After 30-plus years of working and socking away savings, you can finally see retirement on the horizon. But it’s not time to coast just yet.
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 now.
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 sock away 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! Those 50-plus can put $6,000 extra in a 401(k), $1,000 more in an IRA in 2015.
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 stocks. To achieve returns to sustain a 30-year retirement, you need to still be investing for growth. Stocks should make up 50% to 60% of your allocation, with the rest in bonds. The caveat: Those within 10% of their ultimate savings goal can choose to dial back to 40%.
4. Do the math on your mortgage. Of course you don’t want to carry credit card debt into retirement, but what about the mortgage? The old advice was to burn it before you left work, but in today’s low-rate environment, maybe not. Assuming that your rate is less than 5% 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.
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On the other hand, if you won’t be able to swing the nut later on, or simply want peace of mind, use this mortgage calculator [time-calcxml id=hom03] to figure out how to erase the debt sooner. Or consider a cash-in refi to a shorter-term loan. Say you have $200,000 and 20 years left on a 30-year mortgage at 5%. Refinancing to a 15-year at 3% and putting in $50,000 would shave off five years and cut the monthly payment from $1,381 to $1,074. Keep up the original payment, and the loan will be paid off in 11 years, plus you’ll save $10,300 in interest.
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 coworkers 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.