The Home Stretch: Seven Essential Steps for Pre-Retirees

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As you approach retirement, it's crucial to take proactive steps to ensure a smooth transition into this new phase of life. The decade before retirement is a critical period for financial planning and decision-making.

During this time, the impact of financial missteps is amplified because there is less time for investments to recover compared with earlier stages of the investing journey.

As in a foot race, the home stretch is the time to be sure-footed to make sure decades of savings are not lost just before the finish line of retirement.

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Here are seven essential steps that pre-retiree investors should consider:

1. Determine the right time to retire

Deciding the right time to retire involves evaluating various factors such as health care costs, the size of your nest egg and anticipated expenses. It's important to have a clear understanding of your financial situation and retirement goals.

At what age do you think you’ll retire? This critical question is not that easy to answer. When the Employee Benefit Research Institute asked workers over age 25 to estimate when they’d retire, some surprising results emerged.

More than half of workers said they expect to retire at the age of 65 or later. However, most retirees (70%) reported retiring before 65.

2. Take aim at your retirement target

Your income needs in retirement will differ from your working years. A common rule of thumb is to save enough to generate 70% to 90% of your pre-retirement income.

Another rule is to measure your savings mile markers by how much you should have saved at various ages.

For example, if you are making $100,000 at age 55, you should have retirement savings of six to eight times that, or $600,000 to $800,000.

Another rule is to determine what target savings it would take to sustain a 4% withdrawal rate while exhausting a particular bucket of savings over a 20- or 25-year time frame. The amount of savings needed will be determined by how much risk can be tolerated to earn a targeted rate of return.

3. Maximize your nest egg

Take full advantage of workplace plans and participate in catch-up contributions if you're over age 50. Consider adding personal retirement savings and a spousal IRA for a spouse without income.

By maximizing IRA and catch-up IRA contributions, as well as retirement plan contributions and catch-up contributions, a couple, both aged 50 or older, would be able to contribute as much as $46,500 a year to tax-advantaged retirement accounts, assuming one spouse is working and has an income of $150,000. (See the IRS notice on retirement account limits for 2025.)

4. Get a portfolio checkup

Regularly review your portfolio to ensure it aligns with your retirement goals. Consider the impact of job changes on your retirement planning and the importance of maintaining a balanced.

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This is especially important given that the average worker today changes jobs 12 times during their working years, according to the U.S. Bureau of Labor Statistics.

Understanding the financial outlook for and determining your full retirement age (FRA) is essential. Consider the benefits of delaying Social Security to maximize your monthly benefit.

While Social Security may be claimed at 62, waiting until your FRA or until age 70 will increase the monthly benefit. The Social Security Administration provides a benefits planner with expected benefits by date of birth.

6. Build a retirement income stream

Explore income-generating investments and systematic withdrawal plans to create a steady income stream in retirement. Evaluate different income-producing products and their potential impact on your retirement savings.

If your nest egg is large enough, current interest rates may generate enough income. Still, you may benefit from a systematic withdrawal plan that may rely on selling some of your investment principal to meet income needs.

7. Look beyond the money

Retirement is not just about finances. Consider factors that contribute to happiness in retirement, such as health, friendships and family. Create a retirement living plan that includes activities and goals beyond financial security.

By following these steps, pre-retirees can better prepare for a fulfilling and financially secure retirement journey.

Just like some runners choose to work with a trainer, working with a financial adviser may provide personalized guidance tailored to your unique situation.

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Mike Dullaghan is Director of Retirement Sales Execution for Franklin Templeton, joining via the Putnam integration in 2024. He is responsible for promoting new content, providing thought leadership and delivering the tools and resources that enable the Retirement team to effectively sell Franklin products. Mike collaborates and coordinates across multiple business lines, including US Marketing, Distribution Enablement, Public Market Investments, Distribution Intelligence and Retirement. Previously at Putnam, he was the Director of Content and Sales Enablement for Putnam’s DCIO Team.