7 Steps To Create a 10-Years-From-Retirement Plan

Many working people are unprepared for the financial challenge of saving for retirement. A 2024 GOBankingRates study found that 28% of workers surveyed had nothing saved for retirement and 39% weren’t contributing to a retirement fund. Some of the folks in that group may have a pension to rely on, but most are financially unprepared to exit the workforce.

Social Security is only designed to replace a portion of income in retirement, so those who find themselves roughly 10 years away from retiring, regardless of how much money they have saved, need to develop a plan for hitting the finish line successfully.

Get Started on a 10-Year Plan

Ten years is still enough time to reach a solid financial position. “It’s never too late! During the next 10 years, you may be able to accumulate a small fortune with proper planning,” said Patrick Traverse, CFP, financial advisor at MoneyCoach in Mount Pleasant, South Carolina.

People who have not saved a lot of money need to make an honest assessment of where they are and what sacrifices they are willing to make. Taking a few necessary steps now can make a world of difference down the road.

1. Assess Your Current Situation

Nobody likes to admit they might be ill-prepared to retire, but an honest assessment of where you are now financially is vital in order to create a plan that can accurately address any shortfalls.

Begin by counting how much you have accumulated in accounts earmarked for retirement. This includes balances in individual retirement accounts (IRAs) and workplace retirement plans, such as a 401(k) or 403(b). Include taxable accounts if you’re going to use them specifically for retirement, but omit money saved up for emergencies or larger purchases, such as a new car.

2. Identify Sources of Income

Existing retirement savings should provide the lion’s share of monthly income in retirement, but it may not be the only source. Additional income can come from a number of places outside of savings, and you should also consider that money.

Most workers qualify for Social Security benefits depending on factors such as career earnings, length of work history, and the age at which benefits are taken. For workers with no current retirement savings, this may be their only retirement asset.

If you’re fortunate enough to be covered by a pension plan, include that monthly income in your plan. You can also tally up income from a part-time job while in retirement.

3. Consider Your Retirement Goals

Retirement means different things to different people. Your retirement goals will depend not only on your assets but on your plans for the future. Someone intent on downsizing to a smaller property and living a quiet, modest lifestyle in retirement will have very different financial needs than a retiree who wants to travel extensively.

Develop a monthly budget to estimate regular expenditures in retirement, such as housing, food, dining out, and leisure activities. The costs for health and medical expenses—such as life insurance, long-term care insurance, prescription drugs, and doctor’s visits—can be substantial later in life, so be sure to factor them into a budget estimate.

4. Set a Target Retirement Age

Someone who is 10 years away from retirement could be as young as 45 if they are financially prepared and eager to exit the workforce, or as old as 65 or 70 if not. People with longer life expectancies should do their retirement planning estimates assuming they’ll need to fund a retirement that could potentially last for three decades or even more.

Planning for retirement means evaluating not only your expected spending habits in retirement but also how many years retirement may last. A retirement that lasts 30 to 40 years looks very different from one that may only last half that time. While early retirement may be a goal of many workers, a reasonable target retirement date achieves a balance between the size of the retirement portfolio and the length of retirement the nest egg can adequately support.

“The best way to determine a target date to retire is to consider when you will have enough to live through retirement without running out of money,” said Kirk Chisholm, wealth manager and principal at Innovative Advisory Group in Lexington, Massachusetts. “And it is always best to make conservative assumptions in case your estimates are a bit off.”

5. Confront Any Shortfall

All of the numbers compiled to this point should help answer the most important question of all: Do the accumulated retirement assets exceed the anticipated amount needed to fully fund your retirement? If the answer is yes, then it’s important to keep funding your retirement accounts in order to maintain the pace and stay on track. If the answer is no, then it’s time to figure out how to close the gap.

With 10 years to go until retirement, those who are behind schedule need to figure out ways to add to their savings accounts. To make meaningful changes, you will likely need to increase your savings rate while cutting back on unnecessary spending. It’s important to figure out how much more you need to save to close the shortfall and make appropriate changes to how much you contribute to IRAs and 401(k) accounts. Automatic savings options through payroll or bank account deductions are often ideal for keeping your savings on track.

You should also get cracking on eliminating your debt. Americans’ credit card debt reached $1.16 trillion in 2024, and the average balance on credit cards was $6,730, according to Experian data. Much of that debt comes with high interest rates, so getting rid of it can make a dramatic difference in your monthly budget.

“In reality, there are no financial magic tricks a financial advisor can do to make your situation better,” said Mark T. Hebner, founder and president of Index Fund Advisors, Inc. and author of “Index Funds: The 12-Step Recovery Program for Active Investors.” “It is going to take hard work and becoming accustomed to living on less in retirement. It doesn’t mean that it cannot be done, but having a transition plan and someone there for accountability and support is crucial.”

6. Assess Your Risk Tolerance

Risk tolerance is different at different ages. As workers begin approaching retirement age, portfolio allocations should gradually turn more conservative in order to preserve accumulated savings. A bear market with only a handful of years remaining until retirement could cripple your plans to exit the workforce on time. Retirement portfolios at this stage should focus primarily on high-quality, dividend-paying stocks and investment-grade bonds to produce both conservative growth and income.

One guideline suggests that investors should subtract their age from 110 to determine how much to invest in stocks. A 70-year-old, for example, would target an allocation of 40% stocks and 60% bonds.

If you’re behind on your savings, it may be tempting to ramp up your portfolio risk in order to try to produce above-average returns. While this strategy may be successful on occasion, it often delivers mixed results. Investors taking a high-risk strategy can sometimes find themselves making the situation worse by committing to riskier assets at the wrong time.

Some additional risk may be appropriate depending on your preferences and tolerance, but taking on too much risk can be dangerous. Increasing equity allocations by 10% may be appropriate in this scenario for the risk-tolerant.

7. Consult a Financial Advisor

Money management is an area of expertise for relatively few individuals. Consulting a financial advisor or planner may be a wise course of action for those who want a professional overseeing their personal situation. A good planner ensures that a retirement portfolio maintains a risk-appropriate asset allocation and, in some cases, can provide advice on broader estate planning issues as well.

Planners, on average, charge roughly 1% of total assets managed annually for their services. It’s generally advisable to choose a planner who gets paid based on the size of the portfolio managed rather than someone who earns commissions based on the products they sell.

The Bottom Line

If you have little saved for retirement, you need to think of this as a wake-up call to get serious about turning things around.

“If you are 55 and ‘short on savings,’ you’d better take drastic action to catch up while you are still employed and generating earnings,” said John Frye, CFA, chief investment officer at Carnegie Investment Counsel in Los Angeles. “It’s said that people’s 50s (and early 60s) are their ‘earning years,’ when they have fewer expenses—the kids are gone, the house is either paid off or was bought at a low price years ago—and so they can put away more of their take-home pay. So get busy.”

Better to tighten your belt now than be forced to do it when you are in your 80s.