5 year retirement countdownFive years before they retire, older workers start focusing seriously on the big changes ahead, says Emily Guy Birkin, in her book, The 5 Years Before You Retire: Retirement Planning When You Need It the Most. In those last few years, you can get a lot done. Here is a countdown of some of the tasks needed to prepare for retirement.

Retirement Planning – 5 Years to go…

  • Estimate—Consider your health and family history to estimate your lifespan and to determine how long your retirement funds need to last.
  • Calculate—Add up your monthly retirement income (without windfalls or inheritances) from:
    • Pensions (including any cost-of-living adjustment)
    • Social Security (estimate benefits by going to the Social Security Administration website: www.ssa.gov)
    • Other income—a rental property or part-time job, for instance
    • Assets you’ll sell, such as real estate or a business
    • Income from retirement accounts
    • Annuities, municipal bond dividends and interest

Retirement Planning – 4 Years to go…

  • Budget—Itemize an entire year’s spending to create your retirement budget. Include out-of-pocket medical costs, long-term care, taxes and inflation.
  • Pay down—Retire all debt possible, including mortgages, vehicles, credit card balances and other loans.
  • Plan—Think about downsizing. If you’re going to stay put for now, research fallback options for the future.
  • Insure—Price long-term care insurance and weigh pros and cons. If someone depends on your income, consider purchasing life insurance.
  • Consult—Talk to your financial advisor for help on running your numbers on sophisticated planning software, spot planning gaps and refine your investment strategy.

3 Years to go…

  • Catch up—Complete postponed home-maintenance tasks. If possible, get ahead of anticipated repairs and replacements.
  • Decide—Contact the Social Security Administration to learn about taking benefits earlier rather than later, and choose when you’ll claim your benefits.
  • Study—Learn all you can about converting savings to an income stream; and plan how you’ll withdraw your funds, including how to meet required minimum distributions.
  • Supplement—If money will be tight, find a second source of income. For example, take in a boarder or start a business on the side.
  • Assess—Decide the bare minimum you need for a comfortable retirement. Can you fill any income gaps or should you adopt a longer horizon?

2 Years to go…

  • Test—Live on your retirement budget to see where it needs adjusting.
  • Plan—Write a will and consider establishing a trust. File healthcare directives and appoint a legal power of attorney.
  • Disconnect—Tell adult children, lovingly, that they’re on their own financially.
  • Regroup—If you can’t afford to retire, then don’t, says Birken. Run your worst-case scenario with a financial planner and work longer, if possible.  Delay collecting Social Security and cut spending to the bone.

1 Year to go…

  • Decide—Contact the Social Security Administration to learn about taking benefits earlier rather than later, and choose when you’ll claim your benefits.
  • Roll over—Plan whether and where to roll over workplace savings when you retire.
  • Replace—Buy new vehicles to replace older ones.
  • Sign up—Research Medicare and supplemental medical plans and enroll in Medicare three months before your 65th birthday.
  • Consult—Seek professional help before withdrawing income from your retirement portfolio.

Don’t delay. For help planning for your retirement, contact your financial advisor today.

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