Retirement in 5 Years? How to Prepare

In this episode of Upticks, Cory and I discuss engaging with a fiduciary wealth advisor, planning for health insurance, accurately estimating your financial needs, defining your retirement lifestyle, the importance of tax planning, and aligning your investment portfolio with your financial plan.

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Read an overview of the conversation below:

Engage with a Fiduciary Wealth Advisor

Working with a fiduciary advisor who is committed to acting in your best interest is crucial. It’s important to ask potential advisors if they are fiduciaries with your assets at all times. This helps ensure that the advisor is legally obligated to prioritize your financial well-being over their own profits. Be cautious of advisors who sell commission-based products and find someone who specializes in retirement planning. As Jake mentioned, “A fiduciary advisor provides advice and avoids conflicts of interest, which can be particularly important as you approach retirement.”

Plan for Health Insurance

Health insurance can be a significant roadblock for those looking to retire before Medicare eligibility. Having a plan for health insurance, including options like COBRA and exploring the open market, is essential. Understanding your health insurance options and costs is crucial to help avoid unexpected expenses that could derail your retirement plans. Health insurance costs can be substantial, especially if you retire before becoming eligible for Medicare. Even finding part-time work with health benefits can help bridge the gap until Medicare kicks in. Additionally, considering supplemental insurance plans that cover gaps in Medicare can provide extra security and help manage healthcare costs in retirement. As Cory pointed out, “It’s important to start thinking about your health insurance plan well before you retire.”

Understand Your Financial Needs

Knowing how much money you will need in retirement is vital. Tracking your spending for a year can help you get a clear picture and test your budget to help ensure it aligns with your retirement goals. This involves not only understanding your current expenses but also anticipating future costs, such as healthcare, travel, and hobbies. Creating a detailed budget that includes all potential expenses, from daily living costs to occasional splurges, is essential. By tracking your spending for an extended period, you can identify patterns and make informed decisions about your retirement budget. It’s also beneficial to consider inflation and how it might affect your expenses over time, helping ensure your retirement savings can sustain your lifestyle for the long term. Cory shared, “It’s crucial to know how much money you’re actually going to need, not just what you think you’ll need.”

Define Your Retirement Lifestyle

Having a clear vision for how you will spend your time in retirement is important. Writing down your ideal lifestyle and comparing it to your current situation can help identify any gaps. The “10 a.m. on Tuesday test” is a useful exercise to envision your retirement lifestyle. This exercise helps set realistic goals and make necessary adjustments to help live the retirement you envision. Whether it’s traveling, volunteering, pursuing hobbies, or spending time with family, having a clear vision of your retirement lifestyle can guide your planning and decision-making. Identifying activities and pursuits that bring joy and fulfillment is important. Additionally, considering how you will maintain social connections and stay engaged in your community can help enhance your overall well-being. Jake suggested, “Think about what your perfect life looks like and work towards narrowing the gap between your current situation and your ideal retirement.”

Tax Planning

Tax planning is especially important for high-net-worth individuals. Considering strategies like switching to a Roth IRA or setting up a donor-advised fund can help optimize your tax situation. Effective tax planning can impact your retirement savings and help ensure you keep more of your hard-earned money. Understanding your current and future tax liabilities and taking steps to minimize them is crucial. This might include converting traditional IRAs to Roth IRAs, strategically timing withdrawals, or setting up charitable funds to offset taxable income. Additionally, exploring opportunities for tax-loss harvesting and other tax-efficient investment strategies can further your retirement savings. Working with a tax professional is always advised. Jake highlighted, “Tax planning is critical because it can help you pay taxes at the lowest bracket over your lifetime.”

Align Your Investments with Your Financial Plan

Aligning your investment strategy with your financial plan is critical. Having a well-diversified portfolio that matches your retirement goals involves regularly reviewing and adjusting your investments to help ensure they remain aligned with your changing needs and market conditions. As you approach retirement, your investment strategy may shift from growth-focused to income-focused, helping you setup a more steady stream of income to support your lifestyle. Regularly reviewing your portfolio and making adjustments based on market conditions and your financial goals is important to helping maintain financial stability in retirement. It’s important to avoid being too conservative or too aggressive and to maintain a balanced approach. Additionally, considering the role of different asset classes, such as bonds, stocks, and real estate, may help create a portfolio that can weather market fluctuations. Cory noted, “Aligning your investments with your financial plan should start well before you retire, not just on the day you retire.”

If you’re within five years of retirement or just starting to plan, now is the time to act. Engage with a fiduciary advisor, plan for health insurance, understand your financial needs, define your retirement lifestyle, and align your investments with your financial plan. For more personalized advice, consider reaching out to a trusted wealth advisor. Your path to wealth is an important one!

Thank you for tuning in, we hope you have a great week!

Falcon Wealth Advisors is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. Falcon Wealth Advisors and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. Falcon Wealth Advisors and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Falcon Wealth Advisors and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. Falcon Wealth Advisors and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.