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It is crucial to think about the long term when you are planning for your retirement. Having a plan — a specific road map to retirement — is absolutely essential.

Effective retirement planning comes down to four phases:

1. The accumulation phase

The first phase is one of accumulating assets, usually from earned income. However, most individuals do not put away enough, or they use the wrong vehicles for accumulating assets.

Today, most people rely on just their 401(k) plans to save for retirement, only to find out later that the savings are not enough, and that their withdrawals are fully taxable.

In addition to a 401(k), investors can utilize long-term savings vehicles like Roth IRAs or brokerage accounts, in which after-tax funds are invested for retirement.

It is imperative to meet with a retirement adviser early on to get advice on both how much and where you should be putting your hard-earned savings during the accumulation phase.

2. The planning and preservation phase

Many people tend to ride the market roller coaster all the way until their last working day, and they simply cross their fingers and hope the market won’t plunge in the critical few years just before and after retirement.

As you get closer to the distribution phase, one thing you should do is scale back risk.

Consider adhering to the adage 100 years minus your age equals the most money you should have at risk. Example: If you are 50, you should only have 50% of your portfolio at risk; at 60 you should only have 40% at risk, and so on.

Now, if you will have a pension or other guaranteed income in retirement, this rule may be too conservative for you, and you may feel you can afford more risk. But you should still be careful.

In the seven to 10 years prior to retirement, watch for good times when the market is up to sell off riskier investments and move those assets to vehicles that are protected from loss.

Scaling back risk as you get closer to retirement is only one part of a solid retirement plan. Your plan should also include a year-by-year spendable income strategy to meet and exceed your goals in the distribution phase (next) while considering taxes, inflation, liquidity, market losses, required minimum distributions, the cost of healthcare and funds to cover any unanticipated large purchases.

Finally, your plan should include some protection against long-term care costs, which can quickly decimate a retirement portfolio, and premature death, which can sometimes leave a surviving spouse with significantly lower guaranteed income.

3. The distribution phase

This is retirement — the phase you have been saving for your whole life — and you deserve to enjoy it. Continue to scale back risk as you get older, and be sure to stick to the plan.

Again, the cushion of liquid assets that you are not relying on to supplement your income can help cover the cost of any unanticipated large purchases, but you should not simply pull those assets from anywhere at any time.

You don’t want to sell off assets that are market sensitive during a down trend or a bear market, so keep some of these funds in a vehicle that is not market sensitive and is very liquid.

4. The legacy phase

People want to leave money behind if they can, but that shouldn’t be your top priority. Instead, your top priority should be making it through retirement without going broke.

You may think that the IRA funds you put away pretax might be a great gift to your heirs, but they can also be a curse. IRA money left to anyone other than the surviving spouse increases the recipient’s taxable income in the year it is received.

If you want to leave money behind, there are other types of accounts, such as Roth IRAs, that are better for leaving to your family. Distributions from Roth IRAs are tax-free if the person who set up the account met the five-year holding period for contributions and conversions.

Annuities are another option people utilize because they bypass probate upon death in most states, and the growth is tax-deferred until you or your beneficiaries make withdrawals.

Stocks can be a good option because your beneficiaries inherit the stepped-up value, which means that they never have to pay taxes for any growth or increase in value you may have experienced before they inherit the stock. [Ed. Note: Legislation proposed by the Biden administration would eliminate stepped-up basis for estates above $1 million ($2 million for couples)].

Best of all for inheritance is life insurance. With life insurance, your beneficiaries are not required to pay taxes on the difference between the premiums paid and the death benefit, which is often significant.

Dan Dunkin contributed to this article.

© 2021 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.