When you’ve been in business as long as we have and you’ve helped as many retirees and soon-to-be-retirees with their planning as we have, you hear a lot of the same questions. We thought it would be a good idea to answer a couple of these repeated questions every week.
Please note this very important fact. Our answers do not take into account your particular investment objectives, financial situation, or risk tolerance and may not be suitable for all investors. Our answers are not financial advice and should not be taken as advice. This material is provided for educational purposes only.
I Am 10 Years Away From Retirement. What Should I Be Doing?
At Franklin Retirement Solutions, we work with people getting ready to retire, people that are retiring, and people that have retired. We really run the gamut. But we don’t always meet people in that “getting ready to retire” stage. And far too often, when we meet with folks who are already retired, we find mistakes that they have made that permanently impact (usually negatively) their retirement.
A big question on the preparation side is “I’m retiring in 10 years. What should I do?” or “I am working for another 10 years and then I’m retiring. How do I prepare?”. Let’s go over some of the big pieces:
Get Clarity
Figure out, knock out, and write down as many hard details as you can.
- Your target retirement lifestyle (basic, comfortable, travel-heavy, etc.)
- Your expected retirement date
- Your monthly income needs in retirement
Once you have those, you can estimate a rough retirement figure. How much you’ll need in a very broad sense. You can calculate:
- What you already have saved
- What you’re contributing each year
- What you may receive from Social Security, pensions, or rental/other income
Catch Up
If you’re 10 years away from retirement, you’re likely in your 50s and, starting at age 50, you’re allowed to really invest in your employer-sponsored retirement accounts.
- Increase retirement contributions (especially when you get raises)
- Take advantage of catch-up contributions (if eligible)
- Ensure you’re capturing any employer match (it’s part of your compensation)
If you’re unsure what’s realistic, a retirement projection can show how much you need to save monthly to stay on track.
Evaluate (Or Re-Evaluate) Your Investment Philosophy
You may not need to “go conservative,” but you should get more intentional about risk while still focusing on growth. Also, if you don’t have an emergency fund you should start one. This should be a couple of months’—if not a year or two’s—worth of living expenses in a liquid account so that, if the market takes a downturn, you can avoid making a withdrawal from your investments and locking in those losses.
Work On Your Debt & Plan For Big Expenses
Prioritize removing pressure from your future budget, including high-interest revolving debt, and plan now for big expenses down the road. Roofs, HVAC, water heaters, and large appliances all have lifespans that you need to account for. Future weddings, future college, and future home purchases by kids and grandkids should also be considered.
Get A Handle On Healthcare
Retirees have four options for healthcare: go on their spouse’s plan, go on an Exchange plan through the Affordable Care Act, Medicare, or self fund their healthcare. Federal employees have a fifth option: continue FEHB coverage. If you’re retiring at 65, make sure you understand Medicare timing. If you’re retiring early, make sure you have a solid plan for coverage during those non-Medicare years.
And don’t forget about long-term care coverage. Nobody thinks they’ll need it but they keep building new long-term care facilities.
Start Building A Proactive Tax Plan
Tax preparation – passively just filling out your documents every April – costs you money. Proactive Tax Planning can save you money.
Taxes play a role in every piece of a comprehensive retirement plan, so start building a proactive tax plan. Understand where all your money is, what types of accounts those are, what their tax consequences are, and how you can best manage and mitigate their impacts. This is a fantastic time to explore whether Roth conversions could make sense for you.
Keep Asking Yourself Three Big Questions
- Do you have enough?
- Have you had enough?
- Do you have enough to do?
Once the answer to those three questions is “Yes”, you are officially ready to retire. Who knows? Maybe you’ll beat your 10-year estimate.
And if you need help getting any of this done… that’s what Franklin Retirement Solutions is here for. Give us a call at 215-657-9200, send an email to [email protected], or grab some time with one of our advisors.