You’re 5 Years From Retirement, What To Do Now?

Retirement is right around the corner; you can almost see it. With only a few years left, do you have all your ducks in a row? Now’s the time to buckle down and get serious about how to retire with...

Retirement is right around the corner; you can almost see it. With only a few years left, do you have all your ducks in a row? Now’s the time to buckle down and get serious about how to retire with confidence.

Review your savings, invest wisely, and check your insurance coverage—these are all essential steps in getting financially prepared. 

Here’s what everyone nearing retirement should consider now and what Woven Capital can do to help.

Refine Your Retirement “Enough” Number

You have a ballpark figure of how much you need to save for retirement. But with the timer counting down, now’s an excellent time to refine that number.

To do this, take a realistic look at your expected expenses and projected income to determine if you’ll have enough. Your ratio of cash flow to expenses is, honestly, what will drive the success of your retirement plan.

At this point in your timeline toward retirement, you must be honest with yourself. You need to know for sure what you’re currently spending and how much you will likely spend in retirement.

We’ve found that, despite common assumptions, retirees actually tend to spend the same or more in retirement than they did during their working years. To us, this makes a lot of sense. 

They have more free time on their hands than ever before, and they want to fill that time with fulfilling activities. Plus, healthcare costs tend to rise the older we get, which can account for a sizable portion of your expected expenses in retirement.

How do you know what you’re actually spending?

Pull your credit card and bank statements from the past year to assess your spending. While it can be easy to tell yourself you spend less than you do, bank statements don’t lie. 

Are You Coming Up Short?

With inflation at record highs, you may need to start saving more than you originally planned. If you’re coming up a little short on what you’ll need to retire, now’s the ideal time to focus your savings strategies.

Some things you could do include:

  • Maxing out retirement accounts, including catch-up contributions
  • Cut extra spending and redirect toward investments
  • Invest additional cash or large windfalls
  • Work longer than planned

Slash Existing Debt

One way to save money in retirement and free up cash flow is to get rid of existing debt. If possible, try to put more money towards paying down the principal, consolidate debt, or refinance high-interest loans at a lower rate.

Try to avoid taking on new debt in retirement as well, such as credit card debt, personal loans, or car payments. This is especially important if you didn’t account for these monthly payments in your retirement savings plan.

Check-In on Your Investments

Now’s the time to increase catch-up contributions for your IRA, 401(k), and HSAs and direct additional funds towards your brokerage accounts.

As you near retirement, your portfolio will likely require some sort of rebalancing. Your current asset allocation is designed to address the needs of a working person in their peak earning years, but it may no longer be appropriate once you enter retirement. Start now to build an investment strategy for retirement with a trusted financial professional, like our team at Woven.

Don’t forget to start thinking about your withdrawal strategy for retirement. Putting a plan in place now can help you turn assets into income in a tax-efficient manner.

Protect Yourself And Your Wealth

As you head into retirement, you want to ensure you’re well protected, and an excellent step is to review your insurance coverage. Are you adequately protected heading into retirement? 

There may be new policies to consider, such as long-term care insurance. On the other hand, there may be policies that no longer serve a purpose, such as disability or life insurance.

At 65, you’ll become eligible to start receiving Medicare. If this applies to you, you’ll want to review your coverage options and determine how they fit into your greater financial plan.

Create A Lifestyle Plan You’re Excited To Live

At Woven, we believe there are two parts to retirement planning: the financial side and the personal side. While we’re here to help take care of the first, it’s up to you to consider the rest. Planning a fulfilling retirement can take some time and consideration, so start by asking yourself questions like:

  • Where do I want to live in retirement? Am I happy here, or should I move closer to my children?
  • How can I create a new routine that brings fulfillment?
  • What can I do to stay mentally and physically active?
  • Where will I go to meet new social connections?

Retirement is one of the most significant changes you’ll experience in your lifetime, and preparing ahead of time is an effective way to combat unhappiness or loneliness. While you could have all the money in the world saved up, you still need to determine how you’ll use it to create a fulfilling and positive experience in retirement.

Work With A Pro

We’ve helped so many people create retirement plans they love, and we’re excited to help you too. Make sure you walk into these next five years with confidence by working with a financial professional you know and trust.
If you’re preparing for retirement, don’t hesitate to reach out. We’ll develop a plan and address your concerns now so you can have total peace of mind when the time comes to retire.