Golden years: plan for retirement with these six steps.

• Author: Lee, Sean P.
• Position: Money Talk

Regardless of where you might be in your career, proactively planning your retirement can have a significant impact on your golden years. Here are six steps to help you get on track and stay on track with planning your retirement.

Lifestyle Planning: Define your ideal retirement

Retirement may seem like a distant thought or it could be right around the corner. Regardless of where you are, in order to begin planning, you must determine what your ideal retirement looks like. Once you step out of the workforce, do you envision yourself traveling, taking on a new hobby or just relaxing? This step is about bringing clarity to your life's goals from both a financial and personal standpoint.

Income Planning: Determine how much money you'll need

Once you have successfully identified your desired retirement lifestyle, you can begin calculating your income needs and building an income plan. This step includes one of the most difficult questions in retirement planning: How much will you need to have saved in order to live your desired retirement lifestyle?

To get a rough idea, the first step is to focus on the essentials or your "must-haves." Start by estimating and building out your expenses based on your current 12-month spending habits. Make a concerted effort to eliminate unnecessary costs and identify which expenses are likely to change. For example, will your mortgage be paid off by retirement? Will you eventually be adding your child's college tuition to your list of expenses? By laying out your future expenses, you can begin to calculate the amount of money you will need for your golden years.

Next, identify the costs of your desired lifestyle, or your "wants" in retirement and add that to your budget. When combined, this will give you an estimate of what you need to do to live how you want in your retirement years. Remember, retirement could be as long as 30 years--plan accordingly.

Investment Planning: Invest for your future income

As you continue to save and invest for your retirement, it is also important to consistently analyze your investments. The investment decisions you make today could impact how you live in your later years.

While it's prudent to be well diversified, it's important that the investments you use to accumulate wealth are risk appropriate. Review your current investment situation and identify how much risk you're currently taking. How exposed are you to the market?

The closer you get to retirement, the less you should...