It may take decades over the course of a career to save for retirement, but there is a small and defined window of time leading up to one’s golden years that is exceptionally critical when it comes to planning. I often work with my clients three to five years ahead of their anticipated retirement to fine-tune their plan, reviewing everything from financial expectations, probable lifestyle changes or decisions, and often-overlooked non-financial considerations.
Having a map or outline defined in the years before retirement will ultimately provide financial and emotional comfort and stability for the future. Below is a roundup of significant elements to think through in the final years ahead of retirement:
How will the current market environment affect your future?
While inflation and a potential recession may be on the minds of many today, it’s important to remain disciplined in an investment approach. Keep a long-term perspective and don’t let current market noise distract or influence notable portfolio changes, as that could negatively impact meeting future retirement and investment goals.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
At most, the current market environment may lend an opportunity to rebalance. If a pre-retiree investor is now underweight in stocks due to the market dip, they should consider allocating more bonds to stocks to get back to their target allocation.
Another element to proactively plan for is building a larger cash nest egg that can be pulled from early in retirement. Once someone starts spending from their portfolio in retirement, I recommend having six to 12 months of liquid expenses for their upcoming spending. Amid the current market environment, if someone has the financial wherewithal while on a steady income stream, sock away these future funds that may be tapped later in life.
What are your lifestyle expectations for retirement?
Being financially prepared to retire is one thing, but being emotionally and mentally ready is another. Retirement can be a sizable time frame of one’s life – 20 to 30 years or even more. How that time is spent is important.
Often, I see people entering retirement and asking themselves, “Now what?” Not only can this be a financial detriment (frivolous, unorganized spending on travel or hobbies), it can leave a person feeling unfulfilled during this stage of life.
In the years before retirement, determine what your ideal lifestyle should look like. How do you want to spend your days? What is important to keep you mentally stimulated? Will your spouse/partner join you? Three to five years before retirement, if time allows, treat this window as a dress rehearsal. For example, if volunteering is important, join one or two organizations in advance to ensure that the activity and time spent will align with your future retirement objectives.
Is your spouse on the same page?
I recently had a husband and wife client decide to retire at the same time, even though one partner was almost 10 years away from traditional retirement age. The rationale? It was imperative for this couple to experience this new phase of life together.
While this scenario may not work for all, think through the relationship dynamic years before you plan to leave the workforce. For some, having one spouse continue in their career and remain in that “9 to 5” mindset works; it doesn’t upset the household balance that was in play for years prior. For others, it might spur a range of emotions that otherwise weren’t thought about in advance.
Of equal significance is discussing long-term lifestyle plans among partners. Upon retirement, will you move to be intentionally closer to children and grandchildren, or move to a more tax-advantageous state? Will you travel internationally or purchase a vacation home? Think about retirement goals, and what they look like both individually and as a couple – mapping this perceived lifestyle out in advance will help both partners stay on the same page to enjoy a successful retirement.
Modeling out retirement in advance is of course subject to evolve. But, by having even a loose interpretation of how an individual or couple want to spend this time and how they plan to afford retirement, they are often much better aligned for success than those without a plan.
-
Trade Uncertainty Sparks Whipsaw Session: Stock Market TodayVolatility is making a cameo here in mid-October, a generally positive month marked by its historic stock market events.
-
How to Add Your Passport to Google WalletTravelers can now store and use their digital passport on Android for faster, more secure airport experiences.
-
Medicare Open Enrollment: Why You Need to Pay Extra Attention to Part D, From a Financial AdviserThe lowest premium for prescription drug coverage might not actually save you the most money. Make sure you take copays into consideration and do the math.
-
How the One Big Beautiful Bill Will Change Charitable GivingTaxpayers who don't itemize will be able to take a bigger deduction for donations, which could boost giving. However, high-income donors could see their tax benefits reduced.
-
A 'Fast, Fair and Friendly' Fail: Farmers Irks Customers With Its Handling of a Data BreachFarmers Insurance is facing negative attention and lawsuits because of a three-month delay in notifying 1.1 million policyholders about a data breach. Here's what you can do if you're affected.
-
Serving the HNW Market: How Financial Advisers Can Break Through and Deliver Lasting ValueFinancial advisers have a significant opportunity to serve high-net-worth clients by elevating their capabilities, delivering comprehensive planning, building diverse teams and prioritizing family wealth education.
-
Don't Just Sell, Connect: How Financial Advisers Can Ignite Their Sales GrowthAvoid complacency and embrace small, consistent improvements to optimize your sales process and results.
-
Are You a Small Business Owner Buckling Under Economic Pressure? Here's How You Can CopeSignificant emotional and financial challenges, including tariff worries, are piling up on small business leaders. Here's how leaders can develop more healthy coping strategies and systems of support.
-
To Raise Prices or Not to Raise Prices: Tariff Tips for Small BusinessesSmall businesses are making critical decisions. Should they pass on higher costs due to tariffs, or would that only cost them more in lost customers?
-
Five Retirement Planning Traps You Can't Afford to Fall Into, From a Wealth AdviserTo help ensure you reach your savings goals and enjoy financial security in your golden years, be aware of these common pitfalls. The key is to be proactive, informed and flexible.
