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What Should I Do as I Near Retirement?

What Should I Do as I Near Retirement?

October 23, 2022

As retirement comes into view, it is time to put financial planning into high gear and make adjustments to ensure the transition goes smoothly. The action plan should include 

  • Focusing on retirement goals
  • Adjusting asset allocations as circumstances change
  • Developing a strategy for Social Security and retirement date
  • Begin planning for retirement needs

What Is the First Step in Retirement Planning?

For those just starting to save for retirement, begin saving as much as possible and let compound interest generate earnings. The sooner you begin, the better it will be. Someone who invests $75 every month at age 25 will accumulate more interest than someone who invests $100 every month when they are 35.

If there is a 401(k) offered at your place of employment, it allows contributing pretax money. Some employers match 401(k) contributions. At least, contribute the amount the company matches. It is free money. There are two IRA options – traditional and Roth.

Consider establishing an IRA account in helping to build your nest egg. Traditional IRAs are taxable when you withdraw them in retirement. Roth IRAs are funded with after-tax contributions. They are not taxed when withdrawn after age 59½. Yearly contributions are limited; however, after age 50, you can make contributions beyond the normal limits with catch-up 401(k) or IRA contributions. 

Adjusting Asset Allocations

Keep tabs on investments to spot any trends or changes and address them promptly. Experts recommend an annual or semi-annual review of your financial goals and situation. Consider all your choices if you have invested in multiple retirement plans. 

Each has pros and cons regarding protection from creditors, taxes, required minimum distributions, withdrawal rules, fees, and investments. There is a benefit to having all financial investment assets with one firm. It gives you better control. A company you trust can help you understand the investments that align with your retirement goals.

Developing a Strategy for Social Security and Retirement Date

You may start to receive Social Security benefits at age 62. Each year you postpone taking the benefit; you increase what you receive each month until you are age 70. You can continue to work or, depending on your situation, defer payments even if you do not continue to work. 

Income limits when working and drawing Social Security could reduce your benefits—retiring before age 65 means paying for health benefits through COBRA or a private health insurance policy until you are eligible for Medicare.

The age you are eligible to retire with full Social Security benefits depends on the year you were born. Those born from 1943 to 1954 are eligible at age 66. Every year after that age, two months to full retirement is added until 1960 and later, when the full retirement age is 67. Those who wait until they reach 70 to draw Social Security receive the biggest monthly benefits. It can be 77 percent more than benefit payments received at 62.

What Should I Do 5 Years Before Retirement?

Heading into any situation unprepared is stressful. If retirement is within five years, do not procrastinate. It may seem like forever before you are able to retire, the time will go quickly. Research shows people who begin planning at least five years before retiring are happier when they retire. Here are five short-term retirement-planning steps

  • Increasing cash reserves
  • Estimating the money needed to retire
  • Evaluating tax consequences
  • Diversifying investments
  • Educating yourself

Increasing Cash Reserves

Setting up payments from Social Security, pensions, 401(k)s, and IRAs takes time and paperwork that may cause delays in getting the first checks. Be prepared for potential glitches by having cash reserves ready in investments like money market, savings, and checking accounts. It is suggested to have three to six months of living expenses tucked away.

Estimating the Money Needed to Retire

In the article , you will find information for developing an accurate estimate of how much will be needed when you retire. People often overlook factoring in the impact inflation has had over the years. If you are not adept at performing the calculations, a qualified financial advisor can help. 

Evaluating Tax Consequences

It is wise to maximize tax-deductible contributions for those who feel they will be in a lower tax bracket when they retire. If you plan to move, capital gains of up to $250 for someone single or $500,000 for a married couple from selling a home may be tax-free if IRS guidelines are met. Stocks may need to be diversified, and the tax owed for selling stocks needs to be considered. You may want to spread the sale over several years. 

Diversifying Investments

Portfolios tend to go up and down over time. When you take regular withdrawals, the volatility has a more significant impact. Reducing the ups and downs increases the odds money will last through your expected lifespan. 

Learn about the mix of investments that will achieve the needed rate of return while having a risk level you feel is reasonable. The risk-to-return characteristics of a portfolio influence the amount of income and how long it will last.  

Educating Yourself

While getting advice from a professional is advisable, nobody cares about your financial future more than you do. Take time to learn about planning and investing for retirement. Learn about investing approaches that impact retirement distribution. 

Be open-minded about making income secure. It will lead to appropriate choices that focus on receiving the highest rate of return. Use the internet, read books, take an online class in investment, or attend a class at a community college. 

What Should I Do One Year Before Retirement?

Visit your company’s Human Resources Department and inform them you plan to retire in a year. It helps avoid problems and delays later. They will begin the process of checking your eligibility, accrued sick pay and vacation time, and start to gather needed benefit information. Fill our beneficiary and final separation forms.

Discuss the one-year timeline with HR concerning actions you need to take to be able to retire when you like. Meet with a financial planner qualified to help you transition to retirement and help ease fears of retirement finances. The financial planner can go over anticipated expenses and help devise a realistic budget and determine ways to reduce costs.

Along with examining financial responsibilities and priorities, you should examine your insurance needs for life insurance, homeowners, health, and auto insurance to ensure the appropriate coverage for your new lifestyle.

You need to apply for Social Security three months before collecting benefits. To ensure you and your beneficiaries ate protected, have an attorney or financial planner review powers of attorney, investment plans, beneficiary designations, trust, and will. Have money set aside for unexpected costs. An emergency fun ensures avoiding the use of assets dedicated to growth or income purposes.

What Should I Do Six Months Before Retirement?

Create your retirement income plan and retirement budget. Review benefit end dates and health insurance options in retirement. Check the balances of your health savings account and flexible spending account.

To lay the groundwork for a new lifestyle, consider these things to aid in the transition

  • Meditating
  • Taking a language class
  • Joining a book club
  • Volunteering for a local charity
  • Making a bucket list


In our twenties to forties, retirement may seem a long way off. Sooner than you think, you are in your fifties and sixties and begin to pay attention to retirement-related planning. No matter your financial status, there is room for improving your retirement financial security.