How to feel more secure about your retirement funds

Retirement is an opportunity to engage more deeply in activities that bring personal fulfillment—whether it's traveling, volunteering, pursuing new hobbies or spending quality time with loved ones. Achieving this vision requires thoughtful financial planning to ensure that your resources align with your aspirations throughout the various stages of retirement.

"Financial planning, in my opinion, is 80% psychological and 20% math," says Craig Shively, a financial planner with First Citizens Wealth. "Retirement planning isn't just about the numbers. It starts with asking yourself, 'What do I really want my retirement to look like?'" Taking the following steps will help you envision what retirement looks like for you so you can approach it more confidently.

1Know where your money's going now

What's the best way to confirm you can live on your spending plan once you're retired? "Live on one now," Shively says. If you don't currently have a budget, create one—if only to get a stronger idea of your daily expenses. Tools like household budget calculators have made this easier to do. Review your budget quarterly—or at least every 6 months—to see if you need to adjust.

Also look for areas where you can reduce spending, such as canceling subscriptions or consolidating debt, to save more for retirement. Having a better handle on your finances today goes a long way toward assuring yourself that you'll be comfortable in retirement.

2Picture how you'll want to live

Retirement looks different for everyone. Think realistically about how you'll spend your time in retirement, and consider what matters most. Are you hoping to travel extensively, visit family or move to an area with a lower cost of living?

The answers to these questions will influence how much money you'll need to fund your definition of living well. It's also important to recognize that your envisioned retirement lifestyle will likely evolve as you age. Healthcare expenses will likely increase over time, with data from the Center for Retirement Research showing that out-of-pocket healthcare costs consume about 12% of income for the typical retiree (PDF).

At the same time, other expenses like clothing and automobile costs typically drop as retirees spend less on work-related attire and commute less. Meanwhile, travel spending tends to increase in the early years of retirement and tapers off as mobility declines.

3Plan beyond your needs

If you can afford to do so, plan for a retirement that exceeds your life expectancy. "If your family health history says you're likely to live until 75, plan to 90 to temper that longevity risk," Shively says. "If you do live to be 90, great―you're covered. If not, you've got funds left over that your loved ones or your favorite charity can inherit from you."

4Work with a financial professional

One of the best things you can do to adequately plan and manage your retirement—and alleviate any concerns about not being able to fund it—is to work with a trusted financial advisor, Shively says. A financial professional can help you understand how to achieve a realistic and attainable retirement lifestyle, set measurable financial goals to help you get there and adjust the plan as time passes.

"Those adjustments may be in response to issues such as market appreciation, inflation and return rates on investment portfolios," he adds. "Working with a financial professional on your spending plan and investments helps ensure your financial plan is working to help you meet your goals."

5Reimagine what retirement might mean

The cultural definition of retirement is shifting. More people are working longer, partially in response to the increase in full retirement age to 67 to those born in 1960 or later. According to research from Bain & Company, 41% of workers expect to do so beyond age 65 in some way, assisted by the flexibility of remote and online work.

"I think retirement is going to become more fluid," Shively says. "Maybe we take a step back from working full time to part time, or we serve on boards in an advisory capacity. I anticipate the next generation's post-work years will still include work, just not in the typical 9-to-5 sense."

While it's good to plan as if you won't have earned income during retirement, this may not end up being the case. Extra income can create more options for you, from transferring wealth to upgrading your quality of life.

6Don't let fear drive your decisions

Shively acknowledges that talking about aging can evoke a mix of emotions, but "the sooner you can take these steps, the sooner you can come up with a plan and achieve peace of mind today and in your retirement," he says.

For instance, research from the Employee Benefit Research Institute (PDF) found that a 25-year-old worker earning $40,000 annually would need to contribute approximately 6.4% of their salary each year into retirement to have a 75% chance of not running out of money in retirement. However, delaying the start of savings until age 40 increases the required annual contribution to 16.5% to achieve the same probability of success.

"Good retirement planning isn't about sacrificing today's joys for tomorrow's security," Shively says. "It's about finding a balance that allows you to live well now while you prepare wisely for the future."