The years leading up to retirement can be exciting. When you're a decade away from leaving the workforce, you can finally start to dream about living out your goals -- traveling, moving close to family, or enjoying the freedom of not having to punch a clock. If you want your retirement to go smoothly, there are a few key moves you'll need to make before that milestone gets too close. Here are four items to check off your list if retirement is 10 years away.
1. Assess your current savings
Hopefully, by the time you're 10 years from retirement, you'll have socked away a decent chunk of money in your 401(k) or IRA. Now's the time to make sure your savings are adequate. If they aren't, you still have an opportunity to make up for lost time.
As a general rule, aim to retire with about 10 times your ending salary in savings. If you currently earn $95,000 a year, it's safe to assume that in the course of the next 10 years, your salary will increase to $100,000, leaving you with a savings target of $1 million. If you already have a good $600,000 or so in your retirement plan, and you expect to contribute $500 a month to that plan over the next 10 years, then you're good to go (assuming your investments in that plan give you a somewhat conservative 5% average annual return). If you're sitting on $400,000, you'll need to ramp up your savings game.
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2. Research healthcare costs
The amount of money you'll spend on healthcare will depend on a number of factors. HealthView Services estimates that the average healthy couple retiring today will spend $606,337 on medical bills throughout retirement, not including long-term care. That's just one estimate, and it pays to review more. Still, since it's one of the larger projections out there, it could pay to follow it. The last thing you want to do is underestimate your costs.
Once you get a sense of what you might spend on medical care as a senior, adjust your savings plans accordingly. You might ramp up your 401(k) or IRA contributions, or you might put extra money into your health savings account.
3. Figure out when you'll claim Social Security
Social Security will probably play an important role in your retirement, so strategically claiming benefits will be important. If you file at your exact full retirement age -- which, if you were born in 1960 or later, will be 67 -- then you'll get the precise monthly benefit your earnings history entitles you to. Otherwise, you can file as early as age 62 for a reduced benefit, or as late as age 70 for an increased benefit. Figuring out when you'll take benefits will help you determine how much you'll need to cover your expenses.
4. Check your investments
As retirement nears, it's wise to shift some of your stock investments into bonds. Bonds are much less volatile than stocks, and they're less likely to lose value during turbulent economic periods. If you're 10 years away from retirement, you may still be safe to have a good two-thirds of your portfolio in stocks. By the time you get to retirement, you'll probably want more of a 50/50 split, or maybe even a higher concentration of bonds. Now's a good time to see how your assets are allocated and start making changes as needed.
The more thought you put into retirement, the more likely you'll be to enjoy your senior years without stress. Make these moves about 10 years out, and you'll put yourself in a strong position to enter retirement in a financially sound spot.
