Retirement planning is a way to help you maintain the same quality of life in the future. You might not want to work forever, or be able to fully rely on Social Security. Retirement planning has five steps: knowing when to start, calculating how much money you’ll need, setting priorities, choosing accounts and choosing investments.

Step 1: Know When to Start

The sooner you start planning for retirement, the more money you can invest for the long term. The earlier you start saving, the more time your money has to grow and benefit from compound interest. You can also take advantage of tax-advantaged retirement accounts, such as 401(k)s and IRAs, that let you defer or reduce taxes on your contributions and earnings.

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Step 2: Calculate How Much Money You’ll Need

One of the most challenging aspects of retirement planning is figuring out how much money you’ll need to live comfortably in retirement. There are many factors that affect this number, such as your expected retirement age, life expectancy, lifestyle, health care costs, inflation and taxes. A general rule of thumb is to aim for replacing 70% to 80% of your pre-retirement income, but this may vary depending on your personal situation. You can use a retirement calculator to help you estimate your retirement income and expenses, and adjust your savings rate accordingly.

Step 3: Set Priorities

Retirement planning is not only about saving money, but also about deciding what you want to do with your time and resources in retirement. Do you want to travel the world, pursue a hobby, volunteer, start a business or spend more time with family and friends? Setting priorities can help you align your retirement goals with your values and preferences. It can also help you budget for your retirement expenses and plan for potential trade-offs or risks.

Step 4: Choose Accounts

There are many types of accounts that can help you save for retirement, each with its own advantages and disadvantages. Some of the most common ones are:

– 401(k) or 403(b): These are employer-sponsored plans that allow you to contribute a percentage of your salary before taxes, up to a certain limit. Your employer may also match some or all of your contributions, which is essentially free money. Your money grows tax-deferred until you withdraw it in retirement, when it is taxed as ordinary income.

– IRA: This is an individual retirement account that you can open at a bank or brokerage firm. There are two types of IRAs: traditional and Roth. A traditional IRA lets you contribute money before taxes, up to a certain limit, and deduct your contributions from your taxable income. Your money grows tax-deferred until you withdraw it in retirement, when it is taxed as ordinary income. A Roth IRA lets you contribute money after taxes, up to a certain limit, and does not offer an immediate tax deduction. However, your money grows tax-free and you can withdraw it tax-free in retirement, as long as you meet certain rules.

– Other accounts: Depending on your situation, you may also consider other types of accounts that can help you save for retirement, such as SEP IRAs, SIMPLE IRAs, solo 401(k)s, annuities or taxable brokerage accounts.

Step 5: Choose Investments

Once you have chosen your accounts, you need to decide how to invest your money within them. The main factors that affect your investment decisions are your risk tolerance, time horizon and asset allocation. Your risk tolerance is how much risk you are willing to take with your money in exchange for higher returns. Your time horizon is how long you plan to invest your money before you need it in retirement. Your asset allocation is how you divide your money among different types of investments, such as stocks, bonds, cash and alternatives.

Generally speaking, financial advisors suggest that you invest more aggressively when you’re younger, then slowly dial back to a more conservative mix of investments as you approach retirement age. This is because stocks tend to offer higher returns than bonds or cash over the long term, but they also come with higher volatility and risk of loss. As you get closer to retirement, you may want to reduce your exposure to stocks and increase your exposure to bonds or cash, which tend to offer lower returns but more stability and safety.

However, there is no one-size-fits-all formula for choosing investments. You should consider your personal goals, preferences and circumstances when making investment decisions. You may also consult a financial advisor or use a robo-advisor if you need guidance or assistance.