Planning The 5 Years Til Retirement

Author: judytan86

Planning The 5 Years Til Retirement

Editor Pick 2 Finances

Stefan R. Huber | Research Analyst      

February 14th, 2020

As you move through life and your career, the countdown to retirement inches along. But then you hit your 60th birthday, and the conversations surrounding retirement start to hit closer to home. When this milestone is reached, it’s important to start planning your next moves. The five years before you officially retire are critical for getting all of the right pieces in place. Here’s what you can do to prepare for your retirement that’s just over the horizon:

4 – 5 Years Out

When you are four to five years away from retirement, it’s a good idea to start stacking cash. This can help to protect against potential market downturns and can be used in lieu of investments. A good rule of thumb is to have a year’s worth of expenses stored as liquid cash. There is also opportunity for post-tax savings in certain retirement plans. Speak with a trusted financial advisor to see if this is a good option for you.

3 Years Out

At the three year mark, it’s advisable to make any large purchases within this time window. This applies especially to high-value assets with long lifespans, such as house renovations and care repairs. Paying for this while you’re still working and not yet on fixed income can help to keep your retirement cash flow intact. This is also a good time to pay off any 401(k) debt, which will protect you from certain tax burdens and allow you to go into retirement debt-free.

2 Years Out

When you are two years out from retirement, thinking about your estate is key. This is when you should look to sort out the technical details of your estate. This includes power of attorney, beneficiaries, and wills. Your real estate is also a big consideration here. Figure out whether you will pay off your mortgage now or during retirement. It’s also a good time to consider restructuring remaining debt, if necessary.

1 Year Out

At this point, you are so close to retirement you can almost feel it. This is when it’s prudent to review all necessary documents and make sure that all previous arrangements are in order. While you are still working, attain copies of all retirement plans, such as health, dental, and so on. Also be sure to talk with human resources to iron out the formal transition plans. Once you have everything lined up and sorted out, it’s time to figure out your passion and purpose. Once your sights are set, you’re now ready to begin your next stage of life.

Having a plan to transition into your golden years is key. Where are you in relation to your future retirement? Answer this poll below:

Option 1: More Than 5 Years Out

Option 2: 4-5 Years Out

Option 3: 3 Years Out

Option 4: 2 Years Out

Option 5: 1 Year Out

Option 6: Already Retired!

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