After decades of hard work, retirement is finally on the horizon. But with all the responsibilities, tasks and work deadlines, retirement planning can easily fall off the list of all your priorities.
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However, if you want your transition from work to retirement to be smooth and worry-free, now is the time to take charge of your financial future.
What steps should you take to prepare for retirement in the next 10 years? How to solidify your financial base? Read on as we help answer these questions and more. Also find out why talking to a financial advisor before retiring is an important step.
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When you have less than 10 years left until you leave the workforce, it’s essential to start planning, not just dreaming. So take some time to think about how you plan to spend your retirement days.
Are you planning to explore the world? Are there any creative passions you would like to pursue? How much will it cost you? Try to be as specific as possible.
But retirement isn’t just about having fun. You also need to consider your health goals and long-term care.
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Once you have a clear understanding of what you want your retirement to look like, you should take the time to create a realistic monthly budget. To do this, you need to research how much you will need for housing, healthcare, food and entertainment, and also take into account inflation.
At the same time, you should start developing your retirement income plan. Write down all possible sources of income, such as Social Security, annuity, and all your retirement savings. If you plan to work part-time or earn additional income from rental properties, note that as well.
Here’s a handy tool to use to estimate your Social Security benefits.
“Even if you’re still 10 years away from retirement, it’s not too early to start developing a retirement income plan,” said Chris Urban, CFP®, RICP®, founder of Discovery Wealth Planning. “You should take the time to learn about your options for generating income so you can retire with peace and confidence. Consider your sources of guaranteed income such as pensions and/or Social Security, as well as investment and retirement accounts to draw on to support your retirement lifestyle. Coming up with a plan you’re comfortable with, perhaps a few years before you retire, will allow you to spend with confidence once you’re no longer earning a salary.
As you approach retirement, you’ll need to change how you allocate your assets. It’s a totally different experience for your life and your money. Some experts say your investments should become more conservative as you age, while others point out that it’s essential to earn returns that allow you to keep up with inflation (or better yet, keep up with inflation). ‘Before !).
While there is no one-size-fits-all approach to asset allocation, there are ways to find a strategy that fits your specific needs.
After you’ve determined how much money you’ll need and how much reliable income you’ll have from sources other than your savings, you’ll need to calculate the difference between the two numbers. Think carefully about what costs you could forgo if necessary.
Money you will need immediately should be kept in cash. Funds you will need in a few years can be held in bonds. Money that you will no longer need in the near future can be used in stocks.
“Take a closer look at your household asset allocation across all of your retirement and investment accounts and start positioning accounts appropriately based on your short-, medium-, and long-term goals,” Urban said. “Often this results in a combination of safer assets such as cash, CDs, etc., as well as stocks, bonds, alternatives, real estate, etc.”
Debt payments can quickly deplete your retirement savings. Even if you have an investment account that earns 8% per year, that won’t do you much good when you have credit card debt that earns 19%. That’s why it’s important to pay off your high-interest debts as quickly as possible. The sooner you are debt free, the more income you can allocate to your retirement accounts.
Did you know that people aged 50 or older can contribute more to their retirement account? That’s correct. Many employers offer 401(k) plans, which include catch-up contributions. That means you can save an extra $7,500 per year. For an IRA, you can contribute an additional $1,000 per year.
If you maximize these contributions, you will significantly increase your retirement nest egg. This means less stress about your financial health.
A 2021 survey by Fidelity Investments found that finances and retirement planning are difficult topics for many married couples. Surprisingly, some couples aren’t even on the same page about how they want to spend their retirement days. But if you want the transition to be successful, you will have to address this subject, as uncomfortable as it may be.
What will we do when we retire? What do we want to prioritize? What will it take for us to be able to afford it? These are all important questions that you should discuss together.
Ideally, you should plan for retirement right out of college. Realistically? That’s not always how it happens.
Yet even if you’ve struggled to build a sizable retirement fund, it’s not too late to start. Ten years may seem like a long time ago, but time flies. Remember, retirement planning is a marathon, not a sprint. Even if you still have the opportunity, it’s important to set clear goals, maximize your retirement contributions and pay off as much debt as possible.
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This article originally appeared on GOBankingRates.com: 6 Things to Do Now if You’re 10 Years From Retirement, According to an Expert
