Retirement planning is an important step in everyone's financial life. You don't need to have every detail worked out, but you should have an idea of what you're getting into. Part of retirement planning is realizing it is a marathon, not a sprint, and different phases call for different strategies.

A mistake people can make throughout their careers is focusing too much on saving rather than investing. History shows that could be counterproductive to your retirement nest egg.

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Determining how much you need in retirement

If there were a Magic 8 Ball that you could shake to have it reveal how much you'll need for retirement, the planning process could be a lot more straightforward. Unfortunately, too many variables determine how much someone needs in retirement. The cost of retiring in San Diego will likely look a lot different than in Wilmington, N.C.

A common rule is the 4% rule, which says retirees can withdraw 4% of their savings in their first retirement year and then adjust accordingly for inflation every year without worrying about running out of money for at least 30 years. For example, if you withdraw $60,000 in your first year and inflation increases by 3%, you would withdraw $61,800 in year two.

The easiest way to see the 4% rule in action is by multiplying 25 by the yearly amount you believe you'll need in retirement. In this case, if you need $60,000 yearly in retirement, your savings goal should be $1.5 million. If you need $100,000 yearly, the goal should be $2.5 million.

It's important to understand the 4% rule is just a baseline and shouldn't be taken as the be-all and end-all. In times similar to now, when inflation is high, it might make sense for retirees to lower their initial withdrawal to a range of 3.3% to 3.5%.

Being too conservative can be costly

Every investors' risk tolerance is different, and this usually is reflected in their investments. Some investors prefer high-risk, high-reward growth stocks; others prefer value stocks. There are those who like dividend stocks; and some simply want investments with as little risk as possible.

The problem with that last choice is that the risk/reward trade-off usually means that investments with the least risk, such as fixed-income investments, also have very low returns compared to stocks' potential.

The further away you are from retirement, the more the focus should be on growing your money as much as possible. This generally means focusing on stocks. There are no risk-free stocks, as there are with Treasury bonds, but there are stocks that are time-tested and have proved that they can provide value with relatively low long-term risks.

Even simply investing in a broad, low-cost exchange-traded fund (ETF), like one that tracks the S&P 500, can work wonders compared to bonds. The S&P 500 contains the 500 largest public U.S. companies, so it comes with a natural layer of protection with its diversification.

Historically, the S&P 500 index has returned around 10% annually. That doesn't guarantee it'll continue to happen, but for perspective, let's see how $500 monthly investments stack up if you average 10% annual returns versus 4.6% returns (close to the 20-year Treasury yield) for 20 years.

Source: author calculations. Rounded down to the nearest hundred.

The current interest rates are also generous by most standards, so the difference in value could be even wider under more "normal" circumstances. It's even worse with cash sitting in a savings account because rarely will the interest earned outpace inflation. It would be losing purchasing power by the year.

An example of an approach investors can take

How you allocate your portfolio is relative to your personal situation, but here's an example of how it could be broken down based on your age group. The breakdown is broadly based on market cap, which also tends to have a risk/reward trade-off. Large-cap stocks usually provide more reliable returns, while small-cap stocks tend to be riskier but often have a higher return potential.

Younger than 40

• Large-cap stocks: 50%
• Mid-cap stocks: 15%
• Small-cap stocks: 15%
• International stocks: 20%

Age 40 to early 50s

• Bonds: 20%
• Large-cap stocks: 48%
• Mid-cap stocks: 8%
• Small-cap stocks: 8%
• International stocks: 16%

Age 50 into retirement

• Bonds: 30%
• Large-cap stocks: 35%
• Mid-cap stocks: 2.5%
• Small-cap stocks: 2.5%
• International stocks: 10%
• Cash: 20%

Remember: Only do what you're comfortable with. These aren't the definitive rules or allocations, just suggestions that investors can use to adjust accordingly.