Planning Ahead
Build a Retirement Plan in 6 Steps
A plan isn't a spreadsheet you build once. It's six answers you keep refining as life changes.
The six steps
- Know your spending. Track a few months to find your real annual number — the foundation everything rests on.
- Total your net worth. Every asset minus every debt. This is your starting point.
- Set the targets. Retirement age, life expectancy, and the lifestyle (spending) you want.
- Pick assumptions. Expected returns, inflation, and savings rate — be realistic, not optimistic.
- Run the odds. Simulate thousands of market paths to get a chance-of-success number, not a single guess.
- Review and adjust. Re-run quarterly or after any big change. The plan is alive.
Most people stop after step two and call a pile of balances a “plan.” The magic is in steps five and six — turning numbers into a tested probability you revisit.
What good assumptions look like
- Returns: modest and real (after inflation), not the last bull market's headline figure.
- Inflation: ~2–3% long term; higher if you'll live somewhere with faster local inflation.
- Savings rate: the single biggest lever in your early years — push it as high as is sustainable.
Keep it boring
The best plans are dull: spend less than you earn, invest the difference broadly, check the odds, repeat. Excitement is usually a sign of risk.
Key takeaways
- Spending → net worth → targets → assumptions → odds → review.
- A list of balances isn't a plan; a tested probability is.
- Use realistic, inflation-aware assumptions.
- Re-run quarterly or after any major life change.