Retirement planning and tax planning go hand in hand. Here are five great retirement planning ideas on how to ensure you have a nest egg when you are ready and what you can do to take advantage of them. The key is that retirement planning starts today, not decades from now when you are reaching retirement age.

1. Have a plan

If you have a plan, review it for possible revisions. If you do not, consider getting one put together as soon as possible. Surprisingly, most do not know how much money is needed for retirement. This is being made much more difficult by inflation, which is playing a major role in finding the right answer. A retirement plan should consider how long you expect to live, how much money you will need, and the lifestyle you desire in retirement. Your plan should have measurable goals that you aim to achieve.

2. Think of your retirement ideas early

One of the most powerful tools for a well-funded retirement is to start saving early. The sooner you start saving, the better off you will be. Open a retirement account and start saving now. Increase the percentage of your pay that you place in tax-advantaged retirement savings accounts. This includes IRAs, 401(k)s, and other plans. In the early years, consider Roth IRAs and 401(k)s, as your marginal tax rate is typically lower, allowing for lower costs when contributing after-tax dollars to the account.

3. Maximize employer contributions

Many employers offer plans to help employees save for retirement. If your company has a pension plan, understand how it works and how much you can expect to receive upon retirement. If your company has a retirement plan contribution-matching program, take full advantage of this free money by making the minimum contributions required to receive this employer match. Review your employer-provided retirement savings options. Maximize the benefits they are providing.

4. Consider working after retiring

Do you plan to work during retirement or avoid work at all costs? Do you plan on having a pension or Social Security covering all your retirement needs, or none of them? Too often, retirees plan the extremes, but reality ends up being somewhere in between. For example, if you plan to have your pension plan fail and Social Security go broke, you may be taking too conservative an approach.

Create a range of retirement funding scenarios, not just the worst-case or best-case scenario. Consider no work or part-time work. Think about some contribution from Social Security and potential pension income if your employer has a program.

5. Understand the true nature of your retirement ideas

Are your ideas realistic in your future retirement plans? Have you correctly estimated the cost of health insurance? Have you really thought about the impact of relocating to a warmer climate? How important is living close to family and friends? Will you really downsize your home after the kids leave? If you have a retirement plan that includes relocating or traveling to far-off places, consider test-driving the idea before implementing it. You may be surprised at the result.

Retirement should be something to look forward to, especially with a little planning. As always, please contact our RRBB advisors with any questions or concerns regarding your tax situation.