Getting Close To Retirement? Here Are Four Steps To Take

If you know you’ll be retiring in the next year or two, it’s time to start making tactical moves to position your investments in the best possible way before they start providing your monthly paycheck. If you’re getting close to retirement, here are four steps to take right now in order to prepare.

1. Inventory Your Assets

If you’re getting close to retirement, you’ve probably been checking your account statements regularly. However, if you haven’t put together a net worth statement, now is the time. Look across all your accounts, including your spouse or partner’s, and organize them into a balance sheet. Organize them by:

  • Taxable investing and savings accounts, including your emergency fund,
  • Any inherited accounts, and
  • Retirement accounts – if you have multiple 401(k)s from previous employers, be sure to include them all

There are tools available online that can help you track these accounts if you’re so inclined, but really all you need is a basic spreadsheet. You could even write it out by hand! The idea is to create a snapshot of everything you have.

Break down your account balances into the major asset classes: stocks, bonds, and cash. If you own a target-date fund or any other fund that mixes these categories, you can easily look it up on Morningstar.com under the “Portfolio” section. There, it will give you the percentage breakdown for each category.

Once you have them all listed, calculate the amount of each major asset class as a percentage of your total assets. Looking at your investment picture this way can sometimes be surprising – asset allocations drift over time. Also, when you add in cash, it can change your risk profile. You may find that you’re off-target for whatever you’ve determined is the right profile for you.

2. Maximize Retirement Savings

Now that you know your total assets, you can make some informed decisions. Are you tracking to where you think you should be? Can you retire earlier, or do you need to think about working for a few more years?

Even if you’re on track, it’s still important to continue contributing to your retirement accounts. If you’ve already contributed the maximum amount but still have money left over, either contribute it to an existing IRA or your regular investment account. Of course, if you have short-term debt, you may want to prioritize that over additional savings.

The idea is to get that money integrated into your overall, long-term investment strategy. It’s also a good idea to revisit your emergency fund and see if it matches your expenses – you may be saving more than you need at this point in your journey. If so, you can shift the extra to an investment account.

3. Reassess Your Risk

In our current low-interest rate environment, it can be tempting to seek out additional yield in the bond side of your portfolio. Remember, risk and return are related. As Raymond DeVoe famously said, “More money has been lost reaching for yield than at the point of a gun.”

The bond side of your portfolio is supposed to be the steady and conservative part. While it can be tempting to seek additional yield by adding investment grade (a.k.a. “junk”) bonds or alternative strategies, doing so increases the risk profile of your portfolio. After all, it’s real returns that matter.

Instead, as you’re getting close to retirement, think about the overall risk of your investments. If you need more total return (and can tolerate more ups and downs), then it makes sense to put more money into the risky side of your portfolio: stocks and real assets.

4. Get A Check-Up

If you intend to manage your money yourself during retirement, or you like the convenience of online automated investing, it’s still worthwhile to get some professional advice. While you may only retire once, a financial advisor helps someone retire every day. Whether you want ongoing advice or a one-time plan, it’s a good idea to have some informed guidance before you make moves that can be difficult to correct.

If you’re getting close to retirement and need a second opinion, then click here to set up a quick, complimentary introduction call to see if Prana Wealth is a good fit. We do still have the capacity to take on new clients.

As a fee-only financial advisor in Atlanta, we can (and do) work virtually with clients all across the U.S. and we’re here to help you when you’re ready.


The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
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