15 Tips for People 5-10 Years From Retirement

Editor's Note: This story originally appeared on NewRetirement.

On your marks, get set … RETIRE! If you are in your 50s or 60s, you are probably about 10 years from retirement (give or take). Maybe you are even just a year from retirement.

Regardless of the exact timing, you are in the home stretch of a lifelong race to this exciting time of your life.

Here are 15 things to do now to improve your future if you are five to 10 years from retirement.

1. It’s Now or Never: Find More Money and Save It

As a pre-retiree, this is your last chance to amass the savings you need to retire comfortably. You might be surprised by how much you can save when you are a few to 10 years from retirement.

Pre-retirees should use the motivation of their looming retirement date to buckle down and save as much as possible.

• Cut expenses.
• Bank all tax returns, raises, bonuses, inheritances, or other surprise money.
• Consider a second job.
• Explore ways to create passive income.
• Save as much as possible. (Unless you are one of those people who have already saved too much.)

2. Max Out Catch-Up Contributions

If being just 10 years from retirement is not enough incentive, know that pre-retirees get extra tax incentives. The government encourages workers age 50 and older to save more than younger employees by increasing the contribution limits to 401(k) and IRA accounts.

According to the IRS:

• Anyone over 50 can add catch-up contributions up to $7,500 in 2024 to their 401(k) savings. That is in addition to the $23,000 contribution limit. So the total you can contribute to these accounts in a given year is $30,500
• For an IRA, the annual contribution limit for 2024 is $7,000, or $8,000 if you’re age 50 or older.

Learn more about tax-advantaged catch-up contributions for when you are over 50.

3. Don’t Rely on Just a 401(k) — Open an IRA Too (or Vice Versa)

Did you know that you can max out your contributions in multiple kinds of retirement accounts?

Go for it! Can you set a savings goal of $38,500 if you are single or $77,000 if you are married?

After 50 you can put $30,500 into your 401(k) and $8,000 into an IRA in 2024. And, if you are married, you can double those amounts to save $77,000 in tax-advantaged accounts each year.

But, your savings don’t need to stop there. If you can save more, go ahead and sock the money away in taxable savings. You will be happy to have the cash later.

4. Expecting an Inheritance? Check In With Your Parents

According to research from Charles Schwab, more than half of young adults (53%) believe their parents will leave them an inheritance, versus the average 21% of people who actually received an inheritance of any kind between 1989 and 2007.

If you are banking on an inheritance to help you with retirement, you might want to have a frank conversation with your mom, dad, aunt, or uncle.

Medical costs have risen tremendously, and it is easy to find stories of families who have used up every last dime because they live longer than expected or they need to go into assisted living, which can be tremendously expensive.

You might also want to take steps to protect the inheritance. You could consider purchasing a long-term care insurance or life insurance policy for your parents.

5. Get Rid of Debt

Debt can be a problem for retirement. It is best to split from the masses and try hard to pay it off before you stop working.

According to the Employee Benefit Research Institute (EBRI), 77% of families headed by people age 55-64 and over have debt. And, the average amount of debt is $108,011. Worse, these percentages have gone up since the end of the pandemic.

In retirement, your income is normally reduced to a fixed level, derived from Social Security, pensions, and other retirement savings that have been amassed over the years.

A fixed income means that you will not have more money tomorrow to pay off the debt than you do today. You will simply be paying more interest — wasting money every month you carry the debt.

Here are “6 Ways to Have a Debt-Free Retirement.” Being five to 10 years from retirement means that you have time to tackle your debt. Now is the time!

6. Talk With Your Spouse

A survey from Fidelity Investments found that finances and retirement planning are extremely difficult subjects for married couples.

In fact, the survey found that less than half of couples make routine financial decisions, such as budgeting and paying bills, together and only 38% jointly discuss their investment and savings strategies for retirement.

Other research finds that couples might not even be on the same page with how they want to spend their time in retirement.

This lack of communication is likely to prove problematic. Use the Retirement Planner to facilitate a conversation about what you want out of retirement and what you will be able to afford.

When you are 10 years from retirement you’ll still have enough time to make adjustments and compromises to get together on the same page for a happy future.

7. Budget: Inventory Current Spending and Project Into the Future

Predicting exactly how much you are going to spend in retirement can help you go a long way toward achieving financial security. And, the less you spend, the less you need to have saved.

When budgeting your retirement, consider that your costs will likely vary. Most people spend a little more when they first retire, less as they age, and a lot more as health declines.

Learn more about how to do budget projections for retirement.

8. Plan for Out-of-Pocket Medical Costs and the Potential for Long-Term Care

If you are somewhere around 10 years from retirement, you really need to think carefully about your future health care costs. There are three categories of spending you need to consider:

Early Retirement Health Care: If you retire before age 65, funding your health care before you become eligible for Medicare can be expensive. Explore nine ways to cover health care for an early retirement.

Medicare: You are sorely mistaken if you think Medicare will pay for everything. According to Fidelity, the average couple who retired in 2023 at age 65 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement.

Long-Term Care: Not everyone will require long-term care, but everyone needs a plan for how to pay for it if they do need it.

9. Maintain the ‘Right’ Asset Allocation and Start Thinking About Income Planning

Some experts recommend that your investments become more and more conservative the older you get. However, most advisers suggest that you try to at least earn returns that will enable you to keep up with inflation — or even get ahead.

The right asset allocation for you will depend on your goals, time horizon, and overall financial profile. Explore simple ways to develop the best asset allocation strategy for you.

However, beyond asset allocation and being concerned about your returns, now is the time to start thinking about retirement income planning. How are you going to turn your assets into income?

10. Consider Your Own Needs (Current and Future) Before Helping Your Kids or Aging Parents

When you are five to 10 years from retirement, you often face a lot of mouths to feed — your own today, saving for your future, kids in college, and parents with financial or medical issues or in long-term care.

If you can not afford to fund it all, you will need to prioritize and make trade-offs.

Many financial advisors will advise retirement savings over spending on family since there are loans for college and some options for public assistance for long-term care but no financial options for paying for retirement beyond working and savings.

Explore how to fund a child’s education.

11. Know What You’re Going To Do in Retirement

It is easy to get wrapped up in the financial aspects of planning for retirement. However, a plan for what to do in retirement is perhaps more important.

The happiest retirees have a purpose and focused interests.

It is time to start dreaming!

12. Consider Where You Want to Be in Retirement

Think carefully about where you will live in retirement. This is the one time in your life when you are not tethered by your connections and a job and you can choose a place to live that completely suits your temperament and interests.

Relocating can also help your finances and even enable an earlier retirement if you can release home equity to add to your retirement savings.

Explore this complete guide to downsizing for retirement.

13. Set a Date — Plan a Celebration!

Make your future concrete. Set a specific retirement date and start actively imagining the future you really want. Tell your friends and family. Plan a retirement party!

These are all proven tactics for helping you achieve a goal.

14. Be Happy Now

Transition times can be tricky for happiness. You are leaving something behind and looking forward to the future, but happiness gurus suggest that contentment comes from being very rooted in the present.

Explore eight ideas for how to thrive as you transition to retirement.

15. Actively Plan: Don’t Let It Just Happen to You!

If you are preparing for an event, there is a lot you can do before stepping up to the starting line to ensure success.

Retirement is no different, and as a pre-retiree, now is your chance to do the things you need to do for a secure future. Use the deadline as motivation.