Preparing for retirement in 5 years
It’s never too late to ready your portfolio for retirement, and if you’re within a few years of leaving the workforce, there likely are still steps you can take to help get the most out of that time.
By Jill Garvey, CPA, CFP®
Senior Wealth Strategist
The decision to retire in the next few years could help determine whether your post-work life meets your dreams.
The retirement goals you’ve worked toward, invested for, and dreamed of are a few short years away—so close you can almost feel the relaxation that next phase has to offer.
Yet, even if you’ve accumulated substantial assets, you may worry. And you wouldn’t be alone. According to a study by the Society of Actuaries, 47% of surveyed Americans approaching retirement with annual household income of $100,000 or more fear the possibility of depleting all their savings in retirement†.
Retirees who run low on savings prematurely could find themselves having to scale back on their retirement lifestyle or adjust the legacy they’re able to leave for family. Others who may have the resources but haven’t done a level of planning that provides reassurance may find themselves spending precious time worrying.
"You need to understand your whole financial picture—your assets, your debts, the income you’ll have, and what your expenses will be. You have goals, but do you know what to do before retirement?"
Jill Garvey, CPA, CFP®
Senior Wealth Strategist, Huntington Private Bank®
Understanding your retirement goals
The five years before retirement are crucial for tying up loose ends and making necessary adjustments so you can head into retirement with confidence.
For many pre-retirees, the process starts with a question: How much do I need to be financially independent at retirement? Your advisor can help by analyzing what you’ll spend to support the lifestyle you envision, and what trade-offs may be in order. Also, your advisor may be able to help you better estimate if your current investment accounts, along with future growth and savings, are likely to be enough to meet your retirement spending goals. You need to understand your whole financial picture—your assets, your debts, the income you’ll have, and what your expenses will be. You have goals, but do you know what to do before retirement?
Having multiple accounts and scattered assets
One potential roadblock is having assets scattered in many locations, making it difficult to assess your situation. I recall working with one client who over the course of a successful career had collected an assortment of retirement accounts from various employers, as well as investment accounts being handled by multiple advisors.
Together, the assets seemed more than enough to fulfill the client’s retirement goals. Unfortunately, scattered accounts made it difficult to project whether the client would generate enough income, and even harder to make adjustments. And there was another serious risk; when you have accounts in different places, they may be invested in similar types of assets. So while you feel like you’re diversified, you’re not.
Paying off debt before retirement
For some, the prospect of not paying off debt before retirement feels like a burden. I worked with one couple who envisioned retirement as a time to travel the world. To do that, they wanted to retire debt-free. Yet while retirement was only five years off, they still faced 15 years of mortgage payments on an expensive home in the Midwest that they didn’t want to sell. The couple asked for advice.
First, I determined how much they’d need to increase their monthly payment by, condensing 15 remaining mortgage years into five. Getting there without eating into their retirement savings would require significant cuts in personal spending during those five years. With the retirement of their dreams a few short years away, the couple lived frugally for five years, meeting their goal of retiring debt-free.
As you consider your own situation, other concerns may arise. Have you developed a plan to draw down your assets in a way that keeps your remaining investments growing for a long retirement? What steps could bolster your health care savings? Is your portfolio as tax efficient as it could be? Finding answers to these and other questions over the next vital years could make all the difference.
It’s never too late to start preparing for retirement, but it’s best to start as soon as possible. To learn more, please contact your Huntington Private Bank team to see how we can help, or find a Huntington Private Bank® Office near you.
† Society of Actuaries Institute. February 2022. 2021 Retirement Risk Survey. Accessed Oct. 16, 2022.
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