Preparing for retirement

After years of diligent saving, investing and growing wealth, the final years leading up to retirement can feel exciting — and a little overwhelming. It’s typically a time to clarify your retirement vision, while also making important financial decisions to help make your vision a reality.

By beginning to plan for this phase in the decade preceding retirement, you can enter your next chapter feeling energized about what’s to come. We can help guide you through the decisions you’ll need to make during these years to help you reach your goals.  

Here are strategic actions to take during the countdown to retirement: 

10+ years before retirement: Maintain momentum  

One decade from retirement, you’ll want to start planning your transition. At this point, it’s important to keep the focus on growing your wealth and being aware of milestone dates that allow you to save more. 

• Prioritize your savings: This could include maxing out contributions to your retirement accounts. If you’re eligible, consider funding a health savings account (HSA) in the years you’re still working. HSAs offer unique tax benefits that can help you pay for out-of-pocket medical expenses in retirement — including Medicare premiums. 

• Keep track of the key retirement milestone birthdays: As you near retirement, there are certain birthdays that are financially important. You may want to consider bigger financial adjustments when you reach these milestone ages. 

• Take advantage of catch-up contributions: Once you turn age 50, you’re eligible to allocate additional dollars, known as a “catch-up contribution,” to your 401(k) and IRA. These additional contributions can provide a nice boost to your overall retirement savings. 

5-10 years before retirement: Clarify your vision 

At this stage of preparing for retirement, you likely already have a broad vision of when and how you want to spend your time in retirement. But it’s time to get clearer about what your plans are.   

• Get more specific: Maybe you want to volunteer, focus on a hobby or work part-time. As part of your planning, think about your ideal retirement lifestyle. Ask yourself: What’s truly important to me? What will I do with more freedom and flexibility in retirement? 

• Set your target retirement date: Think about the age and time of life you would like to retire. This estimate doesn’t need to be precise — a lot may change in the coming years — but it can be helpful to have a ballpark date to plan and strive toward. 

• Revisit your investment strategy: As you approach retirement, your goals and risk tolerance are likely to change, so it’s a good time to make sure your investment mix, asset allocation and diversification strategy reflect your current time horizon and your priorities. 

2-5 years before retirement: Start thinking tactics 

For many retirees, the transition from earning income to withdrawing income can be an adjustment. Starting early on a retirement income strategy can help ease the transition into your post-work life. As retirement becomes more tangible, start thinking about the income you’ll need to support your lifestyle.  

• Set your official retirement date: It’s now time to choose a more precise retirement age. While you may have had an approximate estimate of when you wanted to retire previously, your target may evolve due to new circumstances in your life or the external environment.  

• Track your expenses: This retirement preparation exercise can help you better understand how much you currently spend so that you’ll have an idea of how much income you’ll need. It’s helpful to categorize your spending into two buckets: your essential needs (housing, groceries, utilities and health care), and your lifestyle spending (including travel, hobbies and dining out). You can do this in a variety of ways using automated tools, separate credit cards or checking accounts.  

• Decide when to take Social Security: You’ll want to start planning for Social Security income years before you actually take it. You can typically start collecting benefits at age 62, but you may want to consider delaying, depending on your circumstances. With each year you delay, your overall benefit increases until reaching the maximum amount at age 70. As you make your decision, consider factors such as your other income sources, tax rate, whether you have any health issues and your family’s life expectancy history. 

Learn more: When should I retire? 

Retirement income calculator

Use this calculator to find out how much monthly income your savings could generate for you in retirement.

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1 year before retirement: Think about cash flow 

During the 12-month countdown to your retirement date, get a more refined sense of what your expenses will be and home in on an income withdrawal strategy that’s designed to last: 

• Create a spending plan: To help you determine the size of the paycheck you’d like to have in retirement, consider creating a budget. While a budget can sound restrictive, this exercise can help you determine the amount of income you’ll realistically need to live comfortably. 

• Set aside a cash reserve: Retirees should consider having a cash reserve to cover as much as 12 to 24 months of essential expenses — or three times the difference between annual dependable income and annual necessary expenses. Having this liquidity can be particularly helpful in the event of a challenging market environment, when you may not want to tap into investments. 

• Design a sustainable withdrawal strategy: Once you know the amount of income you’ll need, you can create a withdrawal strategy that accounts for your different income sources, your tax situation and your financial goals. While a general rule for withdrawing money from retirement savings is to take out up to 4% each year, everyone’s situation is unique, and you should plan on making adjustments as your goals and lifestyle changes.  

Get help as you near one of life’s major milestones 

We can help you determine the appropriate steps to take in the decades, years and months leading up to retirement as part of your personalized financial strategies.