Strategic moves 5, 2 and 1 year from retirement

A senior couple cook together in their kitchen


Key Points

  • Defining a purpose helps you envision priorities in retirement and the income you will need.
  • Even if Social Security income will be secondary for you, it pays to be strategic about filing for benefits.
  • Establish a basis for monthly retirement income needs by tracking expenses before you stop working.

The many strategic financial planning decisions you make with your advisor grow in importance over the years. This includes key decisions five, two and one year away from retirement.


5 years out: Define your retirement purpose

Look at retirement as a beginning rather than an end. Try to mentally remove yourself from your work role, so you see yourself in this new chapter. What’s important to you? What would you like to do with the additional freedom and flexibility in your life?

Here are a few ideas to explore. Map the details with your advisor. As part of ongoing retirement planning, it’s important to understand how you will fund the activities that bring you joy and fulfillment.

  • Help someone. Community organizations, nonprofits and churches need volunteers. Local education programs need teachers.
  • Be a lifelong learner. Take a class, learn a skill and share your new capabilities with others.
  • Create. There are many avenues to explore. Painting, woodworking, writing or gardening are just a few options.
  • Work. You will meet new people while supporting an effort you truly stand behind. Income is an added benefit.


2 years out: Plan for Social Security

Unlike other income sources, Social Security is income you cannot outlive. It also has the backing of the federal government and is protected against inflation.

Deciding when to file for it is a critical step in retirement planning. You can collect benefits as early as age 62, but waiting to collect can pay off in certain circumstances. Each year you delay increases your overall benefit until reaching the maximum amount at age 70.

Your Ameriprise advisor will help you evaluate the Social Security benefit options that support your financial goals and factor in your personal situation. In recommending an age to collect benefits, they will consider:

  • Varying tax rates on Social Security income
  • Capital gains and IRA withdrawals
  • Health issues and life expectancy in your family history

As part of ongoing financial planning, your advisor will work with you to create a retirement income strategy that factors in Social Security and other sources of income — retirement savings, a pension or an annuity, for example.


1 year out: Monitor your expenses and put a price tag on activities

Do this approximately 12 months before you stop working so you have a realistic basis for your monthly outflows.

Consider keeping two running lists — either conceptually or literally, using separate credit cards and checking accounts — to quantify two types of expenses:

  • Essential needs that continue in retirement, such as housing, transportation and health care
  • Lifestyle spending, such as hobbies and restaurants

After a year, you should have a good idea of how much income you’ll need for necessities, with extra money for leisure and lifestyle expenses.


Have confidence in your retirement income plan

Your Ameriprise financial advisor will help you take the right steps today — before you stop working — to support your retirement income later. Consult with your financial advisor to factor your new purpose, Social Security income and lifestyle expenses into your financial picture.