Why the Last Few Years Before Retirement Matter the Most

Retirement can seem like a daunting task, but it’s so vital to be planning in advance for that and especially those last five years before retirement are so important. So let’s walk through some different ideas to be taken into consideration for those last five years before retirement. First, the idea of this compound interest. So you want to be making money on your money and those last five years are so vital because your assets are likely at the highest that they’ve ever been over your lifetime and you’re potentially maxing out your retirement contributions. So not only do you have the most money that you’ve ever had in there, you’re also putting the most money in and hoping that obviously you get some growth on that and really boosting up retirement savings as you lead into retirement. Another factor here to max out those retirement contributions is the kids are likely out of the home at this point, maybe college expenses are behind you and so that helps again with that cash flow perspective. Number two is starting to understand your expenses for retirement. You know you’re maybe walking through the idea if you’re married, you’re talking to your spouse about okay, what sort of travel do we want to do in retirement? What are those leisurely activities that we’re going to be potentially spending money on? What’s the lifestyle look like as again, hopefully if you have a family, children are out of the house and all that. I best heard it said by one of our clients that oh, my child is now off of the payroll. So the kids are off the payroll, as they put it. And so now you know maybe a little better what your expenses look like. And then just simple comparison. You know what those are in comparison to when you were maybe 40 years old and had a lot going on with the family. Number three, paying for bigger expenses up front. So if you know well, we’ve got to replace the roof here pretty soon. That might be something to take care of while you’re still working or if it’s I want to buy a new car or you know have fun with different toys. It’s a boat or a side by side or whatever it might be. If you could pay for that prior to retirement through your regular income, all the better going into retirement. Number four, there’s an opportunity to take care of some maybe medical care while you’re under your employer’s health insurance. You know that medical expenses can be sort of unforeseen. But maybe there’s certain procedures that you’ve put off. You know maybe it’s the knee replacement, the hip replacement, whatever it might be that you’ve been postponing. But it might be that time to do that while your medical costs are primarily covered through your employer. Lastly, take that opportunity to start dreaming. Create maybe a bucket list of things that you want to do. And with that, factor in what those costs might be. If you have a Financial Advisor that you’re working along side, a lot of times I know here at our office we can map out like a long-term plan as far as what those expenses might be. So if you know well okay, a couple of years into retirement we know that we’re going to be going on this big expensive family vacation. And so you want to factor that into the overall retirement plan. Or if you’re the type that says well we know that we’ll want to buy a new vehicle periodically. Then map that out again. And that’s where it’s so beneficial to try and get an idea of what your retirement will look like if you at least put those potential expenses into the overall plan. We encourage you to be intentional with your retirement. Maybe have those different activities. What are you going to do once you get to retirement? Are there different volunteer opportunities that you feel that you’ve always wanted to do, but the time factor hasn’t been there for you? Well in retirement that’s hopefully what that opens up a lot more time. Is it spending more time with, at that point do you have grandchildren? I know that’s pretty popular amongst our clients is spending that extra time with the grandchildren and in certain cases, heavily taking care of the grandkids while maybe your children are at work. And what joy that might bring you and you’re helping out your family. Retirement is an emotional transition and it’s preparing yourself for that. But also to look forward to this time. As you’re building your plan and getting close to retirement, if you have specific questions that here at Centennial Wealth we can help you out with, we welcome you to give us a call.