Financial Moves To Make 10 Years, 5 Years and One Year Before Retirement

For a smooth ride to retirement, take these financial steps when you have 10 years, five years and one year to go.

- Eileen Ambrose And Sandra Block

10 YEARS AWAY

Envision retirement. Now that you’re only a decade away from retirement, it’s time to start getting specific about what that will mean for you. For instance, will you travel, volunteer or work part-time? Will you move out of state, or will you stay in the same town but downsize to a smaller place?

This exercise might even help you reach your retirement financial goals quicker. A recent survey by investment manager Capital Group found that workers who first envisioned retirement were motivated to save nearly one-third more than they might otherwise (see “Ahead,” Jan.).

If you’re married, make sure the two of you compare notes about retirement. “Get on the same page with your spouse,” says Judith Ward, senior financial planner with T. Rowe Price, adding that her husband had pictured retiring on a lake in Canada, but she had had something warmer in mind. “A lot of times spouses have a different vision for retirement.”

The timing of retirement can also be an area of disagreement, particularly if one spouse is much older than the other. The older spouse might assume that both of you will retire at the same time, while the younger one may not be ready to give up a career that’s at its peak. For some couples, the solution is for the older spouse to retire from a full-time job and work part-time until the second spouse is ready to retire.

Run the numbers. To maintain your lifestyle in retirement, your income from Social Security, investments, pensions and annuities will need to replace about 75% to 80% of your current gross income. (That’s roughly what many live on now after 401(k) contributions and payroll taxes are deducted from their paychecks.)