Chapter Four
10 years to retirement? The actions you take in the final decade before you quit working are crucial to getting the next phase off to a smooth start. Here are 5 things you must do. Follow these tips and make it easy
After 30-plus years of working and saving,you can finally see retirement on the horizon. But it’s not time to coast just yet.
1. See if you’re saving enough. If you haven’t recently, take stock of where you are and where you need to be. For example, to replace 70% of your earnings by age 65, you’ll need to accumulate 12 times your pay at 65. But even if you’re playing catch-up, you can still make it to the finish line with what you need. Your choice: Seriously power-save, or work a bit longer while saving less. Say you have five times your income; you could save 33% a year for the next 10 years, or delay retirement 24 months while banking 20%. Either way, don’t miss out on catch-up contributions!
2. Stagger your retirement with your spouse. Among two-income couples,nearly one in five retires in the same
1. See if you’re saving enough. If you haven’t recently, take stock of where you are and where you need to be. For example, to replace 70% of your earnings by age 65, you’ll need to accumulate 12 times your pay at 65. But even if you’re playing catch-up, you can still make it to the finish line with what you need. Your choice: Seriously power-save, or work a bit longer while saving less. Say you have five times your income; you could save 33% a year for the next 10 years, or delay retirement 24 months while banking 20%. Either way, don’t miss out on catch-up contributions!
2. Stagger your retirement with your spouse. Among two-income couples,nearly one in five retires in the same
year, and another 30% within two years of each other, reports the Urban Institute. But quitting in tandem isn’t necessarily the best move. If one spouse works just a few years longer, you can draw less from your portfolio in those initial years.
3. Don’t automatically quit on your share portfolio. To achieve returns to sustain a 30-year retirement, you need to still be investing for growth. Investments should make up 50% to 60% of your allocation,with the rest in a stable portfolio. The caveat: those within 10% of their ultimate savings goal can choose to dial back to 40%.
4. Be mortgage wise. Of course you don’t want to carry credit card debt into retirement, but what about the mortgage? The old advice was to settle it before you left work, but in today’s low-rate environment,maybe not. Assuming that your rate is less than 9.75% and that you’ll be able to afford
3. Don’t automatically quit on your share portfolio. To achieve returns to sustain a 30-year retirement, you need to still be investing for growth. Investments should make up 50% to 60% of your allocation,with the rest in a stable portfolio. The caveat: those within 10% of their ultimate savings goal can choose to dial back to 40%.
4. Be mortgage wise. Of course you don’t want to carry credit card debt into retirement, but what about the mortgage? The old advice was to settle it before you left work, but in today’s low-rate environment,maybe not. Assuming that your rate is less than 9.75% and that you’ll be able to afford
the payments from guaranteed-income sources in retirement or if you’re planning to move there’s no rush. You may do better by investing money you would have put toward the loan.
5. Make friends with the young’uns. Sure, you still want to dazzle your boss, but you’d better be working just as hard to make allies below you. Your younger co-
5. Make friends with the young’uns. Sure, you still want to dazzle your boss, but you’d better be working just as hard to make allies below you. Your younger co-
workers are likely to move up the ranks over the next 10 years and have a say in whether you stay or go. Hanging onto your job for the next decade will be essential to keeping your plan on track. So train subordinates, mentor up-and-comers, and look into a “reverse mentorship” in which a junior colleague teaches you something new