Five Small Steps for You, One Giant Leap for Your Retirement - Rodgers & Associates

Five Small Steps for You, One Giant Leap for Your Retirement

Planning for retirement is like running a marathon: you should set a steady pace and keep going. You don’t want to reach age 60 only to discover that you can’t retire in five years because you didn’t save enough. You should have a strategy in place to reach your goal and do something each year that moves you closer to realizing it. This was the thinking behind A∙G∙I∙L∙E. We wanted to help people under­stand what needed to be completed—and when—during each phase of retirement.

Here are five things you can do this year to help you reach your retirement goals.

  1. Review Your Social Security Statement – Everyone who has paid into the Social Security system and is not drawing benefits should review their benefit statement each year. The statement provides an estimate of benefits at retirement (and other benefit levels, as well). This is useful infor­mation, but you should pay attention to the record of earnings and verify earnings are being recorded correctly. Your monthly benefit is based on your earnings history. It is a lot easier to get this corrected when it is done promptly. You may be required to show proof of earnings and Social Security taxes paid. Most people can produce records quickly from tax reporting infor­mation like a W‑2 statement from recent years. Going back ten years is a lot harder. Review your statement regularly and make sure you are getting credit for taxes you have been paying into the system. Note: Social Security does not mail out state­ments. You need to go to the Social Security website to create an account. Once your account is created, you can view your statement online or download it as a PDF document.
  2. Prepare a Budget – It is vital to develop the disci­pline needed to control spending, and the best way to plan is by using a budget. A budget does not dictate what you can and cannot spend money on: you make those decisions. The goal should be to spend less than you earn. Prior­itize your savings so that you are saving something out of every paycheck. Devel­oping this habit early on will help you reach your financial goals sooner. Shoot for a minimum savings of 10% each pay period. Try to increase the percentage every time you get a raise. The more you control spending, the faster you can build savings, and the sooner you will be able to retire.
  3. Maximize Your 401(k) Match – Many employers match a percentage of their employees’ contri­bu­tions to the company 401(k) plan. Plan to contribute at least as much as your employer will match. If your employer matches a specific percentage dollar for dollar, that’s a 100% return on your investment from day one. On top of the employer match, pre-tax 401(k) deferrals help reduce your annual tax liability.
  4. Make a Roth Contri­bution – You don’t want to have all your retirement savings in a 401(k) plan when you retire. If you do, every dollar you spend in retirement will be taxable. Some of your savings should be accumu­lated in a Roth IRA, where the withdrawals will be tax-free. You can contribute up to $6,000 in 2021 if you have at least that much in earned income ($7,000 if you are age 50 or older, and have at least $7,000 in earned income). Those with Modified Adjusted Gross Incomes (MAGI) over $140,000 ($208,000 for joint filers) cannot make a Roth IRA contri­bution directly. They can, however, make a non-deductible IRA contri­bution and then convert it to a Roth.
  5. Get Out of Debt – I know this probably does not sound like it will help with retirement. You may be in debt because you have not yet learned to control your spending. Just deciding to get out of debt can subcon­sciously help you reduce spending, ultimately leading to increased savings. Besides, you don’t want to go into retirement and still be making debt payments. The first step is to commit to no more borrowing. Then list all your outstanding debts from the largest to the smallest. Concen­trate additional debit payments on the smallest debt first. After one is paid off, roll those payments into the next smallest debt—and keep going until you are debt-free.

You may have heard that the best way to eat an elephant is one bite at a time. Many people think that retirement planning is too big of an elephant to tackle. But it doesn’t have to be. Take small steps, make prudent choices year after year, and watch your savings and invest­ments grow. It may not be long until you can look back and see that it was not as difficult as you thought.

Anyone planning to retire within ten years needs to review the critical issues we have identified in the A∙G∙I∙L∙E phases of retirement. Turning retirement goals into reality takes planning and dedication. Each of the five A∙G∙I∙L∙E phases presents unique planning oppor­tu­nities and pitfalls to avoid. Go to Navigating Your Retirement Journey to determine where you are in the journey.


  • You need to go to the Social Security website to create an account to view your benefits statement.
  • How you spend money is just as important as how much you make. It is not easy to become finan­cially independent if you cannot control your spending.
  • When your earnings exceed the income threshold to contribute to Roth contri­bu­tions directly, contribute to a non-deductible IRA and convert it to a Roth IRA immedi­ately. Pay attention to the pro-rata rule if you have other IRA accounts.

Origi­nally published November 2011