In this episode, we share our list of ten things to do if you’re within ten years of retirement. The list includes taking inventory of your financial situation, reflecting on your current vision of retirement, projecting your future expenses in retirement, understanding your healthcare options, running retirement projections to see where you stand, taking advantage of tax-advantaged retirement accounts and catch-up contributions, revisiting your investment portfolio and asset allocation, checking in with your spouse or partner to see if you’re on the same page, and doing a “trial run” of retirement to see how it feels. We’re big proponents of planning, and the earlier you address some of these things the more time you give yourself to do proactive planning, implement beneficial strategies, and make any necessary adjustments to ensure that your retirement ends up aligning with your ideal vision of it.
Outline of this episode
- Taking inventory of your current financial situation [1:24]
- Reflecting on your vision of retirement [3:12]
- Projecting your future expenses [5:43]
- Understanding your healthcare options [8:54]
- Having a long-term care plan [11:35]
- Running retirement projections [14:37]
- Taking advantage of tax advantage accounts [17:32]
- Revisiting your investment portfolio and asset allocation [20:28]
- Retirement trial run [25:14]
- The recap [28:20]
Taking inventory, confirming your vision, and projecting expenses
Our goal is for you to be able to walk away from this episode with some things to act upon, or at the very least, reflect on to help make retirement a success for you. Let’s begin with taking inventory of your financial situation. Start by putting together your net worth statement, which is your list of your assets as well as what you owe so you understand what's currently available to fund retirement.
Next, reflect on your current vision of retirement. Spend some time thinking about what you want retirement to look like, how your lifestyle will change, and whether there are any specific or bigger goals you want to achieve in retirement.
Then project your future expenses. Use the back of the envelope approach we shared to estimate your current spending. Then based on your reflection on retirement, adjust this spending number either upward or downward to incorporate how things will change in retirement compared to now.
Healthcare options & retirement projections
Health insurance changes materially when you retire. If you retire before 65, understand your options for bridging the gap until Medicare. If you retire after 65, understand how health insurance works on Medicare and based on either scenario, incorporate that extra cost into your retirement spending. You'll also want to make sure you have a plan for long-term care. Understand the likelihood and potential cost of long-term care in retirement, and make sure you have a plan for addressing it, whether that's self-funding and earmarking that as a goal, buying insurance (which is typically done in the late fifties), or some combination of the two.
It’s important to run retirement projections to see where you stand based on what you've saved for retirement, how much you're saving each year, what age you plan to retire, and how much you plan to spend in retirement (both on living expenses and other goals). Run projections to understand whether or not you're on track for your current vision of retirement. If you aren't, then make the necessary adjustments.
Tax advantages, asset allocation, and the more qualitative aspects
When saving for retirement, the best way to stretch your dollars as far as possible is to save to tax-advantaged accounts. Be sure to understand your options and keep in mind that contribution limits for these accounts increase once you turn 50. Review your investment portfolio relative to your retirement goal to confirm that it's the right allocation for you. If it isn't, make the needed adjustments to your investments.
Check in with your spouse or partner to see if you're on the same page. Sit down to discuss your respective visions of retirement, and if there's a disconnect between the two, start having the conversations needed to adjust your visions or reach a compromise that allows both of you to be happy.
And lastly, if you're able to, do a trial run of retirement to see how it feels. You can start to replicate some of your planned retirement experiences such as where you live, reducing your workload, hobbies, activities, etc., before actually pulling the trigger on retirement. This allows you to confirm that the reality of retirement aligns with your vision for retirement and if you're going to be happy and content once you do fully retire.
Resources & People Mentioned
- Download our guide: Retirement Timeline – Key Dates & Opportunities
- Download our guide: Retirement Checklist – A Guide to Planning for Retirement
- Episode #25: Planning for Healthcare in Retirement
- Episode #50: Having a Plan for Long-Term Care
- Episode #51: Making Sense of Your Retirement Projections
- Episode #39: Should You Change Your Investments as You Approach Retirement?