If you’re in the final stage of your career, you’re likely spending more time thinking about how to prepare for retirement financially. You’ve been saving for retirement for decades, but as it draws closer and becomes more and more real, you may have some anxiety. Learn the steps you can take to help ensure that you’ve done all you can to set yourself up to retire with 10 years or less to go.
What to Do Ten Years Before Retirement
Assess Your Retirement Goals
Retirement plans are unique to each person and vary based on individual goals. As you approach the final planning stages in your lead-up to retirement, it’s important to first think through what life will look like when you’re retired. Your intentions in retirement can have a significant impact on how you want to approach the last 10 years of pre-retirement. It might be helpful to create a 10-year retirement plan in which you outline travel plans, hobbies you intend to invest in, gifts for family members, lifestyle changes and living expenses.
You may need to regularly reassess your plans and goals as life changes. Perhaps you have a new grandchild halfway across the country – you may want to update your budget to include regular travel or even purchasing a new home. You may also realize in the first few years of retirement that your lifestyle should change, whether that’s allowing you more money for hobbies or reining in the spending to help ensure your nest egg will last. You may also decide that you’d enjoy or benefit from a part-time job. Remember, these goals are your goals and should fit the retirement you’re looking for.
Estimate Your Retirement Income
Review all your sources of retirement income to see if they align with your retirement income needs. Start with your employer-sponsored 401(k) or 401(b) account then consider any IRAs and any other retirement investments you may own. You may also have rental income or continued income from a part-time job. Try to determine how much income each can provide monthly and use that as the foundation for your monthly budget.
This is an estimate, so be ready to be flexible once you actually begin to withdraw from your accounts.
Determine When to Start Claiming Social Security
Having a good handle on your other sources of income can help you determine when you should start taking Social Security. Although you can start taking Social Security benefits at age 62, the longer you wait (up to age 70), the higher your retirement benefit will be for the rest of your life. It may be beneficial for you to wait to access Social Security until later, relying on other income sources to support you in the meantime.
You can create an account on the Social Security Administration website to view your earnings and see benefit estimates that can help you make the best decision for you.
Develop a Tax Strategy
Work with a financial advisor and a tax professional to create a withdrawal strategy that minimizes your tax liability in retirement. This is different based on your unique circumstances but may include withdrawing from taxable accounts first to take advantage of tax-deferred growth. You should also consider your legacy and the impact of estate taxes; if you intend to leave significant assets to your heirs, you may need a different strategy that helps reduce capital gains taxes on inheritance.
Boost Your Retirement Savings, Pay Down Debt
The last decade of your career is your final opportunity to devote significant amounts of your income toward retirement. Use this time to make financial moves that will help prepare you for retirement: increase your contributions, take advantage of catch-up contributions and pay off as much debt as possible . Eliminating debt before retirement gives you greater flexibility to alter your retirement budget if needed rather than having a significant portion of your income allotted to debt payments.
Plan for Higher Healthcare Costs
An average retired couple at 65 in 2022 may need approximately $315,000 to cover health care expenses in retirement. Not only will you have greater healthcare needs as you age, you’ll also be transitioning away from private health insurance to Medicare, which may alter the coverage you receive. Although Medicare (Parts A and B) will cover a portion of your costs, you'll still have deductibles, copayments and coinsurance. Medicare Advantage (also known as Medicare Part C) may offer additional benefits. Medigap insurance policies may be another option for out-of-pocket costs.
This number doesn’t include long-term care expenses; approximately 70% of Americans who turn 65 will need long-term care, but by age 65 it may be too late to be approved for long-term care insurance. Long-term care costs vary substantially depending on where you live and can be extremely expensive. Making plans for your healthcare needs before you reach retirement can help ensure that you are protected.
Review Your Estate Plan
An estate plan is one of the greatest gifts you can leave for your loved ones. By laying out your final wishes and your plans for leaving a financial legacy with your assets, you can cut down on family disputes and ensure your wishes are being honored. But it’s not enough to just have an estate plan; you’ll want to regularly review and update the plan whenever you experience a life change – such as selling property or welcoming a new family member.
Work With a Professional
A financial advisor can help ensure that you are on-track to retire on your timeframe and can help you complete these last critical steps before retirement. Connect with a Farm Bureau financial advisor to protect your future.