Countdown to Retirement by Decade!

September 12, 2023 — Even if you are in your 30’s you have probably started the countdown to retirement. Probably with a mix of dread (will I be ready?) and anticipation (can’t wait to be free!). No matter what your current age, we’ve set up a retirement countdown in 10 year periods to help with that. The idea is that by doing the preparation in stages you will be building a solid base, one that will result in an effortless blast off when that retirement finally comes. In our experience the happiest retirees are the ones who planned for it.

R (Retirement) Minus 30.

With 30 or more years before retirement you are lucky to

have so much time. Your primary retirement preparation job in this phase is financial – you need to start (if you are not already!) saving aggressively. Establishing a goal for when you hope to retire is one thing to think about. But determining a dollar target that will provide for what you need to live your desired retirement lifestyle is even more essential. Social Security income will be important, and it is easy to calculate how much that will provide, but it alone will not be enough for more than a minimum standard of living. The rest has to be made up from your savings and a possible pension. As an example using the 4% rule of thumb for withdrawals, $1 million will most likely provide $40,000 per year without touching the principal, which you could spend down in the last part of your retirement.

If your employer matches your 401k contribution, make sure you put in every bit you can. In these early years every dollar will make a huge difference down the road. Start looking for a financial advisor who can help you maximize your possible pre and post tax retirement contributions and investments. There are many different possibilities including Roths, SEPs, IRA’s, target funds, etc. If you choose not to have a private financial advisor, at least start an account with a major mutual fund company such as Vanguard, Schwab, Fidelity, etc. These companies have many resources, free services, and knowledgeable people to help you. You should be thinking about how to invest your money into the three traditional buckets – equities, bonds, and fixed income/cash equivalents. Most experts would agree the emphasis should be on equities in this period, invested in mutual funds rather than individual stocks.

R Minus 20.
Let’s say you are 45 now and your goal is to retire at age 65 – so you have 20 years to prepare. It might seem like a long time, but it isn’t really. The Financial aspects of retirement continue to be most important. Continue putting a significant percentage of your earnings into retirement vehicles like a 401(k), and don’t withdraw any unless you absolutely have to.

This is the year you and your financial advisor need to have a pow-wow on the viability of your retirement savings vs. your imagined retirement lifestyle. Does it look like you will have enough saved – or are you going to have to plan on working longer and/or start saving a lot more? What is your target “number”, the amount of all your resources (investments and retirement funds) that together with your pensions, social security payment will cover your expected retirement lifestyle. Should you convert some of your IRA or 401(k) into a Roth, or start a new Roth (basically, pay taxes now on that income but not worry about having to pay taxes on it later)?

At age 50 you are eligible to make an additional $7500 catch-up contribution to your 401(k) plan. Starting in 2026, however, contributions from high earning individuals have to be made into Roth type plans, which means the contribution is made after tax. The catch-up provision is a great opportunity to buttress your retirement nest egg – take advantage if you can.

R Minus 10

Lifestyle planning becomes much important now. Have you been thinking about where you might live once you retire? Also, what about the kind of activities you want to pursue? How important will factors like transportation, walkability, medical care, cultural resources to you? The period 10 years before retirement is a great time to start checking out possible retirement regions, towns, and lifestyles. You can read about many places online and in books. You can talk about it with people you know. And if you find yourself on a business or pleasure trip a good investment is to take a few hours to poke around, or even tack on a weekend to visit some likely areas. With several years to go, you have time to assemble a sizable data bank of places that you might consider living in (take notes).

This is a period when it is also important to think about will keep you busy and centered once you retire. Travel is always popular, but unless you live on a boat or RV, it won’t account for all the time you now have. Do you have a hobby, a volunteer goal, or a passion that will keep your interest and your mind working? Now is the time to start planning what you are going to do once you retire.

Naturally, with 10 years to go, it is also time to have a financial check – are you on target with your financial goals, or do you need to make some adjustments to get back on track? Look at how your investments are structured, perhaps with less emphasis on equities and more on fixed income to insulate your portfolio from market shocks.

R Minus 5.

Yikes, you are almost there. Obviously, if your financial goals are falling short, this is the time for a full court press on that. So now it’s time to really get serious – even considering working a few extra years to meet your target.

Keep discussing and drafting your retirement priorities with your significant other. You have plenty of time to change them, so don’t worry if they are not perfect. But the very act of writing your likes, dislikes, and goals down will help give you focus. Now is the time to develop your “what I’m going to do in retirement” draft. Have you got a hobby or a new business that you want to pursue in retirement? You aren’t ready for retirement if you don’t know what is going to keep you busy.

R Day – Congratulations on your retirement. You planned for it and now it is here. Enjoy!

Now that you are not working your income might decline severely, so the next few years might be a good time to convert some of your traditional retirement 401(k) or IRA money into Roth accounts. You might have to pay taxes on the conversion, but since Roth funds do not require RMDs, you could save in the long term. Most experts would also advise rebalancing your retirement portfolio to eliminate some of the risk. Many folks purchase annuities to assure a steady income stream as part of that.

Bottom line – the Countdown to Retirement

Like any major task, breaking retirement down into bite size pieces is a lot easier than trying to do it all at once. The process can be fun and will give you a big payoff down the road. The resources listed below provide a lot more help too.

Comments? What did (or does) your retirement plan look like? Did you have other steps, and did you involve others in the planning? Please share your thoughts in the Comments section below.

More Resources:

• Retirement Budget Worksheet
• What to Do If You Can’t Afford to Retire
• Quiz: Are You Ready for Retirement
• 10 Steps to Find Your Perfect Place for Retirement