When you think back to when you first began working, didn’t retirement seem like it was a lifetime away?
Yet, here you are.
Every decision you’ve made throughout your life has led you here.
We want to make sure retirement is everything you deserve.
Here are our recommendations for what you should be doing when you’re five years, three years, and, eventually, just one year from retirement.
Let the countdown begin.
If you’re five years from retirement, it might feel as if you have some breathing room.
But don’t be complacent.
The next five years will fly by.
Use this time to your advantage, and to see where things stand. What are you doing well? Do you need a course-correction?
At the five-year mark, we suggest you review the following:
Evaluate your spending habits. How might your cash outflow shift once you retire?
In most cases, we recommend you retire debt-free (this includes your mortgage). If you have credit card debt, pay off the cards with the highest interest rates first.
Everyone’s Social Security claiming ‘sweet spot’ is unique. Learn the basics now so you can make an informed decision down the line.
The average couple retiring today will spend about $280,000 on out-of-pocket healthcare-related expenses.1 Are you funding a Health Savings Account (HSA) to help cover these costs?
Medicare doesn’t cover long-term care, which is care that helps you with your day-to-day needs. Because some people can “self-insure,” not everyone needs a policy. Speak with your advisor so you can evaluate which decision is best for you.
Now that you’re inching closer, you can really start digging into some of the numbers.
But we also like to remind pre-retirees that retirement isn’t just about money. You need to start thinking about how to stay healthy and how you’ll live your day-to-day life.
At the three-year, pre-retirement stage, make the following points a priority:
Forward-thinking tax planning can save you tens of thousands of dollars. Are all your retirement savings in a tax-deferred account, such as a 401(k)? Now’s the time to decide whether putting your money in an account with a different tax structure (such as a Roth IRA) makes sense for you.
If you’re retiring at age 65, review your Medicare options and potential costs. If you’ll be retiring before age 65, figure out what you’ll do until you’re Medicare eligible.
This is important: The beneficiary designations on your retirement accounts supersede anything in your will. It only takes a few minutes to update these, and it could save your heirs a lot of heartache.
The #1 factor of a happy retirement is health and wellness. If you start doing mental and physical exercises right now, they’ll be routine once you retire.
Retirement is right around the corner.
This is when you need to ramp up your decision making. It’s time to:
Evaluate your risk exposure. Everyone is unique, but at this point in the process, your stocks, bonds and other investments should probably be allocated for capital preservation.
Depending on your current tax bracket (versus what it will be during retirement), it could make sense to convert a traditional IRA (a tax-deferred account) into a Roth IRA (an account that grows tax-free).
There are nine different paths for single people to claim Social Security, and 81 if you’re married. There are also numerous claiming decisions to make if you’re divorced, widowed, or disabled.
In just 365 days, your current daily routine will change. What will you do instead? Consider the things you’ve always wanted to do, like going back to school, taking up a new hobby, or starting a new company, and begin planning for them now.
You get one chance to retire “right.” Every choice you make leading up to retirement will impact you for decades to come.
While the suggestions we’ve made here are good starting points, they’re just the tip of the iceberg. See our detailed retirement checklist for additional information.
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1The NBRI Circle of Excellence Award is bestowed upon NBRI clients meeting one or both of the following criteria: Total Company score at or above the 75th percentile of the NBRI ClearPath Benchmarking Database and/or improvement of five (5) or more benchmarking percentiles in Total Company score over the previous survey.
2Scott Hanson (2011, 2012, 2013, 2014, 2015 & 2016) and Pat McClain (2012, 2013, 2014, 2015 & 2016). Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
3As of 01/20, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $8 billion in total assets under management and administration.
4Barron’s 2019 Top 50 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
✢Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.
✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.
†Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.