What You Need to Do 10, 5, and 1 Year before Retirement
After spending years with no shortage of money, it’s pretty hard to live with no source of income when you retire. Instead of regret, the key tip here is to start saving money years before to live a happy life.
Nobody can determine the exact figure you need to save for retirement. Your retirement plan is a complete picture of your lifestyle, goals, and circumstances.
If you’re preparing for your retirement plan, here is what you need to do 10, 5, and 1 year before your retirement.
10-Years before Retirement
It’s a crucial time to start putting money in your retirement account if you have not started already. Think of ways to turn your savings into an income. Make a list of all the things that you would like to do after your retirement, so you make a comprehensive plan.
For instance, are you planning to relocate after retirement? Are you planning to travel or thinking of buying a new home? Consider these factors when you start making a retirement plan.
It’s also an ideal time to pay attention to tax planning to reduce your tax bills during retirement. Your healthcare costs will also rise after retirement, so keep all these big expenses in mind 10-years before retirement.
5-Years before Retirement
5-years before your retirement is a time to take action. If your portfolio suffers during this time, you will have to withdraw early from your retirement account. Your funds will start depleting due to withdrawal. It would help if you started investing in different assets to save yourself from a bigger loss and have a stable income for your retirement. Some examples to diversify your investments are asset allocation, fixed-income sources, bonds, stocks, etc., to save yourself from a shortfall.
1 Year before Retirement
The 1-year before your retirement is the most crucial period. It’s time to finalize your estate plan, allocate beneficiaries, title your properties, etc., so everything is in place before retirement. If you don’t act fast, then you will end up paying from your retirement income.
Test out if your retirement spending plan will be enough to keep you afloat during this time. Make the most of this time to update your retirement plan if there’s a possibility.
Francisco Faraco is a CFA charterholder with years of experience in the field. Francisco Jose Faraco lives in New York with his family. He is currently working as a Teaching Assistant in the Financial Mathematics program at the University of Chicago.
