Retirement Countdown

1. Ten years before retirement

   • Estimate how much you expect to accumulate before you retire, based on your current investments and current investment rate.

     Our calculator can help you with this exercise. Just put in your current salary, the number of years to retirement — and our calculator does the rest. It also lets you experiment with the variables, such as increasing your investments or aiming for a higher return.

   • Assess your retirement income resources, including Social Security. Consider the impact of taking Social Security benefits as early as you are eligible, at age 62, compared to delaying until you reach full retirement age, between 65 and 67, or even later.
   • Estimating expenses 10 years from now may be difficult. At this point in the process, it may be practical to use 70-80% of your current income as a benchmark.

2. Five years before retirement

   • Review your progress toward your goal. Going forward, this is an exercise you should perform every year.
   • Take a careful look at your asset allocation. If you have maintained a highly aggressive portfolio, one that is heavily invested in stocks, high yield and international funds, you may want to shift some money into more conservative assets. However, keep in mind that you want your investments to continue to grow for 20 years or more in retirement, so don't be too conservative in your approach.

3. Three years before retirement

   • Create a detailed written plan. Update your ten-year estimates and your five-year allocation review. Generate a firm budget and match your income resources against your budget. Be sure to include all your assets in your written plan, including your home and any income property.
   • Pay special attention to health care. Although you will be eligible for Medicare at age 65, you may need to set aside money to supplement the benefits you will receive.
   For example, if your retirement investments total $100,000, limit your annual withdrawals to ideally not more than $4,000.
   • As you consider turning your investments into income, remember that it's typically recommended that investors not withdraw more than 4% of your investments annually.
     
     What happens if you withdraw more? Your investments may run out if you experience just one or two bad years in the market.

4. One year before retirement

   • Consolidate retirement investments that remain in any former employer's plans. Consider rolling them over to a single IRA that will allow you convenience and control in planning for income.
   • Repay any outstanding loans from your workplace retirement plan BEFORE you retire. Loans outstanding at the time of retirement are immediately taxable.
   • If you have IRAs at multiple financial institutions, consider rolling them all into a single IRA account at one financial institution. Diversification among specific investments is a good idea, but concentrating assets with a single or few trusted financial institutions makes good sense, especially in retirement. It makes managing your money much easier. Diversification reduces risk but does not eliminate it.
   • Contact your employer's benefits department to make sure that your current retirement plan assets will be available when you need them. A rollover to an IRA typically takes less than 90 days, but it can vary depending on the institutions involved. Stay on top of this process to make sure it happens according to your timeline.