Retirement is an exciting milestone. Planning for this transition requires careful forethought and preparation. It is never too early to start planning, no matter how many years out you are from your expected retirement date. As your date draws nearer, your advisor will work with you to firm up your plans and projections. Here is a rough timeline you can use to help think through important considerations in partnership with your advisor:

10+ Years Before Retirement

The first step in preparing for retirement is to take a little time to dream and reflect on your future goals. Take time to think about where you want to live, how you envision spending your time, and which experiences or travel adventures are on your bucket list. Additionally, consider any charitable contributions or family giving goals you might have. These discussions will help you create a clear picture of your retirement lifestyle.

With that vision in mind, draft a budget that estimates your projected retirement expenses. Will your spending stay the same, or are there new expenses you anticipate? Consider whether you expect any one-time larger costs in the first few years, such as travel or home improvements.

In the decade leading up to retirement, ensure that your current savings rate is on track to cover your future desired expenses. Your advisor can help refine your financial plan to determine how much you need to save over the next few years to meet your retirement goals. For those over age 50, consider taking advantage of catch-up contributions. For example, in 2025, you can contribute $7,500 above the $23,500 contribution limit to 401(k) plans, and an additional $1,000 to IRAs above the $7,000 maximum.

Finally, it is important to diversify your investment portfolio during this period. A balanced portfolio reduces risk and helps prepare your savings for the long-term income needs of retirement.

5 Years Before Retirement

Now is the time to revisit that draft budget and start firming up numbers a little more. Make adjustments based on any changes in your life or financial situation, as well as external factors such as real estate or other costs of living in your desired location(s). This will help to ensure that your expectations align with reality.

1 Year - 3 Years Before Retirement

As you approach the big day, take the time to review any retirement benefits provided by your employer, such as health insurance, life insurance, or pensions. Know when decisions need to be made regarding these benefits and how they will factor into your overall retirement plan.

In the year leading up to retirement, think through your “retirement paycheck.” With the loss of a regular wage, your new reality might look like a combination of Social Security income, IRA distributions, pensions, etc. Your financial advisor can help paint a picture of how cashflow will feel upon retirement and assist with important decisions like when to file for Social Security. For example, in some cases it may make sense to delay Social Security to receive a larger benefit down the road.

One critical area to address during this timeframe is your healthcare coverage. Determine what options are available after retirement, especially if you plan to retire before reaching age 65, when Medicare eligibility begins. In some cases, private insurance might be more affordable than COBRA coverage, so it is important to explore all of your options.

Your advisor will help you revisit your investment allocation to ensure it is appropriate for the distribution phase of your life. As you move from saving to spending, your portfolio might need to be adjusted to reduce risk.

Finally, set your retirement date!

By considering the above planning items, and staying in close contact with your advisor as your thoughts evolve, you can ensure a smoother transition into the next phase of your life.