5 Steps to prepare your savings within 12 months of your retirement.

When you’re on the verge of retirement, say within the next 12 months, you might think you’ve done everything you need to do: saving diligently, investing wisely, and maybe even attending a webinar or two. But have you truly prepared for the retirement you want? Based on real-life examples from my financial planning practice, I’ve found that many retirees wait too long to make crucial decisions about their savings and investments. Today, I’ll share some insights to help you avoid common pitfalls and ensure you’re ready for retirement when the time comes.

Recently, I looked at data from our retirement webinars and noticed something surprising: most people attend our webinars after they’ve retired, not before. While it’s a good idea for anyone to join these webinars regardless of where you’re at in the retirement process, doing so before you retire could make a significant difference in the quality and security of your retirement.

If you’re planning to retire next year, you should start taking concrete steps now. Market fluctuations, unexpected health issues, or even company layoffs could drastically alter your timeline. Proactive planning is essential, especially when you’re this close to retiring.

Let me share two real stories from my clients that illustrate the importance of early retirement planning. In the fall of 2019, I met with a gentleman who was planning to retire on April 1, 2020. He liked our five-step retirement plan but decided to wait until he officially retired to start working with us. Unfortunately, just before his planned retirement date, the stock market dropped by 12% in a single day, and his portfolio took a significant hit. In March 2020, the market crash coincided with the onset of the COVID-19 pandemic, further complicating his situation. He contracted COVID-19 and ended up postponing his retirement every year—for 4 years. Starting his retirement plan earlier would have likely reduced the impact of the market downturn on his retirement savings and helped him hit his retirement target.

Another couple I worked with in 2019 were also approaching retirement, about two years out. After reviewing their portfolio, we discovered that they were taking on more risk than they realized. We adjusted their investments, cutting their exposure to market volatility by half. When the market dropped in March 2020, they were able to sustain their retirement plan because of the work we had done to restructure their portfolio. They stayed on course and retired exactly on time, enjoying their post-retirement life with grandkids and the retirement income they had planned for.

One of the biggest mistakes I see is people waiting for the “perfect” retirement date or market condition before they take action. A couple of my clients were planning to retire at the end of 2020, hoping to continue growing their 401(k)s until the final day. But when the market dropped by 30% in March 2020, they panicked, moved their investments into cash, and were then laid off in June. Then they called me in July, after they were forced to retire, after the market dropped, after they moved to cash and missed on the market recovery. These clients missed out on market recovery because they had no plan in place to adjust their investments as they neared retirement. Instead of trying to time the market or wait until the last minute, take action now to safeguard your savings.

If you’re within 10 years of retirement, you’re in what’s often called the “retirement red zone.” This period, which extends five years before and five years after your retirement date, is when market volatility can have the most significant impact on your retirement. During this time, a sudden market drop can lead to substantial losses that could take years to recover from, affecting the income you’ll have in retirement. By planning ahead and adjusting your portfolio, you can reduce the likelihood of such risks.

So, what should you do if you’re planning to retire in the next 12 months? Here are five critical steps to take:

1. 
   
2. Estimate Your Retirement Spending (SPEND)
   One of the easiest ways to estimate how much you’ll spend in retirement is by looking at your current take-home pay. Whatever shows up in your checking account now is likely what you’ll spend in retirement. Adjust this number for any anticipated changes, like paying off a mortgage or increased healthcare costs.
   
3. Review Your Income Sources (MAKE)
   Retirement doesn’t mean you stop earning money. You’ll have Social Security, and possibly a pension or income from investments. Make sure to evaluate how you can maximize these sources. For example, delaying Social Security can increase your monthly benefit, especially if the higher earner in your household waits to claim.
   
4. Plan for Taxes (KEEP)
   Taxes in retirement can be complicated, and they often fluctuate depending on your income level. Develop a strategy to manage taxes over your lifetime, rather than focusing on reducing them in any given year. This way, you’ll keep more of your savings in the long run.
   
5. Reassess Your Investment Strategy (INVEST)
   As you approach retirement, it’s essential to rethink your investment strategy. You’ll no longer have the luxury of time to recover from market downturns. Consider dividing your assets into short-term and long-term buckets. Money you’ll need in the next few years should be in more stable, low-risk investments, while funds for later years can remain in growth-oriented assets.
   
6. Plan Your Legacy (LEAVE)
   Finally, think about what you’ll leave behind. This includes not only financial assets for your loved ones but also a plan for managing any remaining debts or expenses. Planning your estate properly ensures that your legacy benefits your heirs without complications.
   

If you’re planning to retire soon, don’t wait until your retirement date to start making these critical decisions. By planning ahead, you’ll have peace of mind knowing that your savings are protected, and you’re set up for a successful retirement. For more guidance, visit FiveStepRetirementPlan.com and get started today!

Remember, it’s always better to be proactive. If you’re unsure where to begin, reach out, and let’s create a plan tailored to your needs.

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• www.5stepretirementplan.com 
  
• “Is Your Retirement Facing a Midlife Crisis?” – Retirement Revealed, guest David Blanchett
  

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