5 Things I Plan To Do in the 5 Years Leading Up to Retirement


Dean Mitchell / Getty Images Having a solid plan can keep you on track for…

Dean Mitchell / Getty Images

Dean Mitchell / Getty Images

Having a solid plan can keep you on track for your retirement goals, but just because you have one now doesn’t mean you never need to update it. In fact, if you want to ensure you can retire on your schedule and live comfortably once you do, you’ll probably need to make a few adjustments as you go. This becomes even more important as you get closer to retirement.

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But what exactly should you be doing in those final few years before you retire?

GOBankingRates spoke with Chad Gammon, financial planner at Arnold and Mote Wealth Management, and Dana Anspach, founder and CEO of Sensible Money, to get their thoughts. Here’s what they said they plan to do in the five or so years leading up to retirement and why that might work for others, too.

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Re-Evaluate How You Want Your Retirement Future To Look

For some people, retirement is the opportunity to leave the workforce behind forever and spend all that extra free time relaxing. But this isn’t the case for everyone.

“Having spent over 25 years in information technology, I realized my passion for personal finance,” Gammon said. “I’m not someone who envisions a retirement filled with endless relaxation or days spent playing golf. Instead, I see this next chapter as an opportunity to actively pursue my interest in financial planning. This means staying engaged, continuously learning, and helping others achieve their financial goals.”

It can take a while to figure out what you want your retirement to look like, which is why it’s smart to start thinking about this a few years before you retire.

“Do not take this lightly and give yourself time to explore,” Gammon said. “This took me well over a year to work on.”

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Review Those Financial and Retirement Plans

Ideally, you’ll already have a clear financial plan in the years leading up to retirement. If you don’t, now’s the time to make one. If you do, you’ll probably want to review it and make sure it still aligns with your actual goals and needs.

Don’t be afraid to get this done with a professional. Chances are they’ll see things you didn’t account for.

“Before I became a financial planner, I created my own financial plan but still sought the expertise of a professional to verify it,” Gammon said. “Getting another set of eyes on my plan was invaluable. I recommend interviewing several financial planners to find the right fit. A great resource for this is the National Association of Personal Financial Advisors (NAPFA).”

Look Over Your Portfolio and Make Adjustments

Around five years or so before you retire, assess your current financial portfolio and make some changes.

“You must realize that the portfolio that got you to retirement may not be the right portfolio to get you through retirement,” Anspach said. “Portfolios are designed with goals in mind. During your working years, that goal is to maximize returns to help you accumulate as much as possible. In retirement, the goal is to make sure you don’t run out of money. Different goals means a different portfolio strategy is needed.”

When Anspach gets closer to retirement, she plans to adjust her portfolio according to her goals and needs.

“When I am five years out from retirement, suppose I look ahead and know I will need $50,000 a year from my IRA for my first five years of retirement,” she said. “I will construct a bond or CD ladder within my IRA, so that each year I have $50,000 maturing. As those securities mature, I will use that cash to support my withdrawal needs. In this example, I would need approximately $250,000 (less when factoring in interest) to cover my first five years of withdrawals. The rest could remain in equities.”

Adjusting the retirement portfolio isn’t a one-time thing, however. It’s something that can be done every subsequent year until the actual date of retirement.

“Each year, I would consider selling equities to buy another rung on my bond ladder. So in a year, I may sell $50,000 of equities, buying a bond that matures five years in the future,” Anspach continued. “By doing this consistently, each year up until my retirement year, by the time I get to retirement, I will have 10 years of withdrawals covered by low-risk investments.”

Plan for Healthcare and Long-Term Care Costs

“Healthcare can be a significant expense in retirement, so it’s essential to evaluate your options to ensure you have adequate coverage and can manage these costs effectively,” Gammon said. “In my case, finding a passion that includes insurance benefits has helped fill that gap.”

If you don’t have healthcare through your employer, you’ll need to find other ways to manage medical expenses in your later years. Be sure to account for long-term care, too, as these can add up.

According to the Administration for Community Living, the average cost of long-term care is around $6,844 in a semi-private nursing home room. A private room goes up to about $7,698 a month. Costs can vary immensely based on the facility and the type — and duration — of care you need.

Review and Pay Off Any Remaining Debts

In the five or so years before retiring, Gammon also said it’s important to pay off any remaining debts. This can free up more income for day-to-day living expenses and reduce your financial stress.

“Paying off high-interest debt, such as credit cards or personal loans, is particularly important,” he said.

If possible, aim to be entirely debt free before retiring. Just don’t neglect your retirement account contributions to pay off those debts. If you do, you could end up shorting your retirement income. This could lead to financial insecurity or other undue stress as you make your way through your retirement years.

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This article originally appeared on GOBankingRates.com: I’m a Retirement Expert: 5 Things I Plan To Do in the 5 Years Leading Up to Retirement


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