"Financial Planning ... it's not always about money."

Do These 5 Things Before You Retire

David M. Brenner profile photo

David M. Brenner, ChFC®, CLU®

D. M. Brenner, Inc.
Phone : (858) 345-1001
Schedule a Meeting

If you're within 5 years of retiring, you have a window of opportunity. Don't miss it. A little intentionality now can set the stage for a successful retirement.

Years ago, I planned a backpacking trip through the Grand Tetons in Wyoming. I started by casting my vision for my adventure: the trails I'd hike, the team I'd work with, the sights I wanted to see. Then I started working on the logistics and assessing my equipment, deciding on the items and training I would need before my trip. As we got ready to depart, I talked with some experienced local hikers, who let me know that there was a lot of snow still on the trail. I'm from Texas! It was July! I hadn't thought to bring things like gaiters or ice picks, and I was very grateful for their advice. All the work I did ahead of time paid off; I saw a grizzly bear, moose and two ski bums board down the continental divide.

What exactly does my backpacking expedition have to do with your retirement? The pre-planning process I followed is what you need to do in the five years before retirement so that on the day you turn in your notice, you're prepared, enthusiastic, and confident that it's time to take the big leap.

That last one, confidence, is a big one. As you near retirement, you'll likely worry a bit about the money, but other worries will sneak up on you too. "What will I do each day?" "Who will I do it with?" are common questions that lurk in the back of your mind. Now is the time to explore these.

On the Retirement Answer Man podcast , we asked already-retired listeners to share a piece of advice with listeners who were approaching retirement. Peter's counsel is spot on. "I am glad that before I started my retirement journey, I took the time and effort to organize my thoughts and finances. Knowledge is power. Knowing where you want to go in the future and how you will afford to get there creates the proper mindset to move forward with confidence and without regrets."

Here are the five main areas I recommend that you evaluate in the five years before retirement, financial and otherwise.

Your Net Worth

You've spent decades working and accumulating wealth. You've likely kept a net worth statement to track your finances. One of my absolute favorite financial tools is a net worth statement. If you've been diligent (and a bit lucky), you've likely seen the assets increase and debts decrease over time.

Your net worth organizes the store of wealth you'll use to help fuel your retirement. After years of building it, you'll now need to strategize how you'll harvest portions to fill the gap once you retire. Your list of assets and liabilities will help you get a clear picture of where you stand financially and help you identify some areas that you may need to work on.

  1. What asset will you tap first?
  2. Are there debts you should pay-off?
  3. Are you overweight with tax-deferred assets?
  4. Does your allocation need to change from a wealth accumulation stance to one focused on decumulation?
  5. Should you build up cash reserves in an after-tax account?

Update your net worth statement and use it to help you identify risks and opportunities in your current financial situation.

Recently, Mary (not her real name) and I updated her net worth statement and asked ourselves these questions. It became clear that she should take funds from her after-tax investments and pay off a small mortgage on one of her rental properties. This accomplished three things:

  1. She was able to reduce her exposure to stocks which better balance her portfolio.
  2. By paying off the mortgage, she increased her monthly income by $900 per month which meant we would need less from her investment assets to supplement her retirement lifestyle.
  3. She became more confident as a result.

Your Expenses

You're likely at the top of your game career-wise and hopefully enjoying higher-than-ever earnings to go along with it. Maybe your kids are flying the coop. You probably have more disposable income than ever before, and you may find yourself spending a bit more freely as a result. And who can blame you? While I'm a fan of enjoying the fruits of your labor, this is a good time for you to really hone in on your expenses.

  • What does it cost to live the life you want?
  • What spending will go away after retirement?
  • What new spending will start?

If you haven't kept a formal budget, you're not alone. According to Intuit INTU , the maker of budgeting software, 3 in 5 don't know what they spend month-to-month. Now is the time, though to understand where the money goes. This will give you a target to aim for as you start the nuts and bolts of retirement planning.

Another big shift that's coming your way is going from accumulating as much as you can in your accounts to figuring out how you're going to draw down, or decumulate, from them. That's a HUGE change in mindset, and it can be very difficult to make the switch. Arming yourself with knowledge about your baseline expenses can help tone down the anxiety surrounding this transition.

Your Work Boundaries

If you're a high achiever, you've likely been focused on building your career, always thinking about the next big project or doing what it takes to nab a promotion. You're the yes-woman! You go the extra mile! While there is a certain nobility to that, I encourage you to start developing some boundaries between work and your personal life. Do your job! Do your job amazingly well! Just remember, the season of career growth is ending. Your next big project is rocking retirement.

Sally was a project manager leading an international team. This meant she had conference calls at all hours and team members constantly pinging her on projects (not to mention the leadership calls). She was three years out from retirement but couldn't find the time to even think about life after work. In our chats, she said she'd have to ride the merry-go-round at 100 mph and jump off when she retired. She knew this would cause her to tumble afterward, but she didn't see any other way.

She devised a plan with my encouragement. First, she acknowledged that she was still acting like she was on the career track. Then she started to set some boundaries to give her more free time to focus on life after work. She set time blocks to process e-mail and IM messages and turned the software off in-between. She learned to say "no" more often to her team and leadership when offered new initiatives. "That doesn't work for me" became one of her favorite, complete sentences.

These little actions allowed Sally to compartmentalize work and gave her the mental margin and time to build the runway to her successful retirement.

Your Social Network

Imagine that you're at home for 2 weeks without access to anyone at your office (come to think of it, after 2020 this might not be too much of a stretch to picture). Who would you have coffee with? Who would be your lunch buddy? What would you talk about?

In all honesty, this is an area where I am deficient. I have wonderful friends, but all but a few live in different states, and only one or two live locally.

The five years before retirement are an ideal time to start branching out and forming some new friendships that center on something besides your work. Start thinking about groups you could join or ways to meet other people with shared interests. And then let me know what you're doing because clearly, I need ideas.

Your purpose

Go back to that mental image of two weeks without work. What would you do each day?

A lot of people chuckle when I ask this question. What won't they do!? People in early retirement tend to have a reasonably long laundry list of all the things that they've meant to get to and haven't due to lack of time.

That's not really what I'm addressing here. I encourage you to think about your interests and motivations. What drives you? If you're not sure, you've still got five years with some disposable income coming in; it's the perfect time to experiment and figure it out. Remember, a purpose doesn't have to be earth-shattering and life-altering. Being a fantastic grandparent or the neighborhood's go-to gardening resource are legitimate purposes. The key is finding what fits you.

Where Do You Start?

My list might be a bit intimidating at first. There’s a lot to do before you retire. The good news is you don’t have to do it all at once. Time is on your side. Choose one area and set a baby step you can accomplish in the next seven days. When that’s complete, choose another. Then another. Then another. Soon you’ll have the momentum to carry you over the finish line and on to rocking retirement.

By Roger Whitney, Contributor

© 2023 Forbes Media LLC. All Rights Reserved

This Forbes article was legally licensed through AdvisorStream.

David M. Brenner profile photo

David M. Brenner, ChFC®, CLU®

D. M. Brenner, Inc.
Phone : (858) 345-1001
Schedule a Meeting