Five Years Until Retirement?

How to get on track as you count down the days

By Deborah Jeanne Sergeant

 

Are you just a few years away from retirement?

It may seem that since the finish line for your working life is coming into view that you can coast by the last few years.

However, you still have some planning to do.

“One of the first things folks need to do is think about what they’re retiring to,” said Leah Granger, certified financial planner with Oakwood Financial Services in Rochester.

The retirement part of your life is more than just ceasing to work at your career full-time. Some may want to scale back and work part-time. Others want to segue into a new career, start a business, consult at their old company or volunteer (which although unpaid can feel a lot like working). It’s important to not only count your nest egg but also realize how you want to spend your time in retirement.

“Once someone has figured out what they want to retire to, they need to think about what will it cost to have that lifestyle and try that budget on for size, if possible,” Granger said. “Estimate a realistic estimate to build the lifestyle you want to have. Once you have that, work with your financial adviser to build a plan and see if there are any adjustments to make.”

These distinctions can make a difference in financial planning. For example, someone who still plans to earn some money once retired from his career will have different cashflow needs than someone who plans to eschew all labor and travel the globe.

Granger also advises looking at how retirement may affect the tax bracket. Those in a higher tax bracket before retirement may want to max out their retirement contributions while working, even if they have a comfortable retirement fund just to leverage a tax advantage.

Another financial factor in retirement is the minimal cost of living adjustment (COLA) for Social Security recipients. The COLA doesn’t typically keep up with inflation, so relying upon Social Security as a sizeable part of your retirement income isn’t a sound strategy.

“A person a couple years away from retirement should create a budget, not necessarily less than you’re spending now,” said Ethan Wade, chief development officer with Brighton Securities in Rochester.

Some expenses will remain similar to when you’re working. However, healthcare expenses will exponentially increase as you grow older.

Looking at income and the budget can help you know what is necessary for retirement.

“It’s what you’ll need to live compared with what you have saved,” Wade said.

He also advises paying off all debt, including the mortgage if possible.

“You don’t want to have a retirement where you’re worried,” Wade said. “You want to retire with comfort and peace of mind. A mortgage can be your biggest monthly expense. You may feel better not having that hanging over your head.”

Planning for retirement may feel overwhelming with more questions popping up as you plan. But Wade encourages plunging ahead with planning, even if you don’t know all the answers.

“Winston Churchill said perfection is the enemy of progress,” Wade said. “If we don’t have the perfect answer, we can get overwhelmed. Take action and work towards making progress. You don’t have to have an answer for each of these. Work towards a plan.

“People think they don’t need a financial adviser. They can make decisions on their own, but a financial adviser is helping you navigate all of these questions and all of these thoughts and uncertainties. It should be a holistic approach that at the end of the day provides peace of mind and comfort to live the one retirement you have and the best retirement you can.”