Whether you began preparing in your 20s, or have yet to begin, on some level everyone understands that retirement is coming. What many people don’t realize is that it’s a process that involves a whole lot more than merely saving money. Specifically, properly managing the five-years leading up to retirement can make a big difference in your quality of life.
If you’re working with a credentialed advisor, that’s great. If not, no matter where you are in the process, I recommend you meet with one as soon as possible to help you outline a plan. Until then, here’s an introductory five-year countdown to help you assess where you are in your retirement transition process.
If you want to retire in 5 years, you should be slashing risk in your portfolio. I regularly meet with people who have saved enough money—which is admirable—but, when you consider their close proximity to retirement, have too much risk in their investments. If it’s about five years until you’d like to stop working, make sure you’ve:
- Gotten a second opinion on your portfolio
- Reallocated your investments to help protect yourself from huge market swings
At the 4-year mark, slash your debt before you quit. Money not going out is the same as money coming in. Excess debt and expenses steal retirement dreams. If you have four years to go, make sure you:
- Create a budget, and take a close look at where your money is going
- Pay off your credit cards, lines of credit, cars and recreational vehicles
- Up your payments to pay off your mortgage
- Find 20 ways to cut expenses, even if you think you have plenty of money
At the 3-year mark, you should start to identify just how you want to spend your time once you retire. While it’s likely that you’ll initially take more vacations once you stop working, you may find that the travel itch is more easily scratched than you’d imagined. Now is the time to let your imagination run free. Modern retirement is about reinvention. This can include:
- Teaching or mentoring
- Going back to school
- A new career
- Inventing a better mousetrap
If you want to retire in 2 years, create your real estate plan now. Where are you going to live when you retire? Will you downsize or relocate to a lower income tax state? I urge you not to cruise into retirement without a buttoned-down real estate plan. Start by:
- Estimating what your real estate expenses will be (can you afford them?)
- Deciding with your partner or spouse where you want to live
- Making any property upgrades now
At the 1-year mark, re-emphasize your health. Over my career, when it comes to health, I’ve come to realize that there are two types of people: Those who make their health a priority, and those who don’t. It’s pretty simple: people who practice good health generally live longer and are happier than people who don’t. I’m not talking about marathons. Even if you’ve never exercised a day in your life, it’s not too late to begin. Exercise can make a huge difference in your quality of life. Consider:
- Taking 5,000 steps a day, 4 days a week for the next 6 months (your phone has an app)
- Scheduling an appointment with a dietician
- Cutting your alcohol and sugar consumption in half
- Scheduling a physical
- Taking up yoga, tai-chi or meditation
In my more than 25 years as an advisor, I’ve seen trends come and go, but the one thing that has remained consistent is that the people who have clear financial and time management plans tend to be happier and more at ease during retirement.
Want to gain a deeper understanding of the retirement transition process? Download a free copy of our 7 Personal Decision Points guide now.