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HIT PEAK PERFORMANCE

If You Want to Retire in 10 Years, Do

These 5 Things Now
The decade before retirement is a critical
time. Here's how to make sure you're on
the right path.
After 30-plus years of working and
socking away savings, you can finally see
retirement on the horizon. But its not
time to coast just yet.
The actions you take in the final decade
before you quit working are crucial to
getting the next phase off to a smooth
start. Here are 5 things you must do now.

PM Images/Getty Images

1. See if youre saving enough. If you havent recently, take stock of where you are
and where you need to be. For example, to replace 70% of your earnings by age 65, youll
need to accumulate 12 times your pay at 65. But even if youre playing catch-up, you can
still make it to the finish line with what you need. Your choice: Seriously power-save, or
work a bit longer while saving less. Say you have five times your income; you could sock
away 33% a year for the next 10 years, or delay retirement 24 months while banking
20%. Either way, dont miss out on catch-up contributions! Those 50-plus can put
$6,000 extra in a 401(k), $1,000 more in an IRA in 2015.
2. Stagger your retirement with your spouse. Among two-income couples, nearly
one in five retires in the same year, and another 30% within two years of each other,
reports the Urban Institute. But quitting in tandem isnt necessarily the best move. If one
spouse works just a few years longer, you can draw less from your portfolio in those initial
years.
3. Dont automatically quit on stocks. To achieve returns to sustain a 30-year
retirement, you need to still be investing for growth. Stocks should make up 50% to 60%
of your allocation, with the rest in bonds. The caveat: Those within 10% of their ultimate
savings goal can choose to dial back to 40%.
4. Do the math on your mortgage. Of course you dont want to carry credit card debt
into retirement, but what about the mortgage? The old advice was to burn it before you
left work, but in todays low-rate environment, maybe not. Assuming that your rate is less
than 5% and that youll be able to afford the payments from guaranteed-income sources
in retirementor if youre planning to movetheres no rush. You may do better by
investing money you would have put toward the loan.
On the other hand, if you wont be able to swing the nut later on, or simply want peace of
mind, use the repayment calculator at bankrate.com to figure out how to erase the debt
sooner. Or consider a cash-in refi to a shorter-term loan. Say you have $200,000 and 20
years left on a 30-year mortgage at 5%. Refinancing to a 15-year at 3% and putting in
$50,000 would shave off five years and cut the monthly payment from $1,381 to $1,074.
Keep up the original payment, and the loan will be paid off in 11 years, plus youll save
$10,300 in interest.
5. Make friends with the younguns. Sure, you still want to dazzle your boss, but
youd better be working just as hard to make allies below you. Your younger coworkers
are likely to move up the ranks over the next 10 years and have a say in whether you stay
or go. Hanging onto your job for the next decade will be essential to keeping your plan on
track. So train subordinates, mentor up-and-comers, and look into a reverse
mentorship in which a junior colleague teaches you something new.
Answer this question to get more financial advice tailored to your place on
the Road to Wealth:
Which best describes your financial life?
1. a) A disaster

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2. b) I have a little savings

3. c) Ive got a nest egg but big goals too
4. d) Doing great
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So Youre Retired! Now What?

Donna Rosato @RosatoDonna

Susie Poppick @susiepoppick

Carla Fried

Get in these 4 habits to keep your

financial plans on track.
Youve crossed the proverbial finish line to
retirement. And if youve planned
carefully and done your homework, your
financial plan should practically run
itself. Still, youll want to check in
periodically and avoid some common
pitfalls.

iStock

Dont go chasing yield

As you age, the fixed-income portion of your portfolio becomes more important. The goal
isnt maximum income, but maximum preservationby way of diversification. So put the
majority of these holdings into a total bond market index fund. For inflation protection,
add TIPS (Treasury Inflation-Protected Securities), keeping them to less than 30% of
your bond share. Anyone who has substantial money outside tax-deferred accounts and is
in a high tax bracket should consider municipal bonds too. Initially, youll also keep 12
months of expenses, plus your emergency fund, in cash.
Every couple of years, trim a few percentage points from your stock holdings and stick
the money in bonds and cash. By 75at which point you dont need as much growth to
keep up with inflationyou should have two to three years worth of expenses in a moneymarket or short-term bond fund.
Do a yearly spending checkup
Before you quit working, you gave yourself a budget. Expect to blow it.
Some experts suggest tracking your spending once annually to keep yourself honest.
Check out the budget worksheet on Fidelitys Retirement Income Planner. Then plug in
your assets to see if your spending is sustainable. Chronically going over a 4% inflationadjusted draw could cause your money to run out, but even if youve gone off the rails in a
few years, dialing back can make a difference.
Take from all baskets
As you spend down your cash account, youll need to replenish it. Minimizing the taxes
you incur on portfolio withdrawals will maximize the life span of your savings. Generally,
retirees have been advised to tap taxable assets first, because the long-term capital gains
rate on them is lower than the income tax rate owed on traditional 401(k) and IRA
withdrawals, and because this method allows tax-deferred accounts to continue to grow
without a tax bite.
Whether or not the strategy works, however, depends on many variables. Another failing:
Once you do transition to drawing solely on tax-deferred accounts, you may be bumped
into a higher tax bracket.
While theres no one perfect system, one smart approach is to be more egalitarian with
your withdrawals. Start by balancing any tax deductions you have with withdrawals from
tax-deferred accounts, then take the rest of the money you need from taxable accounts.
Never retire your rsum
Keep in mind that a worst-case scenario may necessitate your returning to work.
Submitting a CV that hasnt been dusted off since Y2K wont do you any favors. So update
your rsum now while recent accomplishments are fresh in your mind. Then revisit it
once a year to add something, even if its volunteer work or leadership in a social club.

Answer this question to get more financial

advice tailored to your place on the Road to

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Wealth:
Do your investments carry high management fees?
1. I have no idea
2. I try to pick lower-cost funds when possible
3. I mostly invest in no-load mutual funds
4. I only invest in ultra-low-fee index funds and ETFs
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