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11 Money Moves to Make in the Decade Before You Retire

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09.07.2021

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For most people, retirement seems like a faraway dream, something that will happen “one day.”

That faraway dream becomes a lot more real and far more serious the decade before you retire.

“It really is the most important decade for planning,” says Steve Parrish, co-director of the Center for Retirement Income at the American College of Financial Services. “It’s your last chance to get your affairs in order and make sure you have everything set up for a comfortable retirement.”

Americans overall feel pretty good about their future prospects. A 2019 Gallup survey found that 55% of Americans 55 or older are confident they will have enough money for a comfortable retirement, the highest level since 2008, and a post-COVID survey showed their outlook remains mostly intact.

Still, it’s one thing to believe you’ll have a secure retirement and another to make sure it actually happens. These 11 smart money moves to be made the decade before you retire can put you on the right path so that your faraway dream becomes a not-too-distant reality.

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“Before you can get into the details, you need an idea of where you’re trying to go. After all, you’ve never retired before,” says Parrish. If you haven’t thought about what you plan on doing after leaving the workforce, you can’t possibly know whether your savings are on track.

To come up with your vision of retirement, focus on the when, where and what. When would you like to retire? Where will you retire, in the same place as you are now or somewhere else? Finally, what do you plan on doing? Will you downsize your lifestyle, keep it the same, or travel more and take on new hobbies?

If you have a spouse or partner, make sure that you have this discussion together. You don’t want one person expecting to stay in, say, Ohio with the rest of the family while the other plans on moving to Florida to golf every day. If you’re single, consider whether other people, like grandkids or a new partner, might enter your life over the next decade, potentially changing your plans.

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This number is how much you will need to have saved to fund your retirement lifestyle, and by now, you should have a pretty good idea of what it is. If you don’t, there are a few common rules of thumb for estimating that number, such as having 12 times your salary socked away, or enough money saved to generate at least 80% of your preretirement income annually.

Sri Reddy, senior vice president for Retirement and Income Solutions at Principal Financial Group, is uncomfortable with these quick estimates because everyone’s circumstances are different. He prefers an estimated retirement spending budget for categories like housing, food, travel and insurance. He thinks you might be getting a decent test run for retirement spending right now. “If you’re working from home, COVID has given you a baseline of what your retirement expenses would look like,” he says. “There’s no eating out, no new clothes, no commuting costs.”

Reddy notes you might need to allocate a bit more for travel and other activities that the pandemic has........

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