How's your game
plan for retirement
going? Are you on track to meet your goals?
Especially within five years of your planned retirement date,
it is important to see how close you are to your vital
"That gives you time to fine-tune strategies that need
adjusting," said Tim Steffens, head of financial planning for
wealth management firm Robert W. Baird. "And it gives you time to
answer key questions."
Here are six key steps:
Make or update your budget.
A budget is the keystone to your planning. Seeing how much you
spend and earn now helps you figure your likely expenses and
income in retirement.
Identify trimmable expenses.
With a budget on-screen or printed, you can ID expenses that you
can cut in retirement.
Those can include work clothes, commuting and housing. But
remember to budget for likely increases in costs for health care
and activities like travel.
Check your financial plan.
This is your investment strategy for building a nest egg that
will provide your yearly retirement income target. The main
engines for growth are
investments in stocks, mutual funds, ETFs
Suppose five years away from retirement you see that
fixed-income funds are a larger portion of your portfolio than
your plan calls for. It's time to rebalance into growth funds
with future contributions.
Or at the five-year mark you may realize you won't retire for
another, say, 10 years. That too would be a reason to rebalance,
bulking up on growth.
Check your company benefits.
This will show you any traditional pension, deferred bonuses or
compensation you may have coming. It will also clarify such
things as whether and for how long you will receive company
health insurance. And you'll learn whether you'll have any
benefits you can cash in.
With the agency's web site calculator, get an estimate of your
You can start benefits at age 62. "But if you work beyond
that, starting at 62 may not make sense financially," Steffens
said. Full retirement age for most people now is 66 or 67.
"Generally, for every year beyond that that you delay retirement,
until age 70, your benefits rise 8%. On top of that you get
If you are healthy and have a long life expectancy, consider
starting benefits as late as possible, he adds.
Project retirement income.
Start by estimating how large your nest egg will be in five
years. You can use historical growth rates for each asset class
to rough out a figure.
Given that estimated balance, how much income would it provide
if you withdraw, say, 4% in your first year of retirement? (Four
percent is a conservative figure that leaves enough room for your
account to keep growing from investment returns.) Add to that
expected income from other sources such as Social Security.
If the combined figure meets or tops the total projected
expenses that your budget predicts, you're in good shape. If your
income looks like it will fall short, it's time to consider steps
like boosting your retirement contributions and delaying
Working longer can let you keep contributing to tax-deferred
retirement accounts, Steffens says. It can also put off depleting
those accounts. And it means your nest egg must last fewer
Five easy-to-access calculators and their URLs
John Hancock Mutual Funds
T. Rowe Price