By Greg Hart, CFP®

The countdown is on and you are finally closer to the finish line than the starting block. Your dreams of white sandy beaches, days enjoying the golf course, or more time with family are just around the corner. This may fill some of you with excitement and others of you with panic at all that still needs to be done before you clock out for the last time. If it seems like your retirement checklist is never-ending and you don’t know where to start, prioritize these 10 things to do as you start your 5-year countdown to retirement. 

1. Crunch The Numbers

Will I outlive my savings and investments? Without a doubt, this is the main question that my clients ask me to help them figure out, no matter what size net worth they have. While you have probably seen information stating that you need to have a minimum of “X” or “Y” dollars, it really is a unique answer for each person as it’s totally determined by your lifestyle and how you expect to live during retirement. Some clients have a large net worth and they are not particularly worried about the near-term, but they have concerns about the long term. Others with a smaller net worth are more concerned about the early years of retirement and what their cash flow will look like given their resources. Now is the time to really put pen to paper and get a handle on what retirement might look like for you.

2. Begin To Formulate A Social Security Strategy

Social Security benefits can be claimed anytime between ages 62 and 70. However, the timing of when you decide to collect these benefits will impact the amount of payout you receive. At 62, you become eligible to receive Social Security benefits for the first time. But before you start claiming Social Security, it’s important to review your benefits and options for claiming so that you can plan to maximize your lifetime benefit.

It rarely makes sense to begin claiming benefits at age 62, unless a health concern or some other extenuating circumstance is forcing the issue. If you start claiming benefits at age 62, your benefits are about 26% lower than if you waited for full retirement age, and over 40% less than if you wait until you are 70 to claim. It’s also important to consider how long you’ve worked and your lifetime average monthly earnings, which are used to calculate your benefit. In some cases, working a few extra years can have a big impact on your monthly Social Security benefit.

3. Evaluate Your Investments

The 5-year pre-retirement mark is a time to consider adjusting your portfolio’s allocations. Meet with your financial advisor to review your current lineup and determine whether your risk tolerance still matches up with your current allocations.

Along with potentially reallocating your investments, you’ll want to consider how the “sequence of returns” could impact your portfolio’s value over time. In the simplest of terms, sequence of returns refers to the risk of receiving lower or negative returns early in a period when you’re making withdrawals from your investments. If your retirement date correlates with the onset of a bear market, your savings can be depleted quickly as you withdraw from your portfolio. With a smaller investment base, you’ll have less wealth remaining to benefit from a future market upswing.

To mitigate the risk of sequence of returns ruining your retirement portfolio, work with your advisor to take the appropriate steps, such as reducing volatility, examining your withdrawal strategy, and finding different market options to protect your money.

4. If You Need To, Save More; Consider Using a ROTH

The closer you get to retirement, the more you should aim to save. It may be time to cut back on expenses, channel any raises and bonuses directly to savings, and automate savings increases of 1% every few months. 

Your increased savings can be invested into your company 401(k) or 403(b) plan or your personal IRA.  In 2020, the maximum you can contribute to a 401k or 403b is $19,500, with an additional $6,500 allowed if you’re aged 50 or older, so that’s a total of $26,000 that you could be contributing to your retirement accounts.  For IRAs, you can invest $6,000 per year and, if you are 50 or older, you can invest an extra $1,000 a year for a total of $7,000 for 2020. Also, don’t overlook the use of a ROTH 401k or ROTH IRA. It is typically to your long-term advantage to put money away into a ROTH account, whether via a 401k or IRA.  While the money put into a ROTH is not pre-tax nor tax deductible, it does grow and stay tax free for the duration. That can add up to a large amount over time. Also, upon reaching age 72, you will be required to make Required Minimum Distributions from your traditional 401k, 403b, or IRA. Those distributions are income taxable, whereas distributions from a ROTH account are not taxable, so it’s usually beneficial to build up assets in a ROTH account. Now is the time to start building assets in a ROTH if you have not started already.

5. Test-Drive Your Retirement Cash Flow

Whether you choose to continue working during retirement or not, you’ll likely rely on retirement income generated from several different sources, including Social Security, employer-sponsored retirement plans, personal retirement plans such as IRAs, and other savings and investment programs. Throughout your working years, you’ve been contributing money to these accounts so you can hopefully have a secure retirement. But how do you know if it’s enough to last your whole retirement?

