3 Secrets of Retirement Power Planners

By Markets Fool.com

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If you want to live the retirement of your dreams, you need to think like a power planner. Photo: Flickr user spinster cardigan.

Numerous studies and surveys have come to a nearly unanimous conclusion: Most people fail to adequately plan for retirement. And there's no shortage of infographics highlighting just how much near-retirees neglected to save throughout their careers, either.

But there are two sides to every coin. Despite the statistics, there's a core group of individuals who have unlocked the secrets of retirement readiness. They're known as "power planners."

Power planners are not confined to the privileged or ultra-affluent; these are everyday people. According to Transamerica's 14th Annual Retirement Survey, a majority of these individuals report an annual household income of less than $100,000, and they span across age ranges.

What sets them apart? It's their proactive approach to retirement planning. One of the ultimate measures of how power planners compare to all workers is their level of savings across all retirement accounts. These "elite" retirement savers' accounts have an average balance more than triple that of the average worker. It's clear they understand the benefits of a written strategy, saving aggressively, and having a savings backup plan.

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Within their plans are the solutions to at least three common retirement dilemmas. See whether you've taken these same steps and are on your way to becoming a power planner.

1. Have a clear retirement vision
Having a vision for retirement is the first step in planning for your goals. If you'd like to enjoy a rich lifestyle, it will require significant savings. Savvy and responsible retirement planning helps make your retirement a time of relaxation and freedom from stress. Inadequate retirement planning, meanwhile, can force you to scrimp and save and worry over your finances. Whether you plan to travel the globe or spend quality time with your grandchildren, list and prioritize your retirement plans and goals.

It's important that you write your goals and plans down. Retirement planning is not just about saving. Achieving success comes from creating a strategy you can stick to. This will help you stay the course when the market is inconsistent. Successful investors have long-term goals, and they stick to them regardless of temporary market fluctuations.

2. Know how much income you'll need during retirement
If you haven't figured out how much money you'll need to live the retirement you're imagining, then it's time to take the guesswork out of your savings plan. There are several ways you can determine this all-important number. One simple method is to multiply your current income by 25. This calculation -- which conservatively assumes you'll spend 25 years in retirement -- gives you a broad idea of what you need to save for your post-work life.

Another approach is to figure out your income replacement ratio, i.e., the percentage of your current income that you'll need during retirement. This method gives you a more precise number. Many financial advisors say you'll need 80% of your current income to live comfortably in retirement. This is because you'll be spending less money on work-related expenses like daily commuting and dining out. However, you may need more than that if you plan to enjoy a luxurious retirement or if you carry substantial debt. Likewise, you may need less if, for example, you've downsized and/or paid off your home. Many retirees live comfortably on 70% of their former income.

Once you know your replacement ratio, use this calculation to determine your retirement savings goal:

(current income x replacement ratio) x 25 = your retirement savings goal

For example, if you currently earn $100,000 annually and you determined your replacement ratio to be 80%:

($100,000 x 0.80) x 25 = $2 million

Again, this assumes you'll spend 25 years in retirement, so adjust accordingly if you're expecting a different retirement time frame.

3. Have the knowledge to make informed retirement decisions
The 2013 Jackson Investor Education Survey showed that 42% of men and 55% of women feel as if they don't have enough financial knowledge to make investing decisions. Power planners, on the other hand, can navigate fund prospectuses with ease and are comfortable using investing lingo in everyday conversation.

Knowledge is power, and there are plenty of resources available for you to educate yourself. Use Google to search for specific terms and phrases, such as "401(k) help," to help you find answers to any questions you may have. This is also where in-plan advice, whether offered through your company as an employee benefit or through your retirement plan administrator, can come in handy. Regardless of where you seek your information, getting comfortable with at least the basics of investing can go a long way toward helping you achieve your long-term goals.

Rising health care costs, longer life expectancies, the uncertainty of Social Security, and changes in corporate retirement plans are among the realities that make planning for your future more important than ever. Getting a handle on market conditions while creating a healthy and prosperous retirement could take decades, and you'll experience many twists and turns along the way. But with these power-planner tips at your disposal, you're likely to feel more confident as you navigate toward your destination.

The article 3 Secrets of Retirement Power Planners originally appeared on Fool.com.

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