If you are planning to retire in five to ten years, there are some very important steps you need to be taking now to prepare. Solid financial planning and preparation are key to having the happy and fulfilling retirement in Florida that so many strive for! 

Focus on Growth Investing and Reducing Debt

Two of the most important steps to take in the decade leading up to retirement are: 1) Investing for the right amount of growth (growth without taking too much risk), and 2) Getting and keeping your debt load down. 

Maximize your IRA contributions, your 401K and other retirement account contributions. Remember any profits made with your investments in your retirement accounts are not taxable until they are withdrawn.

Determine your appetite for risk and initially invest for growth. In general, the older you are, the more your portfolio should be rebalanced toward income and preservation of capital over riskier and more volatile investments. Reassess and adjust your portfolio’s risk profile as you get closer to retirement. 

Debt can be an even greater burden when you are living on a fixed income. You want to pay your debt down as much as possible before retirement. High-interest credit cards and car loans are often a good place to start, even when it means postponing contributions to retirement accounts.

Over time, high interest-rate debt will almost always cost you more than the rates you will gain with investments, so it often makes better sense to pay off high interest debt before maximizing contributions to your retirement plans. 

Set a goal of having all, or most, your debts paid off by the time you retire. Create a concrete plan of what it will take for you to achieve your goal between now and then.

Establish a Retirement Budget

What is the current level of income that you need to feel comfortable? Take a look at your current budget. Many people expect to have less income in retirement, so think through, with focus and clarity, which expenses you need to sustain your desired lifestyle and which expenses you can do without.

How could unexpected medical expenses impact your cost of living? How will you pay for long-term care should you or your spouse experience a need? 

What expenses could go up with inflation? An inflation rate of 3% will cut the purchasing power of your savings by 50% (one half) over 24 years. Inflation is a creeping expense that largely goes unseen unless understood and planned for.

Being as specific as possible about your budget and noting how it has and will continue to change over time makes it easier for you to attain your medium and long-term retirement goals.

Have a Solid Financial Plan that Includes your Lifetime Goals

What are you looking forward to? What are the things you’ve always dreamed of doing when you don’t have to work each day? Maybe you have always dreamed of travel? Or simply enjoying leisure and the beaches in sunny Florida.

Do you have any large purchases you anticipate making after retirement like home improvements?

Do you have hobbies or other interests you’d like to pursue but have never had time to previously? Or a passion you’d like to take to the next level as a side business? What would be the costs of pursuing that?

A fulfilling retirement means feeling that you are being useful, keeping your interests alive and maintaining relevance. It’s consciously cultivating the things that make you happy and keep the spring in your step! 

How would pursuing the things you haven’t had time for in the past possibly change your budget after retirement?

Legacy Planning

Establishing a legacy plan involves listing your assets and determining who you would like to leave them with after you pass.  How would your assets be divided? Is there anything you would like to donate to charity?

One aspect of legacy planning is thinking through and completing an advanced medical directive that gives doctors guidance regarding the level of care you wish for before being left alone without heroic efforts to sustain you. These end-of-life medical costs may impact what you have left for your heirs.

Make Your Retirement a Time of Personal Renewal

Freedom is what we all want. Once people’s work and family responsibilities are largely behind them, retirement can be the time to enjoy the freedom of the time we have remaining in life.

Think about it. If someone had asked you at 21 what your goals were over the next five years with your full life ahead of you, many of us would have a clearer idea of what we were looking forward to and going to do next.

However, if you ask many people at retirement age what their goals are over the next five years, it often isn’t as clear as when we were young. Even though it should be clearer because we have less time left!

People are living longer and living healthier. The costs of sustaining a 20- 30 year retirement is usually one of the largest financial expenses of your life.

Maximizing your personal freedom to enjoy these years with solid pre-retirement planning is key for a happy fulfilling retirement in Florida - or wherever you decide to retire.