Retirement might seem distant when you're in your fifties, but the decade leading up to your golden years is actually the most critical time for retirement preparation. Whether you're 55 and just starting to think seriously about retirement or already deep into your planning, this comprehensive 10-year countdown checklist will help ensure you're ready for this major life transition.
Years 10-8: Foundation and Assessment
Get Clear on Your Retirement Vision
Before diving into numbers and accounts, spend time envisioning what retirement actually looks like for you. Do you want to travel extensively, start a small business, volunteer, or simply enjoy a quiet life at home? Your vision will drive every financial decision you make.
Conduct a Comprehensive Financial Audit
Take stock of all your assets, debts, and income sources. Create a complete picture that includes:
401(k) and IRA balances
Social Security projected benefits
Pension benefits (if applicable)
Personal savings and investments
Real estate equity
Outstanding debts and monthly obligations
Maximize Your Peak Earning Years
Your fifties are typically your highest earning years, making this the perfect time to accelerate retirement savings. Consider increasing your 401(k) contributions, especially if you haven't been maximizing employer matches. Once you turn 50, take advantage of catch-up contributions that allow you to contribute additional funds to retirement accounts.
Address Healthcare Planning Early
Healthcare costs are often retirees' biggest surprise expense. Research Medicare options, consider long-term care insurance, and start building a health savings account (HSA) if you have access to one. HSAs offer triple tax advantages and can be used for retirement income after age 65.
Years 7-5: Strategic Acceleration
Eliminate High-Interest Debt
Focus aggressively on paying off credit cards, personal loans, and other high-interest debt. Entering retirement debt-free significantly reduces the income you'll need and provides peace of mind.
Consider Your Housing Situation
Housing is typically retirees' largest expense. Decide whether you want to stay in your current home, downsize, relocate to a lower-cost area, or move closer to family. If you're planning to move, research your target areas thoroughly, considering not just cost of living but also healthcare access, social opportunities, and tax implications.
Diversify Your Investment Portfolio
Review your asset allocation to ensure it's appropriate for your risk tolerance and timeline. Generally, portfolios should become more conservative as retirement approaches, but don't abandon growth investments entirely. A common rule of thumb is to subtract your age from 100 to determine your stock allocation percentage.
Explore Part-Time Work Opportunities
Consider whether you might want or need to work part-time in retirement. This could be consulting in your current field, pursuing a passion project, or taking on seasonal work. Having options lined up can provide both financial cushioning and mental stimulation.
Years 4-2: Fine-Tuning and Preparation
Calculate Your Retirement Income Needs
Use the 80% rule as a starting point (you'll need about 80% of your pre-retirement income), but customize it based on your specific situation. Factor in reduced commuting costs, potential healthcare increases, and your planned activities.
Optimize Social Security Timing
Understand how claiming Social Security at different ages affects your benefits. While you can claim as early as 62, your benefits increase each year you delay until age 70. For many people, waiting until full retirement age (66-67, depending on birth year) or even later maximizes lifetime benefits.
Consider Roth IRA Conversions
Converting some traditional IRA or 401(k) funds to Roth IRAs can provide tax diversification in retirement. This strategy works particularly well if you expect to be in a lower tax bracket before retirement than you will be after.
Plan Your Withdrawal Strategy
Develop a tax-efficient withdrawal strategy that considers required minimum distributions (RMDs), tax brackets, and the order in which you'll tap different accounts. Generally, it's wise to withdraw from taxable accounts first, then tax-deferred accounts, and finally tax-free Roth accounts.
Years 1-0: Final Preparations and Transition
Test-Drive Your Retirement Budget
In the year or two before retirement, try living on your projected retirement budget. This helps identify any gaps and gives you time to adjust either your spending or your savings.
Organize Important Documents
Gather and organize all important financial documents, including:
Social Security statements
Pension documentation
Insurance policies
Estate planning documents (wills, trusts, powers of attorney)
Investment account statements
Plan Your Exit Strategy
If you're planning to retire completely, work with HR to understand your options for health insurance, pension payouts, and 401(k) rollovers. If you're planning to work part-time, understand how this might affect your Social Security benefits.
Consider a Gradual Transition
Many people find success with a phased retirement, gradually reducing work hours rather than stopping abruptly. This can help both financially and psychologically, allowing you to adjust to retirement life while maintaining some income and structure.
Essential Considerations Throughout the Decade
Emergency Fund
Maintain an emergency fund of 6-12 months of expenses. In retirement, this might need to be larger since you have fewer options for quickly increasing income if unexpected expenses arise.
Estate Planning
Review and update your estate planning documents regularly. Ensure beneficiaries are current on all accounts, and consider whether your current estate plan reflects your wishes and efficiently minimizes taxes for your heirs.
Tax Planning
Consider the tax implications of your retirement strategy. This includes not just investment taxes, but also where you'll live (state income and property taxes vary significantly) and how you'll structure withdrawals from different account types.
Stay Flexible
Remember that retirement planning isn't set in stone. Economic conditions, health changes, and family circumstances can all affect your plans. Review and adjust your strategy regularly, especially as you get closer to retirement.
The Psychological Side of Retirement
Don't underestimate the emotional and psychological aspects of retirement. For many people, work provides not just income but also identity, social connections, and structure. Consider:
How you'll maintain social connections
What will give your days structure and purpose
Whether you want to volunteer or pursue hobbies
How your relationship with your spouse might change when you're both home more
Getting Professional Help
While this checklist provides a comprehensive framework, everyone's situation is unique. Consider working with a fee-only financial planner who can help you create a personalized retirement strategy. Look for advisors who are fiduciaries, meaning they're legally required to act in your best interest.
Final Thoughts
Preparing for retirement is a marathon, not a sprint. The key is to start where you are and take consistent action. Even if you feel behind, remember that small, consistent steps can lead to significant progress over time. The most important thing is to begin, reassess regularly, and adjust as needed.
Your retirement years should be some of the most enjoyable of your life. By following this 10-year countdown checklist, you'll be well-positioned to enter retirement with confidence, knowing you've prepared thoroughly for this exciting new chapter.
Interested in our Prosperity Planning process? Please use this link to schedule an initial meeting with Andy Pulsfort, our Director of Personal Services. Discover how personalized financial planning can transform your relationship with money and set you on the path to true financial freedom.