Creating a comfortable retirement is probably the single biggest financial challenge that anyone can face. Unfortunately, it is one challenge for which many workers are ill prepared.

Fortunately, a 10-year time frame is still enough time to reach a solid financial position. “It’s never too late! During the next 10 years, you may be able to accumulate a small fortune with proper planning,” says Patrick Traverse, investment advisor representative, MoneyCoach, Mt. Pleasant, S.C.

Not Saving Enough for Retirement?

A study found that 56% of workers surveyed had less than $10,000 saved toward retirement. Worse yet, nearly one-third of workers age 55 and older reported no retirement savings. Some of the folks in that group may have a pension to rely on, but most are likely financially unprepared to exit the workforce. Social Security is only designed to replace a portion of income in retirement, so those who find themselves roughly 10 years away from retirement, regardless of how much money they have saved, need to develop a plan for hitting the finish line successfully.

Those who have not saved a lot of money need to make an honest assessment of where they are and what type of sacrifices they are willing to make. Taking a few necessary steps in the present day can make a world of difference down the road.

1. Assess the Current Situation

The need for proper retirement planning is as important as ever. Nobody likes to admit that they might be ill-prepared for retirement, but an honest assessment of where one is financially is vital in order to create a plan that can accurately address any shortfalls.

Begin by counting how much has been accumulated in accounts earmarked for retirement. This includes balances in individual retirement accounts (IRAs) as well as workplace retirement plans, such as a 401(k) or 403(b). Include taxable accounts if they're going to be used specifically for retirement, but omit money saved up for emergencies or larger purchases, such as a new car.

2. Identify Sources of Income

Existing retirement savings should provide the lion’s share of monthly income in retirement, but it may not necessarily be the only source. Additional income can come from a number of places outside of savings, and you should also consider that money.

Most workers qualify for Social Security benefits depending on factors such as career earnings, length of work history and the age at which benefits are taken. For workers with no current retirement savings, this may be their only retirement asset. The government’s Social Security website provides a retirement benefit estimator to help determine what kind of monthly income you can expect in retirement.

For those workers fortunate enough to be covered by a pension plan, monthly income from that asset should be added. You can also tally up income from a part-time job while in retirement if this is a likelihood.

3. Consider Your Retirement Goals

This proves to be a significant factor in retirement planning. Someone who plans on downsizing to a smaller property and living a quiet, modest lifestyle in retirement will have very different financial needs from a retiree who plans on traveling extensively.

Individuals should develop a monthly budget to estimate regular expenditures in retirement, such as housing, food, dining out and leisure activities. The costs for health and medical expenses, such as life insurance, long-term care insurance, prescription drugs, and doctor's visits can be substantial in later life, so include them in any budget estimate.

4. Set a Target Retirement Age

Someone who is 10 years away from retirement could be as young as 45 if they're well prepared financially and eager to exit the workforce, or as old as 65 or 70 if they're not. With life expectancies continuing to grow, individuals in good health should do their retirement planning estimates assuming they'll need to fund a retirement that could potentially last for three decades or more.

Planning for retirement means evaluating not only expected spending habits in retirement but also how many years retirement may last. A retirement that lasts 30 to 40 years looks much different than one that may only last half of that time. While early retirement is likely a goal of many workers, a reasonable target retirement date manages a balance between the size of the retirement portfolio and the length of time that the nest egg can adequately support.

“The best way to determine a target date to retire is to consider when you will have enough to live through retirement without running out of money. It is always best to make conservative assumptions in case your estimates are a bit off,” says Kirk Chisholm, wealth manager at Innovative Advisory Group in Lexington, Mass.

5. Confront Any Shortfall

All of the numbers compiled to this point should help answer the most important question of all—do the accumulates retirement assets exceed the anticipated amount needed to fully fund retirement? If the answer is yes, then it’s important to keep funding retirement accounts in order to maintain the pace and stay on track. If the answer is no, then it’s time to figure out how to close the gap.

With 10 years to go until retirement, workers who are behind schedule need to figure out ways to add to savings accounts. A combination of increasing savings rates and cutting back on unnecessary spending is likely necessary in order to make meaningful changes. Individuals should figure out how much additional savings they need to close the shortfall and make appropriate changes to contribution rates for IRAs and 401(k) accounts. Automatic savings options through payroll or bank account deductions are often ideal for keeping savings on track.

“In reality, there are no financial magic tricks a financial advisor can do to make your situation better. It is going to take hard work and becoming accustomed to living on less in retirement. It doesn’t mean that it cannot be done, but having a transition plan and someone there for accountability and support is crucial,” says Mark Hebner, founder, and president of Index Fund Advisors, Inc., Irvine, Calif., and author of Index Funds: The 12-Step Recovery Program for Active Investors.

6. Assess Risk Tolerance

As workers begin approaching retirement age, portfolio allocations should gradually turn more conservative in order to preserve savings that have already been accumulated. A bear market with only a handful of years remaining until retirement could cripple any plans to exit the workforce on time. Retirement portfolios at this stage should focus primarily on high-quality dividend-paying stocks and investment-grade bonds to produce both conservative growth and income. As a guideline, investors should subtract their age from 110 to determine how much to invest in stocks. For example, a 70-year old should target allocation of 40% stocks and 60% bonds.

A temptation of those behind on their savings is often to ramp up portfolio risk in order to try to produce above-average returns. While this strategy may be successful on occasion, it often delivers mixed results. Investors taking a high-risk strategy can sometimes find themselves making the situation worse by committing to riskier assets at the wrong time. Some additional risk may be appropriate depending on individual preferences and tolerance, but taking on too much risk can be a dangerous thing. Increasing equity allocations by 10% may be appropriate in this scenario for the risk-tolerant.

7. Consult a Financial Advisor

Money management is an area of expertise for relatively few individuals. Consulting a financial advisor or planner may be a wise course of action for those who want a professional overseeing their personal situation. A good planner ensures that a retirement portfolio maintains a risk-appropriate asset allocation and, in some cases, can provide advice on broader estate planning issues as well. Planners, on average, charge roughly 1% of total assets managed annually for their services. It's generally advisable to choose a planner who gets paid based on the size of the portfolio managed, instead of one that earns commissions based on the products he or she sells.

The Bottom Line

If you little saved for retirement, you need to think of this as a wake-up call to get serious about turning things around.

“If you are 55 and are ‘short on savings,’ you’d better take drastic action to catch up while you are still employed and generating earnings. It’s said that people’s 50s (and early 60s) are their ‘earning years,’ when they have fewer expenses – the kids are gone, the house is either paid off or was bought at a low price years ago, etc. – and so they can put away more of their take-home pay. Get busy,” says John Frye, CFA, chief investment officer, Crane Asset Management, LLC, Beverly Hills, Calif. Better to tighten your belt now than to have to do it when you are in your 80s.