizon and risk tolerance. A basic portfolio might follow the "Rule of 110," where the percentage invested in stocks equals 110 minus your age, with the remainder in bonds.

Consider this diversification framework for optimal allocation:

Stocks: 60% U.S. large-cap, 25% developed international, 10% U.S. small-cap, 5% emerging markets

Bonds: 45% U.S. investment grade, 10-30% U.S. Treasury, 10% nontraditional bond, 0-10% high yield, 10% international

Rebalancing Schedule

Regular portfolio rebalancing maintains your target allocation and manages risk effectively. Financial experts recommend reviewing your portfolio annually and rebalancing when an asset class drifts 5-10% from its target. For instance, in a rising market, if your initial 60/40 stock-bond ratio shifts to 70/30, rebalancing becomes essential.

Two primary rebalancing methods exist:

Time-based: Adjust your portfolio on a fixed schedule, typically annually

Threshold-based: Rebalance when allocations drift beyond predetermined limits

Research indicates that wider tolerance bands, such as 3% fixed or 25% relative, often deliver superior performance while minimizing transaction costs. Therefore, consider implementing these broader thresholds in your rebalancing strategy.

Conclusion

Retirement planning demands careful attention to multiple aspects of your financial future. Starting with a clear vision of your retirement lifestyle helps shape realistic goals that align with your needs and aspirations.

Most retirees need 70-90% of their pre-retirement income, making it essential to build strong income streams through Social Security benefits and investment strategies. Smart asset allocation, regular portfolio rebalancing, and proper account selection form the foundation of a secure retirement plan.

Remember that successful retirement planning combines thoughtful goal-setting, precise calculations, and strategic investment decisions. Your retirement journey starts with taking action today - whether through maximizing Social Security benefits, diversifying your investment portfolio, or building emergency funds for unexpected expenses.

Retirement planning might seem complex, but breaking it down into manageable steps makes the process easier to handle. Start with the steps outlined in this guide, regularly review your progress, and adjust your strategy as needed. A well-planned retirement allows you to enjoy your golden years with financial confidence and peace of mind.