This final year before retirement is an important one. You are in countdown mode, and you need to make sure all the details of your retirement plan are going to work so that you can retire with confidence.
We wrote this article to help make sure your details are in place. Our article provides to-dos to complete over the next year and includes a case study to show how you can apply these to-dos.
If you want to learn more about retirement planning, please download our ebook Charting Your Retirement Course. This guide covers in detail the steps you should consider taking 1, 5, and 10 years before retirement.
ADJUST YOUR INVESTMENT PORTFOLIO
The year before you retire can be an opportune time to make strategic adjustments to your investment portfolio. For example, you may want to reduce your exposure to stocks to minimize the chance of a market downturn wiping out your nest egg.
However, finding the right stock vs. bond allocation can be tricky, requiring you to understand the exposure that balances your income and security needs. We recommend that you talk with a fee-only financial planner for fiduciary advice on how to structure your investment portfolio.
SCHEDULE A COMPLIMENTARY PHONE CALL
We offer a free consultation to help you determine how we can help you make sure your retirement is on the right track. Please contact us today for a complimentary, 15-minute phone call.
CREATE A RETIREMENT SPENDING PLAN
As financial advisors, we have seen a lot of people wait until retirement to create a spending plan. Please don’t do this. Not only should you create a spending plan in advance, but you should test-run it as well. You need to know that your retirement income will cover your spending needs, and you do not want to wait until you have retired to find out that it does not.
Remember that your retirement spending should sync with your investment account distributions. A popular rule of thumb says to plan for withdrawing about 4% from your accounts in your first year of retirement and then an equivalent amount, adjusted for inflation, in future years.
Your situation is unique, of course, and the withdrawal amount may need to be adjusted up or down. A financial planner with expertise in retirement planning can draw up a comprehensive spending plan, including distribution amounts, based on your financial situation and goals.
EVALUATE YOUR PENSION OPTIONS
Most people nowadays do not retire with a pension, but if you are one of the lucky ones, you have decisions to make.
One of those decisions is how you will deal with your pension income. Depending on your pension’s specifics, you may have to decide whether to take a lump-sum payment or receive a monthly check. The lump sum may be attractive, but you might be able to manage a monthly check better over the long term.
You will also need to take a look at survivor’s benefits. Choosing a lower benefit now can help provide for your spouse later—which could be important if you expect your spouse to outlive you.
GET THE EBOOK
Get more tips for retiring with confidence! Download Charting Your Retirement Course, a free retirement planning guide that covers in more detail the retirement planning steps you should take in 10 years before you retire.
SHORE UP YOUR CASH RESERVES
If you have read our free ebook Charting Your Retirement Course, you know that we made ramping up your savings Tip #1 when you are 10 years from retirement. Now, with a year left on the work clock, we recommend that you take another look at your savings.
You will want to make sure that you have enough cash set aside for emergencies, since emergencies can be particularly stressful when you are living on a fixed income. By having the cash on hand to handle an emergency, you can feel more confident that you will be OK.
In addition, you should consider having enough on hand to fund your living expenses for the first few months of retirement. This could help you withstand a market downturn without having to tap into your other savings buckets or investment accounts.
REVIEW YOUR MEDICARE OPTIONS
You will first qualify for Medicare when you are 65—and you should do the advance work to make sure you know what plans are best for you. Take a look at your finances, your health history, your potential health care needs, and your prescription drugs, and match up your needs with the Medicare options that meet those needs.
We cannot stress enough how important this advance preparation is, since you will have to wait until the next open enrollment period before you can make changes to your coverage.
RETIREMENT CASE STUDY: MARK & CAROL
Mark is just 12 months away from his expected retirement date. Carol, his wife, is already retired. After recently sitting down for their semi-annual meeting with their financial advisor, Mark has a list of steps he’ll need to take to get ready for his retirement.
First, since Mark will be turning 65 just before he leaves his job, he is reviewing his Medicare options so that he can make an informed decision about health care. Second, with the guidance of his financial advisor, he has made some strategic adjustments to his portfolio so that he is taking on the appropriate amount of risk.
Mark is also fortunate enough to have a pension, and he has decided to receive monthly payments from that plan, rather than taking a lump-sum distribution. He also opted for a lower monthly payment now so that Carol will enjoy a larger survivor’s benefit if he dies before she does.
Mark is also building up some cash reserves to help see him through the first months of his retirement. Finally, he and Carol have designed a budget based on the monthly income they expect to have after Mark stops working. They are test driving this spending plan now so that there are no surprises in the future.
By taking these steps, Mark is well prepared to make a smooth transition into retirement.
GET MORE CASE STUDIES
Our complimentary retirement planning ebook has more case studies, as well as action steps and a helpful checklist. Download your copy of Charting Your Retirement Course today to learn more about what to do 1, 5, and 10 years before retirement.
SCHEDULE A COMPLIMENTARY CONSULTATION
Retirement planning can be complex, and it can be helpful to have an experienced professional providing guidance before you make decisions.
At Parkshore Wealth Management, we offer service programs that meet your needs throughout the stages of your life, including retirement. As independent, fee-only financial advisors, we can help you simplify your finances and create a better plan for the future.
Contact us today to schedule your free 15-minute phone consultation.