The years leading up to retirement can be exciting. After a lifetime of hard work, the end of your career is finally in sight. And once you're able to actually retire, you'll have complete control over your schedule without needing to report to work or meet a manager's demands.
But the closer you get to retirement, the more important it becomes to buckle down and focus on certain financial matters. With that in mind, here are three essential moves to make when retirement is only five years away.
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1. Check your asset allocation
If you invest too aggressively right before retirement, you may need to postpone that event if the stock market takes a dive. Now that retirement is getting closer, take the time to review your portfolio and see how your assets are divided up.
You don't need to unload all of your stocks ahead of retirement. That's actually not a good idea at all. But if you're five years away from retirement, it's generally not the time to have 90% of your assets in stocks. Give your portfolio a thorough evaluation and make changes, as needed.
2. Assess your health
The state of your health could play a big role in your retirement finances. If you're not in the best of health, you may need to anticipate higher costs for medical spending. And that might influence other decisions, like where you live and the type of home you hang onto.
Now's a good time to do a health assessment so you can put yourself in a position to start firming up retirement plans. You may also want to speak to a medical professional about taking steps to improve your health before your workforce exit arrives.
3. Get an estimate of your monthly Social Security benefit
It's not so easy to get an accurate read on your monthly Social Security benefit when you're in your 40s and still have 20 more years of earnings ahead of you. But if you're five years away from retirement, the estimate the Social Security Administration (SSA) gives you at that point is likely to be pretty accurate. And it's important to know what monthly benefit to expect going into retirement.
Thankfully, it's easy to get at that information. All you need to do is check your most recent Social Security earnings statement. If you're 60 or older, it should have arrived in the mail. If not, you can get it by creating an account on the SSA's website.
If you're not happy with the estimate you see on screen or on paper, delaying your Social Security filing past full retirement age is a great way to boost your monthly benefit for life. But that might impact your retirement plans and age, so it's good to know what you're dealing with sooner rather than later.
It's natural to grow excited about retirement as you get closer and closer to it. But make time for these key moves so you're able to go in fully prepared.
