Nearing retirement? 8 strategies to help set you up for success

As you near retirement, you may be wondering how, or if, your retirement investment strategy should change. Should you continue to do what you’ve always done? Or is there something else you should be doing now that retirement is in sight? Here are eight strategies to help set yourself up for an enjoyable retirement.  

1. Max out your retirement contributions.

It’s never too late to max out your retirement contributions or catch-up contributions if you’re 50 and older. As of 2023, you can contribute up to $22,500 to your 401(k) plan. If you’re 50 or older, you can make an additional catch-up contribution of up to $7,500. You can also contribute to an IRA for you or your spouse as long as you have taxable compensation. In 2023, you can contribute up to $6,500 to an IRA and make an additional $1,000 catch-up contribution if you’re 50 or older. 

If you’re already hitting these limits, there may be other products and strategies that will allow you to contribute additional amounts on a tax-deferred basis. Talk to your financial advisor to explore opportunities outside of your tax-advantaged accounts. 

2. Plan for health care in retirement.

Health care likely will be one of your largest expenses in retirement. Yet, according to a 2021 study by Edward Jones and Age Wave, only about one in three workers planning to retire in the next 10 years say they have an idea of what their health care and long-term care costs will be in retirement. 

Most people think they’ll simply rely on Medicare in retirement. However, Medicare doesn’t kick in until age 65, and there’s a lot Medicare doesn’t cover, such as deductibles, co-pays, prescription drugs and long-term care services. A financial advisor can help walk through options for coverage before Medicare eligibility, the costs associated with Medicare and how to prepare for long-term care costs.

3. Pay off your debt.

Got debt? Now would be a great time to pay it down so you don’t have to carry that burden into retirement. Credit card debt is a good place to start, since it usually comes with high interest rates. 

Begin by paying off the debt with the highest interest rate, then move on to the next highest. When all your debts have been paid down, think about directing extra cash toward your other goals. 

4. Plan for your paycheck in retirement.

To make sure your retirement savings will last through your retirement years, you’ll need to  map out your “paycheck” in retirement, starting with when to claim Social Security. You can claim your benefits as early as age 62; however, if you claim before your full retirement age (typically between 66 and 67), your benefits could be permanently reduced by as much as 30%. Alternatively, if you delay claiming until age 70, your benefit may be increased by as much as 32%. 

In addition to Social Security, you’ll want to consider other income sources you have, such as pensions or part-time employment. Depending on your situation, it may also make sense to purchase an annuity with a lifetime income benefit to provide some income protection throughout your retirement. 

The remainder of your income will need to come from your investment portfolio. However, you’ll want to make sure the amount you’re withdrawing is sustainable so you don’t run out of money. As a rule of thumb, a 4% withdrawal rate is a good starting point for someone retiring in their mid-60s, but you’ll want to remain flexible to account for market dips or high inflation. Your financial advisor can help you understand the impact of your Social Security claiming decision and develop a paycheck strategy to meet your specific needs. 

5. Pressure-test your retirement strategy.

While you can’t predict the future, you can prepare for it. One of the ways to do that is to pressure-test your retirement strategy for potential unexpected events. Living longer than expected, needing long-term care, a market downturn in your early retirement years — these are just a few scenarios that could derail an untested retirement strategy. Your financial advisor can help you assess the impact these risks could have on your retirement plans and assist you with devising strategies to mitigate them. 

6. Consider consolidating your retirement accounts.

There are many benefits to consolidating your retirement accounts, including easier-to-manage investments, streamlined paperwork and potentially reduced fees. Plus, your beneficiaries will only have to keep track of accounts at one provider when they inherit your assets. 

IRAs at different providers can be consolidated at any time with no tax consequences or tax-reporting requirements. A 401(k) can typically be consolidated to an IRA through a rollover when you retire, and some 401(k) plans will also allow you to do a rollover while still working. There are no tax consequences when you roll over your 401(k) as long as you meet certain criteria, but you will have to report the transaction on your taxes. There are also some important differences between an employer plan and an IRA that you should consider before rolling over. A financial advisor can help you decide if a rollover makes sense for you. 

7. Reposition your assets to create a more balanced portfolio.

As you shift from saving for retirement to spending in retirement, a more balanced mix between equities and fixed income is generally appropriate. Portfolio growth still matters, since inflation doesn’t retire, but you’ll also need investments that will provide for your short-term needs in retirement. 

Different investments have different roles in providing your retirement income. Some are designed to provide income now, and others provide income later, but they’re all important. Viewing your investments by their purpose can help you better navigate the ups and downs of the market and stick with your strategy over time. 

8. Review your estate plan.

As you near retirement, and throughout your retirement years, it’s important to create, and regularly review, your estate plan. This includes updating your will, looking into life insurance, reviewing your trust (if applicable), as well as revisiting your beneficiary designations on your retirement accounts and life insurance policies. 

A financial advisor can help you craft an effective strategy for achieving and maintaining the retirement lifestyle you want. If you’re interested in learning more, reach out to an Edward Jones financial advisor today.