The first step in good retirement planning is to know exactly how much money you need,  to cover all of your living expenses on a regular basis. But beyond that, there are several other points you need to keep in mind. Here are 5 important steps to make sure you not only retire… but you retire well.

Retired on bench
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When most people think about retirement, they imagine being on warm sunny beaches or exotic tropical locations, or just spending their entire day at a luxury golf course.

But retirement is really much more than that — it’s having the peace of mind of knowing that your daily living expenses are fully covered.

It’s the freedom you experience from having your 9–5 back, to do whatever you want.

And it’s the ease you feel of knowing that you never have to fill out another “TPS report” ever again. (Don’t get this reference? Watch the movie “Office Space.”)

But sadly, it’s projected that over 64% of Americans won’t have enough money saved up by the time they reach their early 60s — to effectively get to that retirement stage.

I know… that’s concerning…

So, to avoid that fate, here are five things that you can do; things that will not only help you retire — but retire well.


Establish your baseline standard of living.

The first step in good retirement planning is to know exactly how much money you need — to cover all of your living expenses on a regular basis.

Budget sheet
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If you maintain a regular budget like I do, it’s easy to figure out what your monthly and yearly cost of living is. You simply take all of your expenses: your rent/mortgage, you car payments, utilities, food etc. — and simply average out your monthly costs for the last few years, to get to a standard yearly projection.

But when you’re retirement planning, it’s important to take that a step further and visualize what your lifestyle might look like look like, in that life stage.

For example, when you retire, you might want to travel a bit more, so you should bake in the costs of a few extra trips throughout the year. You might also want to downsize your home to eliminate your mortgage, or reduce the number of car payments you have, and maybe even kick your kids off of the family plan and make them pay for their own cell phones.

Paddle boards
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Most people find that when they get to retirement age and they’re no longer going in to work every day and their children are all grown up and have left the house — they can actually reduce quite a bit of their normal day to day spending.

The point I’m making here is that we need to visualize what we think our estimated lifestyle and living cost will be in the future, as opposed to considering the current state of our expenses are now — that way we don’t over or under estimate how much we need in retirement. Having a good estimation of your retirement costs will help you refine your overall savings plan, which is a critical piece in this process.


Determine your savings/investing plan.

Once you know what your regular living costs will be in retirement — the second step is to determine how much money you need to save in your core position, for that money to bring in the necessary passive income to cover the living cost number in retirement.

This means you need to establish a budget and a savings/investing plan to hit that core number before you retire. And one hard truth you have to recognize is that in order to build up enough wealth to retire — you have to get to a point where you are covering your entire living costs on a regular basis and still have some money left over to invest. 

Money on table
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You need that surplus money because you need to be able to send them out into the market, and have them earn money and bring it back to you. This is the fastest way for you to grow and amplify the value of your earned capital.

If you’re not sure what I mean here, check out this previous article I’ve written addressing this topic. 


Have no large debts or mortgage going into retirement.

Third on this list, is to make sure you pay off your house or any other major debt — before you retire.

The biggest shackles most people have, that hold them back from financial freedom are home mortgages, large car payments and student loan debts. Some people spend a lifetime paying off these debts and they never ever achieve the financial freedom they are looking for.

Home Pic
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So how do you avoid this?

The easiest way, is to always live below your means and try to pay for large purchases in cash. 

Let’s say you have the means to purchase a $300k home with a 30 year loan of $150k, but instead decide to save up/scrounge up just a little more cash and buy a $200k home instead, with no loan. Then, for the next 30 years, you’d be mortgage free and you’d have more freedom with your income — income that would have otherwise gone to your house payments.

Living below your means and paying for large purchases in cash.

That’s the state you want to be in when you retire — not only does it give you financial leeway, but the psychological effect of not having any house or large debt payment is incredibly liberating.

It’ll also give you peace of mind to weather any large economic situation that may come down the line in the future, like another recession or the need to pay for a wedding etc.

Fancy Wedding
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Of course, this is easier said than done — and I’m not saying that you should never have a mortgage. In the course of your life there will undoubtedly be times where having a mortgage is not only prudent but also the best choice to make for you and your family.

All I’m saying is that — if possible, the best situation to enter into retirement — is to have no mortgage payments or large debts hanging over you.


Develop a side hustle.

Next, at number 4, you’ll want to develop a side hustle before you retire.

It’s said that the average millionaire has up to 7 streams of income, while the average non-millionaire only has one. It’s stating the obvious, but in terms of getting to the goal of saving up to your core retirement position — having a side hustle is a great way to help expedite that process.

Youtuber
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In addition, if that side hustle is something you really enjoy — you could easily take that full time, after you retire, and potentially even grow that into a full time income.

And at the very least, in case there is ever a major financial crash that comes in the future, having at least one additional source of earned income is always good idea.

If you’d like some ideas on what might make a good side hustle for you — check out this previous article I’ve written here.


Have a purpose in retirement.

And lastly, the most important thing you need to have, before you retire… is a purpose in your retirement.

There are so many people that have romanticized ideas of traveling the world and sipping on martinis at luxury resorts when they retired.

But what they fail to realize is that all of those things can be fun for a while, maybe the first 6 months of retirement, but after that — without an actual purpose in your retirement, it quickly becomes incredibly boring and even a bit depressing.

Old person
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To go from working so hard in the last 30–40 years to all of a sudden not having anything productive to do — can seem like hitting a brick wall to some people.

A 2012 study in the Journal of Happiness Studies by Elizabeth Horner, PhD, of UC Berkeley, found that retirees experience a sudden rush of life satisfaction directly after retirement, followed by a sharp decline in happiness a few years later. For many people, work brings a sense of usefulness and resolve within them — and suddenly losing that can bring about a sense of isolation and worthlessness.

It’s quite ironic, that you work so hard to escape the 9–5 grind and get to retirement… only to feel lost and purposeless when you actually reach the finish line.

So the key to retirement isn’t just “relaxing and having fun” all of the time…the key to retirement is having a new purpose — pursuing something you’ve always wanted to do, something you have a passion for, something that drives a sense of inner worth for you — without having to worry about any of the financial distractions of life, like how you’re going to pay your next mortgage payment or whether or not you can afford to go out to dinner the next day, etc.

That is the real objective of retirement.

For me — there are so many things I want to do when I retire…

Professionals talking
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I’d love to take some time to mentor young working professionals — and help them navigate their careers.

Writing on beach
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I’d love to one day write a book, or become published in a journal.

Photographer on hill
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Photography is a hobby of mine and I’d love to dive deeper into that field.

Daniel filming
Daniel filming a video

I’d love to dedicate even more time and energy into my Medium publications and my YouTube channel and connect even more with you guys that support me on these platforms.

Plane at sunset
Credit: StoryBlocks

I’ve always wanted to fly…. it’d be amazing if I could get my recreational pilot’s license.

Daniel's family
Daniel’s family

And of course on top of all of that, I would love to spend more quality time with my wife and daughter.

In retirement, I plan to work harder and longer every day than I do now — the only difference is that I’ll be doing it out of a greater sense of passion and purpose for myself, rather than working for a large fortune 500 company.

Just retiring is not enough — you have to retire well.

And retiring well means being financially complete and having a purpose for yourself beyond your working life stage. It’s not easy to achieve but it’s well worth it in the end.


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**** Disclaimer *****

The content here is strictly the opinion of Daniel’s Brew and is for entertainment purposes only. It should not be considered professional financial, investment or career advice. Investing and career decisions are personal choices that each individual must make for themselves in accordance with their situation and long term plans. Daniel’s Brew will not be held liable for any outcome as a result of anyone following the opinions provided in this content.

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