A 5-Year Countdown to Retirement

Planning to retire in the next five years or so? Take these key steps today to better position yourself for this life-changing event.

1) Set Your Target Date

You don’t have to etch the date in stone, but you do need a timeline to measure your progress.

  • Consider a phased retirement, which lets you transition from full-time work to reduced hours.
  • Talk to your employer about how reduced hours will affect your pension, health insurance, and other employee benefits.

2) Envision Your Retirement

Think about what you want to do in your golden years.

  • Be realistic in what your lifestyle will be like as you age.
  • Think through any additional expenses you may incur.
  • Share your vision so we can understand where your accounts should be as you move through your pre- and postretirement years.

3) Calculate Your Number

Crunch the numbers to determine how much retirement savings you will need.

  • Expect to live longer than your parents. As life expectancy for many people stretches into the 90s, retirement assets must last longer.
  • Understand inflation, which will reduce your spending power over time.
  • Plan to keep your withdrawal rate under 5 percent of your retirement investments, to decrease your risk of running out of money.
  • Factor in health care expenses, keeping in mind that Medicare likely won’t cover all your health care costs.


4) Position Yourself for a Better Retirement

Try to close the gap between your current retirement resources and your ideal savings.

  • Increase your retirement savings by taking advantage of the higher contribution limits for those age 50 and older. You can contribute an additional $6,000 per year to a 401(k) and an extra $1,000 per year to a traditional or Roth IRA.
  • Supplement your savings with other investments, such as brokerage accounts, annuities, and bank savings vehicles.


5) Pay Off Outstanding Debt

Determine what debt you can pay down in the near term.

  • Calculate the effect interest payments can have on your retirement income, and think about whether you can make changes to your debt-paying strategy.
  • Consider paying off your long- and short-term debt, especially loans against your 401(k) account. Loans from your 401(k) that are not paid off shortly after you leave your employer will be taxed as a distribution from your retirement plan.


Understanding the financial changes you need to make today will help ensure that you can continue your desired lifestyle after the last paycheck.