10 Things To Do Within 10 Years Of Retirement

By Brett Gottlieb

After decades of working and saving (and working and saving some more), you wake up one day and realize you are only 10 years away from your target retirement date. But even though you’re getting closer to your much-anticipated golden years, this is not the time to turn on cruise control. Don’t just count down the days until you pack up your office for good; rather, determine to finish the race stronger than you started. Consider doing the following 10 things to help you finish your working years fully confident in your retirement plans.

1. Run The Numbers

When it comes to your retirement savings, there are countless uncertainties. While it may be impossible to predict exactly how long your nest egg will last, you can run your figures through different scenarios to evaluate what may happen if the market crashes, if you face unexpected healthcare costs, or if a spouse dies prematurely. Once you stress-test your savings in this way, you can come up with a plan to help to mitigate these risks. If you wait until you are retired to take this step, it may be too late to make the changes necessary to potentially maximize your retirement income.

2. Test-Drive Your Retirement Income

Whether you choose to continue working during retirement or not, you’ll likely rely on a retirement income generated from several different sources, including Social Security, employer-sponsored retirement plans, personal retirement accounts, and other savings and investment programs. Throughout your working years, you’ve been contributing money to these accounts with a plan to secure a consistent income in retirement. But how do you know if it’s enough to last your whole retirement?

One way is to test it out. While it’s generally recommended to assume you’ll need 80% of your current income in retirement, you and your family may need more or less. For a few months, test-drive a reduced budget. To start, try living on 80% of what you currently receive. Do you find yourself pinching pennies or did you find ways to decrease your budget even more?

3. Ramp Up Your Saving

It may sound obvious, but the closer you get to retirement, the more you should aim to save. Cut back on expenses, channel any raises and bonuses directly to savings, and automate savings increases of 1% every few months.

Your increased savings can be invested into your company 401(k) or 403(b) plan or your personal IRA. If you are over 50, you can invest an extra $1,000 a year into an IRA for a total of $7,000 for 2020. At $6,500, the catch-up contribution for those over 50 is even greater for 401(k) and 403(b) plans, allowing a total annual contribution limit of $26,000.

4. Decide Where You’ll Live

Housing costs tend to be the largest expense in retirement, with the average retiree spending $16,723 per year on housing, not including utilities or amenities.[1] As you approach retirement, think through where you’re going to live and how much you’ll spend on housing costs in retirement.

If you plan on relocating, do your research. Visit your potential locations, and decide if the climate, community, and area are right for you. If you want to stay where you are, ask yourself if downsizing is a viable option. If not, look at any modifications that are needed in your current home to accommodate aging. Plan to make any expensive adjustments and repairs now, before you’re living on a tighter budget.

5. Evaluate Your Investments

The 10-year pre-retirement mark is a particularly appropriate time to adjust your portfolio’s allocations. Meet with your financial advisor to review your current lineup and determine whether your risk tolerance should change.

Along with reallocating your investments, you’ll want to consider how the sequence of returns could impact your portfolio’s value over time. In the simplest of terms, sequence of returns refers to the risk of receiving lower or negative returns early in a period when you’re making withdrawals from your investments. If your retirement date correlates with the onset of a bear market, your savings can be depleted quickly as you withdraw from your portfolio. With a smaller investment base, you’ll have less wealth remaining to benefit from a future market upswing.

To help mitigate the risk of sequence of returns ruining your retirement portfolio, work with your advisor to take the appropriate steps, such as reducing volatility, examining your withdrawal strategy, and finding different market options to help preserve your money.

6. Create A Social Security Strategy

Social Security benefits can be claimed anytime between ages 62 and 70. However, the timing of when you decide to collect these benefits will impact the amount of payout you receive. At 62, you become eligible to receive Social Security benefits for the first time. But before you start claiming Social Security, it’s important to review your benefits and options for claiming so you can plan to help maximize your lifetime benefit.

If your full retirement age (FRA) is 67 and you start claiming benefits at age 62, your monthly benefit amount will be 30% lower than if you waited for full retirement age.[2] And if you wait until age 70 to claim your benefits, your monthly check will be 24% higher than if you retire at 67.[3] It’s also important to consider how long you’ve worked and your lifetime average monthly earnings, which are used to calculate your benefit. In some cases, working a few extra years can have a big impact on your monthly Social Security benefit.

7. Research Healthcare Options

No matter how healthy you are today, you may need more health services as you age. According to the Employee Benefits Research Institute, the average couple at age 65 will require anywhere from $183,000 to $363,000 in healthcare costs in retirement.[4] Most people don’t even have that much in their retirement accounts to live on, let alone cover medical costs. Even with Medicare, there could be significant out-of-pocket expenses and many conditions and treatments that are not covered.

When choosing your health insurance for retirement, make sure you understand all Medicare options and supplements and work with an experienced professional to help you evaluate your options.

8. Consider Long-Term Care

Along the lines of health, think about your potential need for long-term care insurance. According to the U.S. Department of Health and Human Services, most Americans turning age 65 will face the potential of requiring long-term care at some point during their later years.[5] On average nationally, it costs $280 per day or $8,517 per month for a private room in a nursing home.[6] If you decide that long-term care insurance is the way to go, now is the time to act. Insurance costs increase with age. There is also the risk that your health will change and your application for insurance will be denied. Generally, you will have fewer options the longer you wait.

If you want to get a long-term care plan in place, you have a few options. It is smart to consider a traditional long-term care insurance policy, add a long-term care rider to your life insurance policy, purchase an annuity with a long-term care rider, or start saving for your long-term care so you can self-insure.

9. Put A Tax Plan In Place

Tax planning can save you more money than you realize. By projecting your future income and taxes now, you may find opportunities to save. When you are living off a fixed income in retirement, tax strategizing can make a world of difference in the longevity of your nest egg.

For example, a $50,000 withdrawal from a Roth IRA will have a wildly different tax impact than that same distribution from a traditional IRA. Talking with a CPA and creating a tax plan can help you strategically withdraw from your various retirement accounts and help reduce your tax liability.

10. Seek Out Professional Advice

These final years before retirement are critical for making decisions that have far-reaching consequences. Even if you have been saving and planning on your own up until this point, it’s smart to consider enlisting a financial advisor to help you plan for your financial future.

Allow our team at Comprehensive Advisor to help you create a personalized retirement road map to address your concerns and guide you to financial independence. Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125 to get started.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees in Business Administration and Economics. Brett is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

With a combined experience of over three decades in the financial services industry, our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial solutions for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a retirement road map to help ensure their assets are protected and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Comprehensive Advisor are not affiliated companies. C.A. Financial & Insurance Services, CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Neither the firm nor its representatives may give tax or legal advice. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc. generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Comprehensive Advisor, LLC is not affiliated with the U.S. government or any governmental agency. 713239-9/20

[1] https://www.fool.com/retirement/2019/06/10/heres-what-the-average-retiree-spends-on-housing-e.aspx

[2] https://www.fool.com/retirement/2019/10/24/heres-how-much-your-social-security-shrinks-if-you.aspx

[3] https://www.fool.com/retirement/what-are-delayed-retirement-credits.aspx

[4]https://www.ebri.org/docs/default-source/ebri-issue-brief/ebri_ib_481_savingstargets-16may19.pdf?sfvrsn=56b83f2f_6

[5] https://longtermcare.acl.gov/the-basics/who-needs-care.html

[6] https://www.genworth.com/aging-and-you/finances/cost-of-care.html

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