One way is to test it out. While it’s generally recommended that you’ll need 80% of your current income in retirement, you and your family may need more or you might require less. For a few months, you may want to test drive a reduced budget. To start, try living on 80% of what you currently receive. Do you find yourself pinching pennies or did you find ways to cut back? 

6. Decide Where You Will Live

According to studies by the Employee Benefit Research Institute, housing expenses account for an overwhelming 43% of spending for those aged 75 and older—even more than healthcare. (1) As you approach retirement, think through where you’re going to live and how much you’ll spend on housing costs in retirement. 

If you plan on relocating, do your research. Visit your potential locations, and decide if the climate, community, and area are right for you. If your plan includes staying where you are, ask yourself if downsizing is a viable option. If you want to stay in your current home, look at any modifications that are needed to accommodate aging. Plan to make any expensive adjustments and repairs now, before you’re living on a tighter budget.

7. Prepare for the Unexpected

There are countless uncertainties when it comes to your retirement savings. While it may be impossible to predict exactly how long your nest egg will last, you can run your figures through different scenarios to evaluate what will happen if the market crashes, if you face unexpected healthcare costs, or if a spouse dies prematurely. Once you stress-test your savings in this way, you can come up with a plan to mitigate these risks. If you wait until you are retired to take this step, it may be too late to make the changes necessary to maximize your retirement income.

8. Do Some Healthcare Research

No matter how healthy you are today, you may need more health services as you age. According to the Employee Benefits Research Institute, the average couple at age 65 will require anywhere from $157,000 to $392,000 in healthcare costs. (2) Most people don’t even have that much in their retirement accounts to live on, let alone cover medical costs. Even with Medicare, there could be significant out-of-pocket expenses and many conditions and treatments that are not covered.

When choosing your health insurance for retirement, make sure you understand all Medicare options and supplements and work with an experienced professional to help you evaluate your options. 

9. Make A Long-Term Care Plan

Along the lines of health, think about your potential need for long-term care insurance. According to the U.S. Department of Health and Human Services, most Americans turning age 65 will face the potential of requiring long-term care at some point during their later years. (3) On average nationally, it costs $275 per day or $8,365 per month for a private room in a nursing home. (4) If you decide that long-term care insurance is the way to go, now is the time to act. Insurance costs increase with age. There is also the risk that your health will change and your application for insurance will be denied. Generally, you will have fewer options the longer you wait.

If you want to get a long-term care plan in place, you have a few options. You can go with a traditional long-term care insurance policy, add a long-term care rider to your life insurance policy, purchase an annuity with a long-term care rider, or start saving for your long-term care so you can self-insure. 

10. Don’t Forget About Tax Planning

Tax planning can save you more money than you realize. By projecting your future income and taxes now, you may find opportunities to save. When you are living off a fixed income in retirement, tax strategizing can make a world of difference in the longevity of your nest egg. 

For example, a $50,000 withdrawal from a Roth IRA will have a wildly different tax impact than that same distribution from a traditional IRA. Creating a tax plan can help you strategically withdraw from your various retirement accounts and minimize your tax liability. 

Get Professional Advice

Even if you have been saving and planning on your own up until this point, these final years before retirement are critical for making decisions that have far-reaching consequences. If you want to spend your final working years enjoying life rather than worrying, our team at Haddon Wealth Management stand ready to help you create a personalized retirement road map to address your concerns and guide you to financial independence. Get started by calling us at (856) 888-1744 or contacting us online to schedule a complimentary get-acquainted meeting.

About Greg

Gregory M. Hart, CFP® is the founder and managing director of Haddon Wealth Management, LLC, a registered investment advisory firm that provides comprehensive wealth management (in-depth financial planning and sophisticated investment management) for clients who value a relationship-driven approach that delivers customized solutions. Based in Haddonfield, New Jersey, Greg works with clients throughout the Delaware Valley, as well as nationwide. To learn more, connect with Greg on LinkedIn, visit our website at, or call (856)-888-1744 to begin a discussion.






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