Getting retirement planning right can be a bit of a headache, especially when you dive into it with limited prior knowledge and experience. Maybe you’ve read a bit on it or was told by a colleague to start exploring your options – either way, it’s a daunting experience.

We’ve found that one of the best ways to get a head start with retirement planning is to utilize ‘backward induction’, which is really just working a problem backwards. It’s often used in the solving of economic theories, finance solutions, and much more. In the case of retirement planning, try to imagine how much you would spend each month; how much you can currently save each month – and from there you can build the foundation of your plan.

Different people have different goals when it comes to retirement, so it’s essential to have a good grasp of your retirement before you begin, otherwise you’d be wasting your time. Depending on your needs, you’ll have to adjust your plan accordingly, as different lifestyle experiences will call for different monetary needs. For example, if you’re looking to just partially retire at first, tending to personal business ventures or investments for several years before exploring the world, you might not need as much as say, someone who’s looking to get on a plane immediately following retirement.

Having a tangible target that you’re happy with will be a great place to start. Don’t worry too much about having to be as precise as possible either, because leaving some room to adjust your goals may be useful. To help you get started, here are some common considerations you should make when considering your retirement.

Getting started with planning

Income: a great way to determine your desired retirement income is by separating your spending into needs and wants. Any needs you have will be the likes of food, utility bills, clothing, etc. They’re all things you’ll need regardless of what you want, so in your calculations, it’d be smart to consider them as absolute essentials. On the other hand, any spending that falls under ‘wants’ will have much more flexibility. From expenses such as gym memberships to cable plans, you have a much wider berth of options and control over the amount you want to spend. Here, you can cut expenses if you’d like, or make sure to plan for these payments.

Splurging: retiring is certainly something to celebrate. After all, you’ve made it to your golden years! Were you going to celebrate with a lavish meal at the nearest steak house? Or the 3-starred Michelin restaurant across the world? Maybe you can finally get the comfortable luxury car you’ve always wanted. Whichever it is, knowing ahead of time will definitely make your retirement planning easier, as you’ll then be able to modify your goals even down the line. If you were looking to go on a backpacking trip across continents, it’s still possible down the line to cut that down to one continent, or splurge even more. There’s a great deal of flexibility with this kind of expense.

Emergency funds: as with all things investment, the future is uncertain. While we do our best to minimize risks, having a fallback in the event of worst-case scenarios is highly recommended. Have a designated fund for medical maintenance such as health checkups, dental care, as well as for medical emergencies. These funds should extend to any other maintenance you may need, such as for your vehicle, or your home.

Bequest: figure out how much you want to leave to your family and loved ones. You can also designate funds to be donated to be charity in the event of your passing. Determining the exact amount you’d like to leave will be entirely up to you.

Now that you’ve got a clearer picture of how much you’re going to need for your retirement, you can start making goals toward it.

Working towards your plan

While there are plenty of online calculators that can figure out how much you’ll have to save each month, or each year, based on your needs and current income, the secret to successful retirement planning is constantly adapting your goals. This way, you aren’t tied down to a strict schedule per se, but can keep changing things as you see fit. Maybe one month, you had to spend a particularly hefty sum to repair your car’s engine. That’s okay, you can save more next month. Maybe 2 years into your retirement plan, you received a huge promotion – great! Review your retirement plans again, because maybe now you can afford an even more luxurious trip around the world, without having to limit more of your spending each month.

This will be of significant impact in your other investing endeavors. Depending on how close you are to achieving your retirement plan goals, you may adjust your stock market habits, or may put off that big home stereo upgrade until later.

Using your earlier considerations as a guide, build an asset allocation portfolio that best fits your needs. Prioritizing a regular income for as long as you can? Adjust your fixed-income investment to reflect that! You’ll be able to afford this investment further into retirement anyway.

A Life-long journey

Following a goal-based approach will keep you on the right track toward an effective and healthy retirement plan by teaching you to be mindful of your long-term needs and goals, of which you’ll need to sort through and prioritize. The process is completed by identifying risks and adjusting your existing portfolio to fit with your plan.

Adaptability will be your friend in achieving a healthy plan that helps you build toward a secure retirement without sacrificing your convenience and comfort. Achieving this adaptability will demand a greater knowledge of the different types of investment you’ve dabbled in, but you also get to reap the rewards of that information in way of knowing exactly how to adjust your portfolio to best facilitate your circumstances. This way, your investments’ successes depend more on your decision-making than on the ups and downs of market trends.