Everyone needs a plan for retirement. If you’ve never thought about it before I bet you have an idea in the back of your head about the money you will earn over the next 20-30 years of your life and how successful you will be.

Maybe you expect to have such a high income later in life that you won’t have to worry about money. Lot’s of people start out thinking like that and find themselves in a very different situation when they reach their fifties and sixties. Not everyone reaches the point where they are earning a high income later in life. The quality of life they experience after retirement will greatly depend on the plan they had in their twenties, thirties and forties.

So that brings us to the question, what is your plan? I’ve listed below what I believe to be the most common strategies people use to reach retirement. If you are a doctor, lawyer or have a high income in general they plans 1 or 2 might be enough. But if you are a regular guy or girl like me plans 3 or 4 are much more necessary.

Common Plans

1. Work and Save:
Develop a career, work towards promotion and save money. Extra cash goes into a savings account. Some portion of income may go to a 401k or other retirement savings account.

2. Work and Invest:
Just like plan 1 the idea is to work at your career and get promoted. You make sure to contribute to your 401k or IRA and would not miss out on the match opportunities offered by your company. The big with this plan is that the money you save gets actively invested. You buy stocks and mutual funds on your own in an attempt to grown your money. If a investment opportunity outside of the stock market presented itself you would possibly invest in it.

3. Work, Supplement Your Income and Invest:
This is a difficult strategy to balance, but it is one that I promote to all my readers. For most of us, working at our 9-5 job will not produce enough income to pay off our mortgage and build wealth for retirement. Supplemental income produces the income we need to be able to invest and grow towards our goals of financial freedom.

4. Work, Supplement Your Income, Invest and Buy Income Producing Assets:
This takes step 3 to the next level. After you have reached a point where your job and your supplemental income produce enough money you can start to buy income producing assets. These are assets that you pay a fixed price for, retain their value or increase in value and they pay you monthly recurring income. Using this strategy you increase and diversify your supplemental income to help you earn more.

When I first started thinking about my plan for retirement I realized that I was stuck on plan 2. For me, plan 2 wasn’t enough because my earning potential would not get me to where I wanted to be. If you have a high income, or expect to have a high income in the near future then plan 1 or 2 might be all you need. It’s good planning to write down your goals and come up with a plan for how you will achieve those goals.