A:

One of the first steps you should take at this stage is avoid the pitfall many pre-retirees experienced in 2008 – overexposure to stocks. Sure, you'll want to keep a significant equity portion of your portfolio to boost potential gains, but you won't have as much time as younger workers to make up lost ground if the market sinks. A conservative rule of thumb is to keep a percentage of stocks equal to 100 minus your age. If you're 60 years old, that means keeping 40% of your investments in stocks and putting the rest in bonds or money market accounts. More aggressive investors will sometimes use "110 minus your age," instead.

With just five years to go in your full-time job, it's not too late to get a realistic retirement budget together. On the income side of the ledger, figure out how much you'll reasonably be able to count on from savings, Social Security and 401(k)s, and if you're lucky, a traditional pension plan. Then total your expenses. Factor in two of the biggest outlays anyone in their 50s or 60s should anticipate later in life: medical needs and long-term care.

While you may have paid into Medicare throughout your working years, it's still not free for most recipients. The Part B component typically costs about $100 a month, and if you want to boost your coverage, you could be paying significantly more than that for Medicare Advantage.

Even if you're in great health today, now is the time to be thinking about the considerable assisted living and nursing home costs that may lie ahead. For those with moderate net-worth, long-term care insurance is often a good idea, even so, it can cost several hundred dollars a month. There are several online tools that can help provide an estimate based on your age, the state you live in and other factors.

Creating a budget can help you make minor adjustments to your retirement plan that could make a big impact later. If you forecast a deficit, you may need to work a year or two longer, but at least you'll feel more secure in your golden years.

In reality, making decisions about where to put money and whether to buy insurance gets complicated. Often, it's a good idea to talk with a knowledgeable financial adviser who can help you understand your options and chart the best course forward. Even if a consultation costs a few hundred dollars or more, sound advice can help put you on solid footing for the next phase of your life and provide peace of mind.

Of course, even those who prepare diligently for retirement will occasionally need some additional income after their primary career is over. Maybe you're planning to work part-time in a different field. If so, start researching what you'll need to do ahead of time, whether it's getting a special certification or having some volunteer experience under your belt. When the day of retirement finally arrives, you'll be ready to embark on your new endeavor and develop an added revenue stream.

RELATED FAQS
  1. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  2. Are spousal Social Security benefits retroactive?

    Spousal Social Security benefits are retroactive. These benefits are quite complicated, and anyone in this type of situation ... Read Full Answer >>
  3. Can my IRA be used for college tuition?

    You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can ... Read Full Answer >>
  4. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Contributions to IRA, Roth IRA, 401(k) and other retirement savings plans are limited by the IRS to prevent the very wealthy ... Read Full Answer >>
  5. How do you calculate penalties on an IRA or Roth IRA early withdrawal?

    With a few exceptions, early withdrawals from traditional or Roth IRAs generally incur a tax penalty equal to 10% of the ... Read Full Answer >>
  6. What are the best ways to use your 401(k) without a penalty?

    The best way to use your 401(k) retirement savings account is to take normal distributions after you reach retirement age. ... Read Full Answer >>
Related Articles
  1. Investing

    Five Things to Consider Now for Your 401(k)

    If you can’t stand still, when it comes to checking your 401 (k) balance, focus on these 5 steps to help channel your worries in a more productive manner.
  2. Retirement

    The World's Most Luxurious Retirement Destinations

    If money is no object (or if you would just like to dream), these five spots are the crème de la crème.
  3. Professionals

    How to Protect Elderly Clients from Predators

    Advisors dealing with older clients face a specific set of difficulties. Here's how to help protect them.
  4. Professionals

    Social Security 'Start, Stop, Start' Explained

    The start, stop, start Social Security strategy is complicated. Here's what retirees considering it need to consider.
  5. Retirement

    Strategies for a Worry-Free Retirement

    Worried about retirement? Here are several strategies to greatly reduce the chance your nest egg will end up depleted.
  6. Professionals

    Your 401(k): How to Handle Market Volatility

    An in-depth look at how manage to 401(k) assets during times of market volatility.
  7. Professionals

    How to Build a Financial Plan for Gen X, Y Clients

    Retirement is creeping closer for clients in their 30s and 40s. It's a great segment for financial advisors to tap to build long-term client relationships.
  8. Professionals

    Don't Let Your Portfolio Be Trump'd by Illiquidity

    A look at Donald Trump's statement of finances and the biggest lesson every investor can learn.
  9. Professionals

    Top Social Security Issues for Divorced Women

    What female divorcees need to know about the twists and turns of figuring out Social Security benefits.
  10. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
RELATED TERMS
  1. Dynamic Updating

    A method of determining how much to withdraw from retirement ...
  2. Possibility Of Failure (POF) Rates

    The likelihood that a retiree will run out of money prematurely ...
  3. Safe Withdrawal Rate (SWR) Method

    A method to determine how much retirees can withdraw from their ...
  4. Qualified Longevity Annuity Contract

    A Qualified Longevity Annuity Contract (QLAC) is a deferred annuity ...
  5. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  6. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!