How to Navigate the 10 Years Before Retirement

The decade before you retire is often crunch time for many would-be golden agers. It’s often a last-chance opportunity to fine-tune a plan that can set a successful retirement in motion. Still, many late-stage careerists aren’t sure exactly which steps they should take during those latter years—or how small course corrections can sometimes lead to large lifestyle wins. To get started, consider these four easy-to-enact retirement strategy boosters.

Assess Your Current Progress

A good first step is to figure out your target financial goal—and how far along you are toward that goal. A retirement planner calculator can help you appraise your current savings trajectory. To get a more accurate estimate, make sure to include your target retirement age, your annual income goal and the expected length of retirement.

Identify Ways to Accelerate Progress and Fill in Any Gaps

What if you run your numbers and discover a gap between where you are and where you want to be? Try one or more of these retirement strategy enhancers to help get your plan back on track.

1. Pay down or off outstanding debts. The fewer monthly expenses you have during retirement, the less income you’ll need to make ends meet. Credit card balances and car loans should take top priority. Mortgage payments and even student loans—either those borrowed for yourself or for a family member—can also substantially decrease cash flow for retirement expenses. Start paying down as many of those balances as possible.

2. Take advantage of savings opportunities, including retirement plan catch-up provisions. The more you stash away, the quicker you can reach your retirement savings goals. If you’re over age 50, there are catch-up provisions that allow you to contribute up to $7,000 to your IRA and an extra $6,500 to a 403(b). Take advantage of any retirement plan contribution match your employer offers. These years are critical to your long-term savings strategy.

3. Consider an annuity if you have access to a cash lump sum and want to have another income stream during retirement.

4. Delay retirement or plan to work part-time if you’re still not meeting your goals. A delayed start date can give you more time to prepare while part-time income can help supplement gaps in your retirement saving goals.

Start Decreasing Risk

Stocks, stock-based mutual funds and exchange-traded funds (ETFs) are great for building assets during the early and middle years of your career. As you reach retirement age, however, the same market swings that can often leave an equity portfolio more flush in the long-term can have serious downside effects in the short-term. That’s because pre-retirees might need to tap their portfolios before a market trough has the time to recover. Consider these tips to mitigate against this possibility in the years before retirement:

1. Start allocating a greater percentage of assets to less risky investments as you inch closer to retirement. Those could include high-quality corporate or government bonds, mutual funds or ETFs. Or, consider a target date mutual fund, which will automatically re-allocate your asset mix as you get closer to your target retirement date.

2. Hold more cash. During a robust market, move the first few years of retirement income to a cash-based account like a savings or money market fund. This strategy can safeguard those first-year retirement assets from the risk that markets will hit a short-term down cycle early in your retirement—right when market swings have the potential to do the most damage.

3. Create a strategy to pay for healthcare costs during retirement. A healthy 65-year-old couple could expect to pay thousands in healthcare costs during the remainder of their lives. That amount includes Medicare B and D premiums, dental costs, out-of-pocket medical expenses and long-term care. If you haven’t, consider a medical savings account that can be used to pay these costs as they arise. Fund a health savings account (HSA) if you have access to one, or just start a separate account that’s earmarked for medical spending. A long-term care insurance policy can also help offset the costs not paid by Medicare.

Start Planning Your Golden Days

Financial concerns aside, many new retirees are surprised to discover how much happiness, social connection and sense of purpose they derived from working their nine-to-fives. Before you cut your workplace cord, think about ways to include those sentiments as part of your second act. Will you join a social club? Start a second business? Volunteer or return to a long-abandoned hobby?

In the end, it’s your ability to pre-plan your retirement—both the day-to-day social details and long-term financial considerations—that can impact your ability to enjoy those years. It’s up to you. Make them special.

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