When you’re a decade away from retirement, you’re on the homestretch. But it’s important to keep saving, because these final years can be some of the most critical as you’re preparing to retire.
The last decade of your career can potentially make or break your retirement. If you let your guard down and relax, even one mistake could derail your savings. But if you take these three steps, you can head into your senior years as prepared as possible.
1. Adjust your asset allocation
Asset allocation refers to how your investments are divided within your portfolio. Generally, the younger you are, the more risk you can take when investing. But as you get older, your portfolio should gradually become more conservative so your savings are more protected against stock market volatility.
Keep in mind, though, that you also don’t want your portfolio to be too conservative. Investing all your money in bonds and other “safer” investments rather than stocks can protect your savings, but it will also make it harder for your investments to grow because bonds, in general, have much lower rates of return than stocks.
One common guideline is to subtract your age from 110, and the result is the percentage of your portfolio that should be invested in stocks. So if, for example, you’re 55 years old, 50% of your portfolio should be allocated toward stocks and the other 50% toward bonds. This isn’t a hard-and-fast rule, and your asset allocation will also depend on your tolerance for risk. However, this guideline can help get you in the right ballpark.
2. Check your estimated Social Security benefit amount
Even if you’re still a decade away from retirement, you can get an idea of how much you can expect to receive in Social Security benefits. And by knowing your benefit amount, it will be easier to determine how much you’ll be able to rely on Social Security in retirement.
By creating a mySocialSecurity account online, you can check your estimated benefit amount based on your real earnings. This calculation assumes that you’ll be claiming at your full retirement age — which is 67 years old for those born in 1960 or later — so if you plan to claim benefits early, keep in mind that your benefit amount will be reduced.
In addition, your benefit amount could change as you get closer to retirement. The Social Security Administration calculates your benefit amount by taking an average of your income over the 35 highest-earning years of your career. So if you still have 10 working years left, that could potentially boost your benefit amount.
3. Double-check your retirement savings goal
If you already have a retirement savings goal in mind, that’s a great start. But it’s important to double-check your target every so often to be sure it’s still accurate.
Use a retirement calculator to see how much you should be saving, and really think about your inputs. Has the amount you expect to spend each year in retirement changed since you last calculated your goal? What about your desired retirement age? These factors can affect how much you’ll need to save, and if you find that your goals have changed, it’s better to know that information now while you still have a decade left to prepare for retirement.
Saving for retirement takes decades, and it’s crucial to keep preparing until you reach the finish line. By making these three money moves during the final years of your career, you’ll be able to start retirement off on the right foot.