The Final Countdown: 5 Years to Retirement

Most people treat retirement as a “set-it-and-forget-it” project—they automate contributions to an employer-provided 401(k), get the company match (hopefully) and then watch the fund grow. One day, your daily destination involves lures and rods instead of reports and research.

This is a great first step, but a successful retirement requires a more strategized plan. Start by breaking it up into stages. Today, we’re talking about the important steps a person should take about five years from their expected retirement date. Beyond understanding how retirement income works and the associated tax implications, here are some other things to consider:

1. Have a back-up career plan
   You may plan to stay with your current company until you retire, unfortunately, plans can change. Even if you’ve been loyal to your employer for a significant amount of time, it’s possible to get laid off. What will you do? Freelance? Start your own business? Work for another company?
   
   Or, maybe you’ll be at your job until you retire but are interested in continuing to work in some capacity. Now is the time to prepare. Keep your resume up-to-date and investigate what steps you should take as you near this major life change.




2. Consider downsizing
   Many retirees stay in their family homes primarily because they no longer owe anything on the mortgage. However, don’t overlook the ongoing costs—general upkeep, taxes and utilities, just to name a few—as well as the time and energy it takes to maintain. Downsizing could cut down on maintenance expenses and also put a serious chunk of cash in your savings.




3. Cash in your stocks
   Financial professionals often recommend reducing your equities a few years before and after your retirement date. Why? To decrease the chance of losing money while keeping what you’ve saved as your retirement begins. Once you’ve had a chance to see how you use the money, you can reinvest later on.




4. Boost your Social Security earnings
   According to the Social Security Administration (SSA), if you retire at your full retirement age of 67 (if born in 1960 or later), you will receive 100% of your retirement benefits. However, if you want to take an earlier retirement, say at 65, you’ll only receive 86.7% of your benefits. If you’re in good health and can still perform your work duties, consider delaying retirement until age 70—in which case, you’ll receive 124% of your benefits. That’s a significant difference!




5. Put together an estimated budget
   Write down all of your post-retirement expenses. Maybe your big expenses have already happened. Maybe you still have tuition and weddings to fund. Do you want to travel? Whatever it is, put it all down in one place. Compare this monthly amount to the income you expect to receive after retirement. Include pensions, Social Security and any additional sources of income. It’s best to discuss these amounts with a professional who can advise you on how to move forward—which brings us to the next point:




6. Find a trusted financial advisor
   You don’t have to know everything about retirement to have a comfortable one. If you have questions or need help deciphering the rules and regulations, find a good financial advisor. It’s a good idea to start talking with a professional as early as possible. That way, you have more time to implement the strategies they recommend.




7. Keep your family in the loop
   Retirement is a big life change. Not only does it affect your finances, but it also affects your relationships. Discuss your short- and long-term goals as a family to make sure everyone is on the same page.