Your Ten-Year Retirement Countdown Checklist
Quick question: Do you feel ready for retirement? If your answer is less than a confident “yes,” you’re in good company. Just 61% of workers feel good about their retirement preparation, the lowest level in nearly a decade.
Here’s the good news, though – if retirement is about 10 years out, you still have time to change the outcome. This decade is your last, best chance to get it right. On a recent HerMoney Podcast, sponsored by LIMRA, Jean sat down with Anne Lester to help build your pre-retirement checklist. Lester is the author of Your Best Financial Life, the former head of retirement solutions at J.P. Morgan Asset Management, and a fellow with LIMRA’s Retirement Income Institute. Together, they cover the big things to do (and think about) before you clock out for good.
Step one? Take a big, deep breath. “When planning for retirement, there’s no perfect right answer,” says Lester. ‘What you want to do is get into the right zone, knowing that lots of things will probably change – and even if they don’t change, you can’t pinpoint with perfection exactly what the markets will do…or maybe how long you’ll work. With that as a backdrop, I think one of the most important things you can start with is just assessing the landscape.”
SOCIAL SECURITY: TO WAIT OR NOT TO WAIT?
For many people, assessing the landscape begins with making a decision on when to take Social Security. You probably know the basics: typically, the longer you wait to claim, the bigger your check. Waiting isn’t feasible for everyone, but it’s worth understanding what you’d gain. “Maybe there are reasons for you to think that that extended paycheck isn’t necessarily going to be worth it,” says Lester. “But assuming you can afford to, the longer you wait, the more income you guarantee for life. And let’s not forget it’s going to be inflation-adjusted as well – and that is worth a lot.”
What does Lester make of the scary headlines? The latest estimate says the Social Security Trust Fund will run short in 2032, triggering benefit cuts. In order to prevent that from happening, Congress would have to act. Lester isn’t panicking, but she is realistic. “It seems to me that it will be very unlikely for this not to get fixed,” she says. “However, I worry that it won’t get fixed until right up on the deadline. So we’re all going to be living with a lot of uncertainty.”
One thing you can do right now? Log into your Social Security account and compare your estimated benefit at different claiming ages. Seeing the numbers can make your claiming decision much less abstract.
TAKE YOUR RETIREMENT BUDGET FOR A TEST DRIVE
Your spending is one of the few big factors you can control, and the best time to get to know your habits is now. “I think the most important thing you can do is spend these ten years or even five years getting very well acquainted with what you like to spend money on,” she shares. “Then, with that understanding of how much your nest egg will be and how much income you might generate off of that, see if those two things are lined up or not. If they’re not lined up, you’ve got some work to do. Maybe save a little more, maybe hope to work a little longer, but probably the place you should start is trying to start trimming some of your expenses.”
With these factors in mind, build a retirement budget and live on it for a few months or longer. Notice what’s working, what feels tight and what you didn’t see coming – then tweak accordingly.
WHY THE DAY YOU STOP SAVING IS YOUR RISKIEST
You should know your asset allocation at every stage of your career, but in the ten years before you stop working full-time, it deserves a real deep dive. Lester recommends gradually becoming more conservative as you approach your retirement date.
Why? “The most risk your future will have is the day you stop saving and start taking money out of your retirement plan,” she shares. “And that is because compound returns and compound growth are your biggest friend when you’re adding to your portfolio, but when you start taking it out, it can actually work against you if the markets are down.”
In other words, withdrawing during a downturn locks in your losses, and those assets can’t grow to fuel your future income. “It’s very, very important to keep a close eye on the level of risk you have.”
One thing that can change the equation is how much guaranteed income you have, whether that’s Social Security, a pension, or purchasing guaranteed lifetime income through an annuity. “The more guaranteed income you have, the more risk you can afford to take in your invested portfolio,” Lester adds.
TO WORK…OR NOT TO WORK?
We know… retirement and work don’t exactly belong in the same sentence. But a growing number of people head back to work after retiring, largely part-time. Some want the mental and social boost; others need the income.
If that’s your plan, Lester says you can start laying the groundwork now. “Start informing yourself about the kinds of things that might exist in your industry,” suggests Lester. “But one note of caution – there are more people who plan on doing that than statistically are able to do it, whether that’s because of their own health or a change in corporate policy and their layoffs or the health of a spouse or an elderly parent and they find themselves in a caregiver role and unable to keep working. So when you’re thinking about this runway, I think the plan is a great thing to have.”
BEYOND THE SPREADSHEET: WHO WILL YOU BE NEXT?
We spend so much time on the financial side of retirement that the emotional side can blindside us. “There are spreadsheets and their numbers and their formulas and we can either feel worried or pat ourselves on the back for how we’re scoring on the numbers, but there’s no equivalent for the who am I and who will I become,” says Lester.
She’s lived it. For her, becoming an empty nester and retiring felt remarkably similar. Her key was thinking not just about how she’d spend her time, but about what would give her days meaning. She kept a toe in the water with work adjacent to her career and found new passions, too: adventure travel and exercise. She’s even thinking about tackling the Appalachian Trail. “It’s leaving space for discovering things about yourself that you might not know you have,” she shares.
LESTER’S 3 MUST-DOS FOR YOUR DECADE BEFORE RETIREMENT
The ten years or so before retirement can feel overwhelming, but Lester says a solid foundation starts with three key must-dos:
- Understand where your money is going: “Number one, get your arms around your current spending. And maybe think about if it’s likely to continue after you stop working,” she shares.
- Know your assets: How much do you currently have saved? How much do you plan to save before you officially retire? Pin down both numbers.
- Get to know yourself: “Do a little dreaming. Give yourself some unstructured time to think about what’s important to you now and what dream you have, maybe, that you haven’t been giving enough oxygen to, and give yourself permission to let that in your imagination flourish a bit,” she adds.
Ready to start your countdown? LIMRA has put together a resource to help you prepare for this next chapter. Get started here.