Planning to Retire in the Next 3-5 Years? What to Consider Today – Kiplinger’s Personal Finance

It may take decades over the course of a career to save for retirement, but there is a small and defined window of time leading up to one’s golden years that is exceptionally critical when it comes to planning. I often work with my clients three to five years ahead of their anticipated retirement to fine-tune their plan, reviewing everything from financial expectations, probable lifestyle changes or decisions, and often-overlooked non-financial considerations.

Having a map or outline defined in the years before retirement will ultimately provide financial and emotional comfort and stability for the future. Below is a roundup of significant elements to think through in the final years ahead of retirement:

How will the current market environment affect your future?

While inflation and a potential recession may be on the minds of many today, it’s important to remain disciplined in an investment approach. Keep a long-term perspective and don’t let current market noise distract or influence notable portfolio changes, as that could negatively impact meeting future retirement and investment goals.

At most, the current market environment may lend an opportunity to rebalance. If a pre-retiree investor is now underweight in stocks due to the market dip, they should consider allocating more bonds to stocks to get back to their target allocation.

Another element to proactively plan for is building a larger cash nest egg that can be pulled from early in retirement. Once someone starts spending from their portfolio in retirement, I recommend having six to 12 months of liquid expenses for their upcoming spending. Amid the current market environment, if someone has the financial wherewithal while on a steady income stream, sock away these future funds that may be tapped later in life.

What are your lifestyle expectations for retirement?

Being financially prepared to retire is one thing, but being emotionally and mentally ready is another. Retirement can be a sizable time frame of one’s life – 20 to 30 years or even more. How that time is spent is important.

Often, I see people entering retirement and asking themselves, “Now what?” Not only can this be a financial detriment (frivolous, unorganized spending on travel or hobbies), it can leave a person feeling unfulfilled during this stage of life.

In the years before retirement, determine what your ideal lifestyle should look like. How do you want to spend your days? What is important to keep you mentally stimulated? Will your spouse/partner join you? Three to five years before retirement, if time allows, treat this window as a dress rehearsal. For example, if volunteering is important, join one or two organizations in advance to ensure that the activity and time …….


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