The most important time to focus on a successful retirement may be the five years preceding retirement.
Five Years and Counting
The five-year period leading up to retirement is generally the time people bring home their largest paychecks due to their experience and company seniority. At the same time, when income increases, often this time period coincides with many large financial obligations decreasing. Mortgages are finally paid off, college tuition bills are replaced by diplomas, and children become financially independent. During the five years pre-retirement, a family’s disposable income may reach an all-time high.
But although this greater income is advantageous in helping to increase finances and raise lifestyle quality, look out for one potential problem: lifestyle shift. After working hard for most of your life, it’s normal to feel that you “deserve” more. Even if you want to save, it’s hard to keep that seemingly disposable money from burning a hole in your pocket. Lifestyle shift is potentially dangerous because it may continue into retirement, making these years more expensive.
Pre-retirees face a tough dilemma: to spend and enjoy their hard-earned money, or to save it for the future? Many couples decide to delegate some funds for retirement and some for immediate pleasures.
Enjoying the First Five Years of Retirement
Budgeting for these pleasures and greater expenses may become a necessity. But it should not be done at the expense of saving funds for your later years. Sufficient funds must remain for future medical costs, possible long-term nursing care, leaving an inheritance, etc.
During the years immediately preceding retirement, balance your wishes to improve your current lifestyle with your desires to fulfill your retirement dreams. To learn more about specific steps that should be taken during every decade of your working life, download (for free) The Retirement Planning Book . Conscientious planning can turn retirement into a comfortable and exciting time of your life, a true celebration of your golden years.
Douglas Goldstein, CFP®, is an investment advisor and author of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing.
Douglas Goldstein, CFP®️ is the director of Profile Investment Services, Ltd. www.Profile-Financial.com He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published August 18, 2014.