Retirement Countdown: 4 Key Milestones to Prepare for the Future

Retirement Countdown: 4 Key Milestones to Prepare for the Future

Susan and I work with Jeff Bloomquist with Ameriprise Financial, and he send me interesting articles each month, we are putting them in our own words and shareing them if you want to read the full article please click on Jeff's name and go directly to his article. 

As the years fly by, your retirement might seem far off one moment and just around the corner the next. To ensure your golden years are more about relaxation and less about financial stress, it’s essential to take strategic actions at key pre-retirement milestones. Here are four critical stages in the countdown to retirement and the steps you can take to set yourself up for success.

10 Years Before Retirement: Revisit Tax Diversification

With retirement on the horizon, it’s time to boost your savings and strategically diversify your assets across three key tax categories:

• Tax-deferred (e.g., 401(k) or traditional IRA)
• Tax-free (e.g., Roth accounts)
• Taxable (e.g., brokerage accounts)

Why is tax diversification important? It allows you to manage your tax burden more effectively during retirement. By drawing income from a mix of taxable, tax-deferred, and tax-free accounts, you can reduce the taxes you owe on your retirement income. You’ll also gain more control over when and how much you withdraw, particularly since tax-free and taxable accounts (except Roth 401(k)s) do not have required minimum distributions (RMDs). This flexibility can help you adapt to unexpected expenses, like medical costs, without being forced to tap into your retirement savings prematurely.

5 Years Before Retirement: Focus on Your Retirement Goals

Five years out is the perfect time to refine your vision for retirement. What do you want your post-work life to look like? Whether you plan to travel, pick up new hobbies, volunteer, or work part-time, your financial plan should align with these goals.

To set yourself up for a fulfilling retirement, consider the following:

• Maximize retirement contributions to your 401(k), IRA, or other retirement accounts to meet federal limits.
• Pay down unsecured debt, such as credit cards, to reduce financial strain in retirement.

Clarifying your goals now ensures that you’ll have the resources to support your desired lifestyle once you retire.

2–5 Years Before Retirement: Plan for Social Security

Social Security is a cornerstone of most retirement plans, offering a steady income stream that’s inflation-protected and backed by the government. However, deciding when to claim your benefits is crucial. Although you can start claiming benefits as early as age 62, delaying until age 70 increases your monthly payout.

We can help you determine the best time to file for Social Security based on your individual circumstances. Considerations include:

• Tax rates on Social Security income
• Your health and family life expectancy
• Capital gains and IRA withdrawals

In this period, also continue maximizing your retirement contributions and working to eliminate unsecured debt to ensure you’re in the best financial position when you retire.

1 Year Before Retirement: Monitor Your Expenses

In the final year before retirement, it’s time to take a close look at your spending habits. Track your monthly expenses and separate them into two categories:

1. Essential expenses: housing, groceries, utilities, health care.
2. Lifestyle expenses: travel, hobbies, dining out.

After a year of tracking, you’ll have a clearer picture of how much income you’ll need to cover your basic needs, with a comfortable cushion for leisure activities. This process will help you create a realistic retirement budget and ensure you don’t outlive your savings.

Take Control of Your Retirement Plan By taking strategic actions at each of these pre-retirement milestones, you can set yourself up for a financially secure and fulfilling retirement. Contact us today to start preparing for the next chapter of your life.