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3 Money Moves You Should Make When You're 10 Years From Retirement

By Katie Brockman – Feb 16, 2020 at 10:18AM

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This is a crucial period when it comes to retirement planning.

As you're reaching the home stretch of your career and getting closer and closer to retirement, it may be tempting to slow down and relax as you coast into your senior years.

However, this is one of the most crucial stages of the retirement planning process, and how you choose to spend this time can potentially make or break your retirement. If you relax too much, you could end up not being as prepared as you expected by the time you retire, at which point there's little you can do to fix the problem and save more.

To ensure you're as prepared as possible, there are a few things you should be doing when you're 10 years away from retirement.

Older couple looking at documents and using a calculator

Image source: Getty Images.

1. Double-check that your savings are on track to reach your goal

By this point, you should have a goal in mind for how much you should save by the time you retire. But that goal isn't necessarily set in stone, so it's important to double-check that your target hasn't changed and that you're still on track to achieve it.

To do this, use a retirement calculator to estimate how much you should have stashed away by retirement age. Be as accurate as possible when inputting your information, too. Factors like the amount you expect to spend each year and the number of years you think you'll spend in retirement will have a major effect on the total amount you should save, so if you're only guessing at these numbers, your savings goal won't be as accurate as it should be.

The calculator will also give you an estimate as to how much you should be saving every month to reach your overall goal by retirement age. If you're saving the amount that your results suggest, that means you're right on track. But if your results show that you should be saving more than you actually are, that's an indication that you may be falling behind. The sooner you realize you're behind, though, the more time you have to make adjustments and catch up.

2. Decide what age you want to start claiming Social Security benefits

You won't be able to depend on Social Security benefits to fund your entire retirement, but your monthly checks are an important source of income. The size of those checks, though, will depend on what age you begin claiming.

By claiming at your full retirement age (FRA) -- which is age 67 for those born in 1960 or later, or either 66 or 66 and a certain number of months for those born before 1960 -- you'll receive the full benefit amount you're entitled to. However, you can claim before that age, as early as age 62. If you claim early, though, your monthly checks will be reduced -- by up to 30% if you have a FRA of 67 and claim at 62. You can also delay benefits past your FRA, which will result in bigger checks. If you have a FRA of 67 and claim at 70, you'll receive a 24% bonus on top of your full amount.

You don't necessarily have to claim benefits as soon as you retire, so consider how your retirement age will affect the age you plan to file for benefits. You may choose to retire in your early 60s but delay benefits until later to earn those bigger checks, for instance, or you might retire and claim benefits at the same time. Regardless of what you choose to do, make sure you understand how the age you claim will affect how much you receive each month.

3. Budget for major expenses like healthcare and long-term care

As you're planning for retirement and estimating your future expenses, you may be budgeting for everyday costs like housing and food, as well as some of the more significant expenses like travel and home renovations. But some of the most overlooked retirement costs tend to be the biggest -- including healthcare and long-term care.

Medicare won't cover everything in retirement, and the average retiree spends around $4,300 per year on out-of-pocket costs, according to a study from the Center for Retirement Research at Boston College. Even with Medicare coverage, you'll still be responsible for all deductibles, premiums, copays, and coinsurance. In addition, there are some costs that Original Medicare won't cover, such as dental, vision, and prescription drugs. For additional coverage, you'll need to enroll in a separate plan, like Medicare Part D or a Medicare Advantage plan -- which will be more expensive.

Medicare also doesn't cover long-term care, which is one of the priciest expenses you can face in retirement. Approximately 70% of retirees will require long-term care at some point, according to the U.S. Department of Health and Human Services, and the average semi-private room in a nursing home costs around $6,800 per month -- or nearly $82,000 per year. While you can't predict whether you'll need long-term care or not, it's wise to plan for it anyway by either budgeting the costs into your retirement plan or considering long-term care insurance.

When you're 10 years away from retirement, it's more important than ever to make sure you're as prepared as possible because this is your last chance to make adjustments. By spending this last decade putting the finishing touches on your retirement plan, you'll have a much better shot at enjoying your senior years comfortably.

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