10 Years Before Retirement Checklist

It can take years to plan for your retirement, and you may be compelled to change your strategy every now and then to accommodate your diverse needs and wants. Every time your personal situation changes with marriage, divorce, having children, losing a loved one, suffering from a health condition, etc., your retirement planning checklist also alters. Moreover, every time there is a change in your professional status, you have to reflect the same in your retirement plan, so you are able to make the most of increments, bonuses, hikes, etc. Similarly, any downfall in your personal and professional life also calls for modifications to your retirement plan.
Keeping aside all these situations and events, you also have to keep adjusting your plan depending on how much time you have left to retire. When you are young and just beginning your career, you have fewer responsibilities. This is a great time to invest in equity. The long investment horizon balances out the risk, and you are able to build up a considerable corpus early in life. As you age, your responsibilities and liabilities deepen, and your ability and capacity to take risks reduce. This calls for a gradual decrease in your equity holdings and a shift towards debt instruments. Debt investments let you preserve capital and ensure safety with low risk. Reaching out to a professional financial advisor for financial advice can help you better prepare for your future and to be on track to save enough funds for your retirement.
If you are 10 years away from your retirement, you need a distinct retirement investment plan that lets you make enough money for your approaching retirement, and at the same time, offers safety so that you do not risk losing money at such a crucial time. This article talks about how to plan for retirement during this phase of your life. Keep reading to find out more.
Why retirement planning is important
Retirement planning ensures that you take care of all the minute details that can easily be overlooked otherwise. Retirement is a long phase of your life. And even though it is seen as the tail, it is a large and integral part of life that cannot be ignored. Depending on when you retire, your retirement could last for up to 30 years and sometimes even more. Moreover, this is a time when there is no active income or a job to rely on, and your health is bound to weaken and deteriorate due to advancement in age. All of these factors and more make retirement planning an essential task.
With retirement planning, you can gain the following advantages:
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- Peace of mind: Financial planning for retirement ensures that you live a stress-free life. Money is an indispensable part of the way you live your life. It dictates your lifestyle and is instrumental in providing you security. When your retirement planning checklist is up to date, and you are well aware of your financial situation, you can make decisions and investments that can keep you financially protected for as long as you live.
- Financial liquidity: Financial liquidity ensures that you have readily available funds for any need. Retirement comes with a host of expenses, and adequate investments and savings in the right funds guarantee you a lifetime of financial adequacy and abundance.
- Funds during emergencies: Whether your home needs urgent repairs or your child requires some financial assistance, thorough retirement planning can solve many financial emergencies. A piece of helpful retirement advice that you can ever receive and follow is to create an emergency fund for a rainy day.
- Better distribution of your assets among heirs: The looming fear of death starts to linger in the later years of your life. Therefore, estate planning is vital in your retirement planning checklist. An estate plan includes a will, a trust, health care directives, power of attorneys, and more to cumulatively offer your loved ones financial safety and, at the same time, ensure that your hard earned money that you have meticulously gathered over the years reaches your beneficiaries without being wasted away in taxes.
- Tax savings: A lot of people find themselves in a higher tax bracket than before in retirement. This can be due to a miscalculation in your choice of savings and investment instruments. Retirement planning ensures that you pick a combination of assets and deploy strategies that help you lower your taxability. Withdrawal schedules, postponement of withdrawals from accounts like Social Security benefits to maximize your check, switching between Roth and traditional retirement accounts, etc., are some ways to do this.
- Protection against health costs: Health concerns and the bills they result in is a prime expenditure in retirement. Retirement planning ensures that your needs are met with adequate funds in the form of insurance, savings account, long term care preparations, and more.
What retirement planning checklist do you need for a 10 year investment plan before retirement?
10 years before retirement is a significant time as it can either strengthen or break your finances. Making the right decisions at this phase can offer you a lifetime of security and the wrong moves can result in you living a life of fewer means. Here are some things you can do if you plan to retire in the next ten years.
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- Review your savings and investments: Considering the fact that most people retire in their 60s, ten years before your retirement would mean you are in your 50s. In your 50s, you would have saved a considerable portion of your retirement nest egg already. Therefore, the first thing you need to do is check how you are faring till now. There is no fixed number that you need to attain by any age, so do not be misled by numbers. However, your savings should align with your goals and reflect your needs. Have a look at your current lifestyle, and determine if your current retirement corpus would be sufficient to cover your expenses on a monthly basis or not. If the answer is yes, you are on the right track. However, if the answer is no, you would likely have to change your strategy and invest or save more. A professional financial advisor can offer you the right retirement advice and guide you to take the best course of action depending on how and where you are lacking.
