Planning for Retirement

You're thinking about retirement. That's the first smart move. Whether you're 30 years out or 5, the decisions you make now about saving, investing, and tax strategy will compound — literally — into the retirement you actually get to live. This guide walks you through the key concepts before you touch a calculator.

The three pillars of retirement income

Most retirees draw income from three sources. Understanding how they interact — especially from a tax perspective — is the foundation of every retirement planning decision.

Social Security

Your base layer. Benefits are calculated from your highest 35 years of earnings and adjusted for the age you start claiming. Claiming at 62 permanently reduces your monthly check by up to 30%. Waiting until 70 increases it by up to 24% beyond your full retirement age benefit. For most people, Social Security replaces 30-40% of pre-retirement income.

Employer-Sponsored Plans

401(k), 403(b), and 457(b) plans are the primary wealth-building vehicles for most workers. Employer matches are immediate, guaranteed returns — the single best deal in personal finance. These accounts grow tax-deferred, but every dollar withdrawn in retirement is taxed as ordinary income. The question isn't whether to contribute, but how much and pre-tax vs. Roth.

Personal Savings & IRAs

Traditional and Roth IRAs, taxable brokerage accounts, and other savings. The key distinction: Traditional IRA contributions may be tax-deductible now but taxed on withdrawal. Roth IRA contributions are after-tax but grow and withdraw completely tax-free. Taxable accounts offer no tax benefits but have no withdrawal restrictions or RMD requirements.

Estimate your Social Security benefit

Tax-advantaged accounts at a glance

Every account type has different contribution limits, tax treatment, and withdrawal rules. The right mix depends on your current tax bracket, expected retirement bracket, and employer match.

Account 2026 Limit Tax Treatment
401(k) / 403(b) / 457(b) $24,500 Pre-tax or Roth
Catch-up (age 50+) +$8,000 Same as base
Super catch-up (age 60-63) +$11,250 SECURE 2.0 provision
Traditional IRA $7,500 Deductible (income limits apply)
Roth IRA $7,500 After-tax (income limits apply)

Pre-tax vs. Roth: the contribution strategy decision

The fundamental question: pay taxes now or later? Pre-tax contributions reduce your taxable income today and are taxed at withdrawal. Roth contributions are taxed today but grow and withdraw tax-free.

The conventional wisdom — "Roth if you're young, pre-tax if you're in peak earning years" — is a reasonable starting point. But the real answer depends on whether your retirement tax rate will be higher or lower than your current rate. Factors that affect this:

  • Employer match is always pre-tax, even in a Roth 401(k). This gives you a natural pre-tax base.
  • Required Minimum Distributions (RMDs) from pre-tax accounts start at age 73-75 and can push retirees into higher brackets.
  • Social Security taxation is triggered by provisional income — large pre-tax withdrawals can make up to 85% of your benefits taxable.
  • IRMAA surcharges hit when modified adjusted gross income exceeds thresholds — a large IRA can trigger $2,000-5,000/yr in Medicare premium surcharges.

The employer match priority

Always contribute enough to capture the full employer match before optimizing anywhere else. A 50% match on 6% of salary is an immediate 50% return — no investment can beat that. After the match, decide between additional pre-tax, Roth, or IRA contributions based on your bracket.

The retirement income equation

Retirement planning reduces to one question: will your income sources cover your expenses? The income equation is straightforward:

Social Security + Pension + Withdrawals + Other Income ≥ Annual Expenses

Most financial planners use a replacement ratio of 70-85% of pre-retirement income as a spending target. This accounts for the disappearance of payroll taxes, work-related expenses, and (hopefully) mortgage payments. But your number might be higher if you plan to travel extensively, or lower if your home is paid off and your lifestyle is modest.

The gap between your guaranteed income (Social Security + pension) and your spending target is the amount your savings need to generate each year. The Retirement Optimizer models this across your entire career — accumulation, transition, and withdrawal phases.

Model your retirement income

Roth conversion windows

Between retirement and when RMDs begin (age 73-75), many retirees have a window of lower income. This is the optimal time to convert Traditional IRA balances to Roth — you pay taxes on the conversion at your current (lower) rate, and the money grows tax-free forever after.

The key constraint is staying below IRMAA thresholds. Medicare premiums are based on income from two years prior, so a conversion in 2026 affects your premiums in 2028. The Roth Conversion calculator models this tradeoff year by year — showing how much you can convert while staying below each IRMAA tier.

Plan your Roth conversions

Annual review checklist

Retirement planning isn't a one-time exercise. Review these items annually — your income, savings rate, and tax situation change, and your plan should adapt.

  • Maximize employer match — confirm your contribution rate captures the full match.
  • Review contribution strategy — has your bracket changed? Should you shift between pre-tax and Roth?
  • Check catch-up eligibility — turning 50? You get an extra $8,000/yr. Ages 60-63? An extra $11,250.
  • Estimate Social Security — your benefit changes as your earnings record grows. Re-estimate every few years.
  • Model Roth conversion opportunities — low-income years (sabbatical, gap between jobs, early retirement) are conversion windows.
  • Consider inflation — are your projections using real (inflation-adjusted) or nominal returns?
  • Review asset allocation — as you approach retirement, your risk tolerance and time horizon change.

Authoritative sources

This guide is for educational purposes. Tax rules change, and your situation has nuances that no calculator can fully capture. Before making decisions, consult a tax professional and review these primary sources: