Pre-Retirement Planning

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 11, 2023

Get Any Financial Question Answered

What Is Pre-Retirement Planning?

Pre-retirement planning is the process of preparing for one's retirement years by assessing and addressing various financial, lifestyle, and personal factors.

It involves setting retirement goals, estimating retirement income, creating a retirement budget, developing investment strategies, managing debt, and determining the desired retirement lifestyle.

A well-crafted pre-retirement plan can help ensure a smooth transition into retirement and promote financial security and well-being during the golden years.

The importance of pre-retirement planning cannot be overstated. By taking the time to assess and address various aspects of your financial and personal life, you can develop a roadmap to a comfortable and fulfilling retirement.

A well-structured pre-retirement plan can help you identify potential gaps in your retirement savings, make better investment decisions, and manage your debts effectively.

Additionally, it allows you to make informed choices about your desired retirement lifestyle and budget accordingly.

Assessing Retirement Goals During Pre-Retirement Planning

Identifying Goals

The first step in pre-retirement planning is identifying your retirement goals.

These may include financial objectives, such as maintaining a certain standard of living or leaving a legacy for your heirs, as well as personal aspirations, such as traveling, pursuing hobbies, or volunteering.

Take the time to reflect on what is most important to you and what you envision for your retirement years.

Prioritizing Goals

Once you have identified your retirement goals, prioritize them based on their importance and feasibility.

Some goals may be non-negotiable, while others may be more flexible. By prioritizing your goals, you can allocate your resources more effectively and develop a realistic plan to achieve them.

Quantifying Goals

After prioritizing your retirement goals, it is essential to quantify them in financial terms.

This may involve calculating the amount of money needed to maintain your desired standard of living, estimating the costs of travel or hobbies, and determining the amount you would like to leave as a legacy.

Quantifying your goals helps you understand the financial resources required to achieve them and provides a benchmark for measuring your progress.

Estimating Retirement Income During Pre-Retirement Planning

Sources of Retirement Income

A crucial aspect of pre-retirement planning is estimating your retirement income from various sources.

Common sources of retirement income include Social Security benefits, pensions, personal savings, and investment income.

By understanding your projected income streams, you can assess whether they will be sufficient to cover your expenses and achieve your retirement goals.

Social Security Benefits

Social Security benefits are an essential component of retirement income for many retirees. To estimate your Social Security benefits, you can use the Social Security Administration's online tools or review your Social Security statement.

Keep in mind that the age at which you claim benefits can impact the amount you receive, with delayed claiming resulting in higher monthly payments.


If you have a pension plan through your employer, it can be a valuable source of retirement income.

Be sure to understand the terms of your plan, including the amount you can expect to receive and any options for taking the benefit, such as a lump sum or monthly payments.

Additionally, review the plan's vesting schedule to ensure you are fully vested in the benefit.

Personal Savings

Personal savings, such as bank accounts, CDs, and money market accounts, can provide additional retirement income.

Assess the current balance of your savings and consider how they can be used to supplement your other income sources. Remember to account for any taxes or penalties associated with withdrawing from these accounts.

Investment Income

Investment income, including dividends, interest, and capital gains, can be a significant source of retirement income.

Review your investment portfolio and estimate the income it is likely to generate during your retirement years. Be mindful of the potential tax implications of withdrawing from your investments and plan accordingly.

Creating a Budget During Pre-Retirement Planning

Living Expenses

When creating a retirement budget, begin by estimating your living expenses, including housing, utilities, groceries, and transportation.

Consider whether your living expenses will change during retirement, such as downsizing your home or relocating to a more affordable area.

By understanding your anticipated living expenses, you can better assess whether your retirement income will be sufficient to cover your needs.

Healthcare Expenses

Healthcare expenses are often a significant component of a retirement budget. Estimate your expected healthcare costs, including insurance premiums, out-of-pocket expenses, and long-term care.

Be sure to account for potential increases in healthcare costs over time due to inflation and changes in your health.

Travel Expenses

Many retirees envision traveling during their golden years. If travel is part of your retirement goals, include estimated travel expenses in your retirement budget.

Consider the frequency and types of trips you plan to take, as well as the associated costs for transportation, accommodations, and activities.

Other Expenses

Your retirement budget should also include any other expenses you anticipate, such as taxes, insurance, gifts, and charitable donations. Additionally, consider any one-time expenses, such as home repairs or replacing a vehicle.

By accounting for all of your expected expenses, you can create a comprehensive retirement budget that accurately reflects your financial needs.

Investment Strategies to Consider for Pre-Retirement Planning

Risk Tolerance

An essential aspect of pre-retirement planning is determining your risk tolerance. Risk tolerance refers to your ability and willingness to withstand fluctuations in the value of your investments.

As you approach retirement, your risk tolerance may change, necessitating adjustments to your investment strategy. Be sure to periodically reassess your risk tolerance and make any necessary changes to your portfolio.


Diversification is a key principle of investing that involves spreading your investments across various asset classes and sectors to minimize risk.

As part of your pre-retirement planning, review your investment portfolio to ensure it is well-diversified.

If needed, make adjustments to your holdings to maintain an appropriate level of diversification based on your risk tolerance and investment goals.

Asset Allocation

Asset allocation is the process of dividing your investments among different asset classes, such as stocks, bonds, and cash, to balance risk and return.

A well-diversified portfolio is essential for long-term investment success and can help protect your assets during market downturns.

Review your current asset allocation and compare it to your target allocation based on your risk tolerance and investment goals. Make adjustments as necessary to ensure your portfolio remains aligned with your objectives.

Managing Debt During Pre-Retirement Planning

Identifying Debts

As part of your pre-retirement planning, identify all of your outstanding debts, including mortgages, car loans, credit card balances, and personal loans.

Assess the interest rates and repayment terms associated with each debt to determine which should be prioritized for repayment.

Paying Off Debts

Develop a plan to pay off your debts as quickly as possible, focusing on those with the highest interest rates first.

Reducing your debt before retirement can help free up resources for savings and investment, as well as provide greater financial flexibility during your retirement years.

Consolidating Debts

In some cases, it may be beneficial to consolidate your debts, such as through a balance transfer credit card or a debt consolidation loan. Consolidation can simplify your debt repayment process and potentially reduce your overall interest costs.

However, be sure to carefully consider the fees and terms associated with consolidation before proceeding.


Lifestyle Considerations to Include in Pre-Retirement Planning

Identifying Retirement Lifestyle

Your desired retirement lifestyle is an important factor to consider in your pre-retirement planning.

Reflect on the activities, hobbies, and interests you would like to pursue during retirement, as well as the level of social interaction and community involvement you desire.

Your retirement lifestyle will influence your financial needs and goals, as well as your budget and investment strategies.

Adjusting Lifestyle

As you approach retirement, be prepared to adjust your lifestyle to align with your retirement goals and budget.

This may involve downsizing your home, cutting back on certain expenses, or finding new, lower-cost activities to pursue.

By being flexible and willing to make adjustments, you can help ensure that your retirement lifestyle is both enjoyable and financially sustainable.

Bottom Line

Pre-retirement planning is a crucial step in preparing for a comfortable and secure retirement.

It involves assessing various financial and personal factors, such as retirement goals, retirement income, budgeting, investment strategies, debt management, and desired retirement lifestyle.

By taking the time to develop a comprehensive pre-retirement plan, you can optimize your resources and increase the likelihood of achieving your retirement goals.

The benefits of pre-retirement planning are numerous. A well-crafted plan can help identify potential gaps in retirement savings, promote better investment decisions, and manage debt effectively.

Additionally, it allows for informed choices about retirement lifestyle, budgeting, and long-term financial security.

As you move closer to retirement, be sure to review and update your pre-retirement plan periodically. Consider any changes in your financial or personal situation that may impact your retirement goals, income, or budget.

By staying proactive and flexible, you can help ensure a smooth and enjoyable transition into retirement.

Pre-Retirement Planning FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

Meet Retirement Planning Consultants in Your Area