Almost There: What to Do 10 Years, 5 Years and 1 Year before Retirement
Timing is an important part of the planning process
Retirement planning isn't just about saving money until you reach your ideal retirement age. It's about strategic lifestyle decisions and making certain moves with your savings and assets for years before you reach retirement. Here are some guidelines you should consider:
10 Years before Retirement
- Work to avoid new debt. When you are 10 years away from retirement, it's a good time to avoid taking on debt. You should be focused on paying off existing debt so that you can simplify your post-retirement life.
- Think about where you might want to live. You may not want to live your retirement years in the same location where you lived your working years. For reasons of comfort or budget, you may decide that it's better to move elsewhere once you stop working. Start researching alternative locations at least 10 years before you retire.
- Think about your investment risk. The closer you get to retirement, the less you'll want to focus on high-risk investments and the more you'll want to focus on asset preservation. Work with your financial institution on moving your assets around accordingly.
- Estimate your needs, and plan to save for them. Your saving obligations do not abate the closer you get to retirement - they increase. Look for ways to tweak your budget and increase your retirement savings contributions during the decade before you retire.
5 Years before Retirement
- Consider asset allocation. Work with your financial institution to reconsider the risk held in your portfolio. With each passing year, think about making your portfolio a bit more conservative and taking a bit less risk.
- Start selling tangible assets to prepare for a post-retirement move. If you plan to move when you retire, you don't want to downsize your possessions at the last minute. Instead, think about the items you can unload now - such as a second car, unused furniture from your children's former rooms and other soon-to-be-unneeded pieces.
- Talk to your children about your plans. It's important to give your children an idea of what changes they might expect when you retire. But don't spring these changes on them at the last minute. Instead, sit down with them a few years in advance so that they have the time they need to prepare emotionally.
- Dedicate yourself to saving. The five-year span before your retirement is no time to start slouching on your savings. By now, your debt should be paid off and you should be saving even more than you were before.
- Focus on an ideal retirement age. Check your retirement savings balances, your budget and your anticipated expenses so you can make sure you are on track for retiring when you want to. Also, check with your human resources department and benefits administrator to ensure that you will be fully vested at that time. Keep in mind any penalties you might face for early withdrawal from your IRAs.
1 Year before Retirement
- Move your assets. Your financial advisor may suggest another reallocation of your invested assets as you close in on your retirement. The idea is not to cut off asset growth, but to be more invested in fixed income and low-risk stocks as well as some cash.
- Downsize your home. If you plan to move after retirement, you may want to talk to a real estate agent now. Discover how much you can expect to sell your home for, and determine when you need to get it on the market.
- Verify dates for retirement fund access. Talk to your HR department and find out when you can access company-provided retirement accounts.
- Think about health insurance. If you retire before you are eligible for Medicare, then you need to consider what you will do for health insurance coverage until that time.
- Finalize your budget. Create your final post-retirement budget based on your anticipated living expenses after retirement. Don't forget to include taxes for any capital gains you might have and for taxable retirement account withdrawals.
Allow us to work with you on your retirement planning needs, whether you are 5, 10, 15 or 40 years out from retirement. Just stop by or give us a call today.