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Summer is coming to an end and hopefully, you and your family had a chance to take a great vacation. As you think back to your summer vacation, think about all the time you spent planning for the trip. You reviewed your available cash and created a budget for your trip. Then you began shopping for hotels and flights online to find the best value. You read reviews on the best restaurants, parks, and activities in the area and fit everything you wanted to accomplish into your week long vacation. Before you knew it you spent just as much time planning the perfect trip as you will spend enjoying it.

How much time have you spent planning for your retirement?

If you took a week long vacation, you probably started planning the vacation more than a week in advance. Well, retirement is essentially a 30-year vacation. You should be spending decades preparing for this new stage of life. The best case scenario is for you to start saving early and often, with the guidance of a CFP professional. However, often times clients come to us when they are a few years away from retirement and have just started to think about their plan. While this is not ideal, not all is lost. If this is you, here are some steps to start working on. 5 years to go…

  • Begin to picture your retirement, where will you live, what will you spend your time doing? If you are married begin daydreaming with your spouse about retirement.
  • Take Inventory of your financial information:
    • Create a Net Worth Statement: Your net worth is your assets minus liabilities.
    • Build a cash flow statement showing your current income and all of your expenses. Begin to track your expenses each year.
    • Social Security: Go to ssa.gov to review your estimates.
    • Pension: If your employer provides a pension, ask HR to run a scenario showing you retiring in 5 years.
  • Consider increasing your savings towards retirement. If you are over 50 you can take advantage of the catch-up provision. The catch-up provision allows you to save an additional $6,000 per year in your 401k and $1,000 per year into an IRA.
  • Starting a good exercise program now will provide you with better health and more energy in retirement.
  • Develop a plan to pay down all of your debts. Your goal is to be debt-free at retirement.
  • If it makes sense to purchase long-term care, don’t wait too long to lock in lower premiums.
  • How will you pay for medical expenses? Research Medicare and learn what it does and does not cover.
  • Review the asset allocation of your current investments. Are you taking too much risk as you approach retirement?
  • Consider working with a financial planner to get a 2nd Financial planners have the experience and expertise to help you discover any blind spots in your retirement plan.

2 years to go…

  • Test Drive your retirement Budget. Begin living each month on your retirement budget to see if it needs adjusting.
  • Complete a will, health care directives and appoint a legal power of attorney.
  • Inform adult children, lovingly, that they’re on their own financially.
  • Complete any repairs and maintenance you have been putting off.
  • Consider replacing older vehicles
  • Consider part-time work in retirement

1 year to go…

  • Finalize your cash flow budget and your strategy for how you will take cash out of your portfolio.
  • Meet with your accountant to discuss the tax implications of income in retirement.
  • Review Social Security: You need to file 3 months before you plan on receiving your first check. Sign up for Medicare 3 months before your 65th birthday, assuming you are not already drawing Social Security.
  • Portfolio check-up: Don’t underestimate the value of diversification!
  • Finalize your pension decision.
  • Meet with your HR department.
  • Consider consolidating investment accounts to help simplify your financial life.

Focusing on these items as you approach retirement will increase your peace of mind and increase your likelihood of a successful retirement.

BTN# is 1-536502.0916

Bridgeworth is now a part of Savant Wealth Management as of 11/30/2023. Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois.