Nearly 40 percent of Americans have given little or no thought to planning for retirement.1 For many, the reason why planning is so hard is that they don't know where to start or where to go for help.
No matter how far or near retirement is for you, there are smart moves you can make to help put you in a better position for your financial future.
Twenty years out
You may think you have all of the time in the world, but right now time is your most valuable resource. Use it to your advantage by staying invested and compounding your gains for long-term growth. Participate in your workplace retirement plan and contribute at least as much as your employer match, if one is offered.
But don't stop your contributions or take money out of your account (unless you really have no other financial options.) Withdrawing funds at this point would be like starting the game over—except you'll have less time to find a way to win.
Instead, depending on your personal financial scenario, build up enough savings to cover 3-6 months of expenses in a readily accessible cash account. Use this money for emergency expenses, rather than take money out of your retirement account.
Ten years out
As you get closer to retirement, the risks you face become more critical. A job loss can depress your income. A market drop can potentially impact some of your nest egg. An accident can wipe out your savings.
Plus, the assets you have accumulated are worth more, so they need a higher level of care and attention. That's why it's important to review your insurance coverage at this stage, especially because your current coverage may be based on what your life was like 10 years ago, when the value of your assets was lower.
Don't ignore the risks you may face in your portfolio and retirement accounts as well. At ten years from retirement, it's a good idea to re-examine your risk tolerance and, if necessary, reallocate your assets to perhaps more conservative investments. Also, you may be able to defer more income from taxes as you get older, so you keep more of the money you earn and invest toward retirement.
Five years out
It's time to get real serious. For many, retirement comes gradually, as they step out of full-time careers and opt for part-time or consulting work. Some do it to stay active and engaged, while others out of necessity for income.
To determine how you'll step into retirement, start by defining what kind of lifestyle you want—are you looking to maintain your standard of living or downsize to something more manageable? Then, make an estimate of your expenses. This will help you measure the gap (if any) between your savings and income, and make choices to help you live the retirement lifestyle you want.
And don't neglect Social Security and Medicare. Especially with Social Security, your filing decision is permanent and will affect how much income you will receive for the rest of your life. There are many online calculators available to help you project your Social Security income and Medicare costs—use them to get a better picture of your options.
Your next move
Whatever your time horizon for retirement, we are eager to help you look at all of your important decisions and position yourself for the retirement you want.