Retiring in the next decade? Here are some crucial steps you should consider:
Retirement may seem like a far-off concept, but before you know it, retirement planning becomes a necessity. With a decade or less until your golden years, it's essential to take action now and secure your financial future. Here's how you can be financially prepared for retirement in less than a decade:
- Understand Your Social Security Benefits:
If you've paid into the Social Security system for at least 10 years, you might be eligible to collect benefits as early as 62. Your benefit amount depends on your highest 35 earning years, adjusted for inflation. The longer you work, the higher your benefit, and the maximum payout occurs at 70. Request a statement of your earnings and estimated benefits from the Social Security Administration to know how much you'll receive.
Although estimating your benefits is a good first step, increasing your retirement readiness requires further actions.
- Examine Retirement Savings Contributions:
If you've worked for a while, you might have contributed parts of your pay to a retirement plan through your employer. These defined contribution plans allow you to invest the funds and defer taxes during accumulation. Utilize any employer match, and if eligible, contribute the maximum amount allowed (up to $23,500 for 401(k)s, with catch-up contributions for those 50 and older). Review your account to ensure it can meet your retirement goals, and consider boosting contributions if needed.
- Revise Asset Allocation Strategy:
As you approach retirement, reassess and adjust your investment strategy for a more conservative approach, shifting towards less volatile assets like bonds and cash. Even with the S&P 500's recent returns, remember its volatility. When retirement is near, it's best to diversify your portfolio.
- Plan for Healthcare Expenses:
Healthcare costs are on the rise, expected to increase faster than inflation as you age. Ensure you understand Medicare's coverage and explore additional coverage options, especially for expenses not covered by Medicare. With an HSA, enjoy triple tax advantages – tax-deductible contributions, tax-deferred earnings, and tax-free withdrawals for qualified medical expenses. Proactive planning can help you cover future healthcare costs, including additional savings and possibly supplemental insurance.
By following these steps, you're well on your way to preparing for a financially secured retirement within a decade. Regularly review and update your retirement plan to ensure you're financially ready for the future.
- To supplement your Social Security benefits and meet your retirement goals, consider putting extra money towards investments that offer growth, such as stocks or mutual funds.
- As you get closer to retirement, it's crucial to create a budget that accounts for your anticipated income and expenses during this phase of your life. This will help you determine if you need to make adjustments to your retirement savings plan or explore additional sources of income.
