Questions to Ask Five Years Before Retirement

Five years before retirement is a prime time to sharpen your retirement planning. If you don’t have clear retirement goals, or if you’ve fallen behind on some of them, there are measures you can take to get caught up. Things you do now can go a long way toward making your retirement years more secure, more enjoyable, and more rewarding. Here are five questions to ask your financial advisor in the five years before retiring.

1. What’s my retirement income plan?

Once you retire, your income situation will change. It’s critical to have a well-thought out retirement income plan to identify your income sources and expenses, so you can understand what distributions are needed from your savings and retirement accounts. There are a lot of questions to ask when building your income plan, and getting answers now may be key to a comfortable retirement. Ultimately you should be able to answer the question, “How can I ensure that I won’t run out of money?”
The sooner your plan is put in place, the more time you have to make adjustments and ensure your plan can succeed.

2. Do I need to boost my savings to reach my goals?

Once you have a plan in place, you should have a clear picture of your goals and whether you are on track to achieve them. If you are behind on putting enough money away, now is the time to be more aggressive about adding to your savings.
Taking advantage of tax-deferred savings like 401(K)s, IRAs and executive compensation programs can make saving easier. They help lower your tax bill so that your take-home income takes less of a hit from the increased savings. If you are age 50 or older, you can make catch-up contributions to 401(k)s or IRAs to maximize the tax-advantaged savings.


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3. Can I live on my planned retirement budget?

Your retirement income plan will determine how much income your savings can provide throughout retirement. That may be less than your spending needs are now, which may mean you’ll have some budgeting decisions to make in retirement. You can practice making spending adjustments now, so you can get used to a smaller budget before you have to live on it. If you find that the budget is too restrictive, you can make some spending decisions such as choosing less expensive housing simpler hobbies, or more modest travel arrangements. If you can’t make the smaller budget work, you can always choose to delay retirement and build up additional savings.

4. Should I pay off my debt before retirement?

In retirement, it pays to have as few debts as possible. It will smooth your budget and make more room for your desired spending. In the remaining years before retirement, build extra mortgage payments and car payments into your budget so that you can have your home and car paid off around the time you retire.

5. Should I move in retirement?

Where you live in retirement can have a huge impact on your finances. For one thing, moving to a different community or a different state can lower your expenses. You can make an even bigger impact on your retirement by downsizing. By replacing your home with a less expensive one, you can convert some of your home value into cash and add money to your nest egg. And if you can get rid of your mortgage in the process, you can really reduce fixed expenses, giving you much more flexibility.

It may take discipline to meet your retirement savings, debt and income goals during the five years leading up to retirement. You may have to make a few tough decisions. But a few sacrifices now can really pay off in the form of a more comfortable and worry-free retirement.

As financial planning experts we help you build a sound income plan as part of your overall planning for retirement. We design and implement your plan, considering all the facets of retirement like Social Security, Medicare, estate planning and legacy planning, tax planning and more. Contact us to learn more about how we can help you build your retirement income plan.

About Jon Beyrer

Jon Beyrer, EA, CFP® is a partner of Blankinship & Foster LLC and is the firm’s Chief Compliance Officer. As a lead advisor, he focuses on helping families achieve their goals with sound wealth planning. In the community, Jon serves on several boards and is co-founder of the Professional Alliance for Children, a legal/financial charity for families of ill children. He has been quoted in The Wall Street Journal, The New York Times, and the Journal of Financial Planning. Jon lives in San Diego with his family.

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