- Maximize your savings: The moment you cross the age of 50, the main item on your retirement planning checklist should be to start focusing on maximizing your savings accounts like a 401(k) account, a 403(b) account, a 457 account, an IRA (Individual Retirement Account), etc. The government allows additional catch up contributions for people over 50 that allow you to save more. For instance, you can make a $1,000 catch-up contribution over the limit of $6,000 annually. This takes the total to $7,000 annually. Doing this for ten years will give you an advantage of $10,000 straight up. In the case of a 401(k) account, you can contribute up to $19,500 if you are under the age of 50. If you are over 50, you can additionally put in an amount of $6,500 as catch-up contribution per year. For a 10 year time frame, this totals to $65,000. Moreover, these contribution limits are only for the year 2021. They may be changed in the future, and you may even be able to contribute more.
- Pay off all your debt: A lot of people, who had previously stalled the idea of purchasing a home, find themselves purchasing one in their 50s. This can be a good time to purchase a house since you would be in a better position financially and can take on such a massive undertaking. However, you can also get stuck with a high value loan or mortgage very close to retirement. Many parents also take out loans for their children and their education. Alternatively, some end up using their savings from accounts like an IRA to fund their children’s education. This also, in turn, increases your dependence on debt like credit cards, personal loans, etc. Adding on to your debt increases the burden on your retirement fund. It eats away your savings in the form of high rates of interest. This can be particularly damaging to your retirement planning when you are nearing retirement in the next ten years. Given the value of student and home loans, the repayment schedule is likely to take many years. Overlapping your retirement with a loan can be worrisome and detrimental to your financial status. So, try to avoid taking on fresh debt during this time. Furthermore, if you have any debt from the past, your 10 year investment plan should focus on settling it as a priority.
- Make an estate plan: Estate planning is essential prior to retirement. Estate planning comprises a number of things. The most important of these is a will. A will is a legal document that states your wishes and how you want your assets to be distributed among your legal heirs and beneficiaries. The absence of a will can result in your estate being taken to court and having to suffer the long and expensive procedure of probate. Having a will ensures that your loved ones do not end up feuding over your assets and get their share in the proportion you want them to have. Trusts can be useful in the case of minors or children with disabilities. It can also be good if you want to restrict your child’s access to your assets up to a certain age. Health directives can be used if you become incapacitated and are not able to take your own decisions. Other useful estate planning documents include the power of attorneys. You also need to pick a legal guardian for a minor child. Moreover, you can come up with strategies like gifting or charity too. These help lower your taxes when you pass on your estate to your next of kin.
- Try to create multiple income streams: Multiple streams of income in retirement help you stay financially afloat for a longer time. The more income sources you have, the more relaxed and at ease you can be, knowing you would have something to bank on in your hour of need. More than one stream income also lets you indulge and live life luxuriously. As far as retirement is concerned, most people get money from their investment returns. These could be capital gains, cash flow from dividends, etc. Other sources of income include savings like pensions, Social Security benefits, etc. However, apart from these, it can also help to set up a side hustle. The retirement age may not be the same for all individuals. Despite the official retirement age, a lot of people continue to work beyond that age, and many retire way before. If you are retiring earlier than usual, a side hustle where you either work part time or are able to create a flow of income from can be advantageous. For instance, even though you may want to retire in your 40s, you can always create a real estate asset that is able to generate income in the form of rent or lease. Similarly, you can stop working full time but can have a business where you can work a few hours a week and still earn money. The foundations of these types of assets or income generating tools can begin approximately ten years before you retire. This will offer you enough time to set things up, watch it grow, surpass the risk phase, and build a reputation or value that contributes to a steady flow of income in retirement. So while retirement planning, look for ways to earn money outside of your investment returns and savings too.
- Create an emergency fund: Emergencies in retirement can push you to the edge and hamper your peace of mind. Therefore, it is essential to have an emergency fund as part of your retirement planning checklist. Your emergency fund can be big enough to cover at least up to 4 to 6 months of your monthly income at present. This can be useful in most situations. The emergency fund should also only be used for emergencies and no other purpose. The countdown to retirement can be quite eventful. This is a time when your children are growing and hence can have more financial demands like college education, travel, setting up a business, etc. The possibility of developing health conditions that can lead to hefty bills and prolonged lifelong treatment are also high. An emergency fund can help you tackle all of these without steering off the path. Moreover, if your employer wants you to hang in your shoes and promote younger talent, as is the case with many companies, you can use your emergency savings and cover your essential expenses. If you never get to use this fund pre-retirement, it will come in handy post-retirement. But as long as you have one, you will have the peace of mind that you have sufficient funds in your hour of need. It will also eliminate the chances of having to depend on others for your needs. You will also be able to avoid taking on fresh debt.
To summarize
Your 10 year investment plan for retirement is essential as it can help you gauge where you stand and where you lack. You can think of it as a test that determines your score and readiness for retirement. It will also strengthen your strategies and approach to financial planning for retirement. Retirement is a long time, and every minute detail needs to be accounted for when you plan for it. Having a distinct plan close to this phase will ensure that you take care of all details and are not left high and dry in your
golden years. So, make sure to go through these points thoroughly. In addition to this, if you want professional retirement advice, consult a financial advisor in your area and get personalized guidance on building your retirement corpus in a failproof manner.
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