If you save in a 401(k) or IRA, congratulations! You’re taking a great step toward financial success and well-being, potentially using tax advantages through these accounts, or picking up free money as employer contributions.

Undoubtedly, contributing to these retirement plans is a must if you want financial independence and stability down the road. However, “employer-sponsored retirement plan” or “IRA plan” can be slightly misleading. A 401(k) or IRA is not a retirement plan.

They are investment vehicles that help you save for retirement. These accounts help you develop the resources you need to live the life you want.

But they’re only pieces to a retirement plan, not a retirement plan itself.

A retirement plan is a well-thought-out blueprint for achieving your specific retirement goals. The foundation of this blueprint is defining the retirement lifestyle you want to have and then pricing it. Your retirement savings and investment strategies should be built on this foundation.

If your 401(k) or IRA is not a Retirement Plan… What Is?

If you have a 401(k) or IRA, that’s great! Again, these accounts are part of a plan that can help set you up for the lifestyle you want once you retire.

The overall plan should include the following:

Your current financial situation: Where are you right now? What have you saved up to this point for your retirement years? How much are you currently saving each paycheck and yearly for your retirement?
Your goals: What do you want your retirement lifestyle to look like? When would you like to retire? Where would you want to live in retirement?
Your estimate of what you need and how long it will take you to get there: How much will you need to live the life you want? What will your tax situation look like when you retire? How will you pay for unforeseen healthcare costs? What’s the difference between how much you need saved and where you are today? What adjustments will you need to make regarding the amount you are saving?
Your Investment Selections: Have you properly linked your retirement account’s investment decisions with your retirement goals and risk tolerance? Are you monitoring and adjusting your investment portfolio as your life evolves and the economic environment changes? Have you sought our professional help in doing so?
Your tools and resources: What’s available for you to use to help you reach your goals? How will you use these resources effectively?
Your action steps: What will it take to get from where you are today to where you want to be in retirement?

A retirement plan isn’t just one thing. It’s an entire system, or a roadmap, that plots how to get to where you want to go and what you need to do along the way.

It’s a powerful tool because it allows you to be proactive rather than just reactive. You can see what needs to get done — and how! And perhaps even more importantly, your plan can help you foresee challenges before they become problems that are hard to solve.

Considerations for Your Retirement Accounts in Your Plan

Your 401(k) or IRA comes into play in a few places in your retirement plan.

The balances of these accounts contribute to the assets in your net worth. The balances also help you determine where you are today versus how much you need to have before you can retire. And you can list these accounts as some of the tools and resources at your disposal.

You’ll also want to consider exactly how your accounts, whether you have a 401(k), IRA, or both, best fit into the overall picture.

Retirement planning includes asking (and answering) questions like:

How long should I max out my 401(k) if I can?
Does my 401(k) offer the best funds (with reasonable fees) for my goals?
Should I rollover my 401(k)?
Does it make more sense to contribute to an IRA or Roth IRA?
How do I withdraw money from my 401(k) or IRA?
How do I deal with Social Security?
What’s the best way to minimize my tax burden?
What do I do if I’m self-employed?

These questions may or may not apply to you, and that’s because each retirement plan should be unique to your goals, needs, challenges, and available resources.

Do You Have a Plan?

Now that you know a 401(k) or IRA isn’t a retirement plan, it is just one piece of a much larger puzzle. It’s worth asking: do you have a plan?

If not, the time to start is now. It doesn’t matter how young or old you are. You need a plan to help you make the most of the opportunities available. It’s never too early or too late to take action and be proactive about living the life you want.

Eric C. Jansen, ChFC , is the founder, president, and chief investment officer of Finivi Inc., a Westborough, Massachusetts-based firm offering retirement income planning and investment management services nationwide.

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Disclaimer: This information is for educational purposes only and should not be considered legal or tax advice. Finivi Inc. makes no representations regarding the accuracy or completeness of linked third-party content and assumes no responsibility for any outcomes resulting from its use. External links do not imply endorsement.

Please consult a professional before making financial decisions. Social Security benefit amounts and regulations are subject to change. For personalized guidance, consult the Social Security Administration at www.ssa.gov.