A 5-year plan for a stress-free retirement
You can get a lot done in five years if you set the right goals and regularly track your progress. That’s why your last half of working life can be the perfect time to make sure your nest egg is ready for retirement.
Here is a game plan to make your five years of work productive and strengthen your finances.
Year 1-2: Strengthen the foundation
A key step in any long-term financial plan is paying off debt. Eliminating high-interest debt like credit card debt and your personal loan allows you to focus on building wealth.
After that, increase your retirement contributions (or at least contribute as much as possible). If you’re 50 or older, you can make additional deductions for your retirement account (IRA) and 401(k).
Use a diversified tax strategy where it lasts. You can lower your current tax bill by contributing to traditional retirement accounts, because you won’t pay taxes until you withdraw the money. Roth retirement accounts do not offer immediate tax benefits, but withdrawals from this account are tax-free.
Gold Offer: Sign up with American Hartford Gold today and get a FREE investor kit, plus get up to $20,000 in free silver on qualifying purchases
Year 3: Protect what you have built
As you approach retirement, it pays to protect your portfolio. Choosing low-risk assets that grow steadily over time may lead to lower returns, but with these types of assets, you’ll have more leverage during market downturns.
Investors can buy high-yielding stocks, low-yielding stocks to generate cash flow or choose an exchange-traded fund or exchange-traded fund (etfs) that includes a basket of those stocks.
Young investors should be more aggressive with their portfolios since they have more exposure to climate uncertainty. But at this stage in the five-year plan, you’ll only have two years until you plan to retire and start withdrawing from your portfolio.
Extra money: See how you can get up to $1,000 in stock when you fund a new sofi inva sofi account
Year 4: Retiree-like Budget
Year four is a good time to review your retirement budget to see if it’s possible. (You should still contribute to your retirement accounts and put more money into other investments this year as well, if you can.)
Look at what your retirement plan looks like – including any travel or new hobbies – and calculate your monthly expenses. After that, use it according to this plan throughout the year to find out if your budget hits the mark or if you need to increase it. A higher budget, of course, will require more money in your portfolio before retirement.
Save Smarter: manage your money with the Rocket Mones Money app, one of the most popular currencies
Year 5: finish and start
After spending four years growing your portfolio and assessing your retirement budget, the final year is here. You will have to calculate how much you will pay for health care and figure out how to manage that cost. But during this time, you may also want to receive social security payments, depending on your age.
If retirement feels like too big a step for you, you may want to consider retirement. Working 20 hours a week or less will still allow you to make more money, but you will have more time to focus on loved ones, hobbies and other important areas of your life.
