The 5-10 years before retirement can be both exciting and stressful. Retiring from a career you’ve spent a lifetime building can be an unexpectedly challenging transition - both financially and personally. The more you can set clear goals in the leadup to your retirement, the more likely you’ll be able to enter this new season of your life seamlessly.
You should think about setting a combination of financial and lifestyle goals. Ideally, you’ve been saving for retirement for the full length of your career. However, there are still a few things you can do to extend the life of your retirement savings and lower your cost of living. Your lifestyle goals will also be a culmination of a lifetime of dreaming about your ideal retirement.
Ready to start setting some clear-cut retirement planning goals? Let’s dive in!
One of the most important financial steps you can take toward an ideal retirement is boosting your savings. Even if you’ve built a sizable nest-egg by the time you’re a decade or less away from your retirement, there are several things you can still do to get a leg up.
For example, individuals age 50 or older are eligible to contribute an additional $6,500 to their workplace retirement account in 2020. Traditional and Roth IRAs allow a catch-up contribution of $1,000 each year once you’re age 50, as well. Setting a goal to take advantage of these contribution limits can help you add a much-needed boost to your retirement savings as you near the corporate finish line.
Many people start to pay off their debt as they approach their retirement. However, they typically focus on the usual suspects - credit cards, auto loans, and other consumer debt. What many people don’t think of is to pay down their mortgage before retiring, as well.
This is actually a lifestyle decision, as many people who enter retirement would like to be virtually debt-free and not worry about their home being at risk. However, if a cash need arises, it may be difficult to refinance a home if your credit score is not stellar and you don’t have other assets that would qualify you. The other side of this is being able to use a reverse mortgage as a source of cash flow.
Although paying off your mortgage can be challenging, freeing up the cash flow you use to pay your monthly bill can create more wiggle-room in your budget when you retire. Those funds can be used to support your long-term dreams of travel, or leaving a legacy that you can pass on to your kids and grandkids. The fewer debt payments you carry into retirement, the more likely you are to fund a lifestyle you love during this next chapter.
Have you ever thought about what you want your retirement to look like? Now is the time to make those dreams a reality. By setting clear lifestyle goals for yourself, you’ll be better able to budget for the expenses that matter most to you. Some examples of lifestyle goals might be:
Once you have a few goals set, you can break them into smaller, more actionable tasks and events. For example, traveling around the world is a fantastic lifestyle goal. However, unless you have a clear plan for different types of travel you’re excited to pursue, you may struggle to budget for your trips and they may or may not come to fruition.
Additionally, having more actionable goals can help you to get excited about the retirement transition. Not having a lifestyle plan often leads to depression in retirement, which is why it’s so important to think ahead.
These are just three ideas to get you started as you close in on retirement. Have questions? Schedule a call with us today! We’re here to help guide you through this exciting season.
Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.
"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.