Do you have a 5/10/20 Year Retirement Plan?

Think your expenses will drop in retirement? Don’t count on it!

Tips for a planning ahead on your retirement plan

5-10-20 year retirement plan“In the first two years of retirement, 28.0 percent of households spent more than 120 percent of their pre-retirement spending. By the sixth year of retirement 23.4 percent of households still did so.”1 

If you’re 5 years away from retirement:

  • Make a list of retirement “needs” and “wants.” If you do not have enough savings for all your “needs,” make a five-year plan to increase your funds.

  • Double-check your reported Social Security earnings and resolve any discrepancies now. Explore your Social Security claiming options and make sure you understand the timing of applying benefits.
  • Run tax projections periodically to ensure you take advantage of opportunities the IRS provides, such as education credits and ROTH IRAs, which allow tax-free withdrawals.

If you’re 10 years away from retirement:

  • Brainstorm any big-ticket financial commitments you anticipate in the next 10 years and consider how these items might affect your retirement timeline.
  • Review your estate documents to ensure the language is still accurate. For example, are the named trustees still alive and capable? Your estate documents should include items such as: a will, powers of attorney, a living will, a healthcare proxy and possibly a revocable trust.
  • Reallocate your investment portfolio based on your earnings timeline with a focus on performance, risk and expenses. Decide when – or if – you should shift to a more conservative asset allocation.

If you’re 20 years away from retirement:

  • Create an emergency fund of 3-6 months of living expenses to avoid tapping into your 401(k) or home equity in the event of an emergency
  • Boost your earning potential and benefits package by contributing the maximum annual amount to your 401(k), or at least enough to receive a full employer match.
  • Ensure you have a diversified investment portfolio so that you are investing for growth and distributing your assets across taxable, tax-deferred and tax-free sources. If you have multiple retirement or brokerage accounts, now is a good time to consolidate them.

1 —
Info provided by National Association of Personal Financial Advisors (NAPFA)