Steps to Take in the Years Leading Up to Retirement: Pre-Retirement Tips

Written by Canty Financial - Published on February 16, 2021

We read a lot about the importance of saving and investing for our retirement throughout our working careers. This is critical and we encourage our clients to save as much as possible and advise them on how to invest for retirement

What doesn’t always receive as much emphasis is the importance of pre-retirement planning, specifically the 5-10 years leading up to retirement. Here are a number of steps we suggest that you consider during the critical time leading up to retirement. 

Review Social Security 

Social Security is a key source of retirement income for most retirees. This is a good time to review your Social Security statement. The statement will tell you what your projected benefits would be at several different claiming ages.

Additionally, you can review your earnings history. This is important as your benefit is calculated based upon your 35 highest-earning years. If you find that some years of earnings are missing or seem incorrect, you can contact Social Security to have this corrected. You can sign up to receive your statement on the Social Security site

As part of this review, you might begin to consider when you will claim your benefits. If you are married, you will want to look at this issue in terms of the benefits both of you have earned and other factors such as your relative ages and the level of your respective benefits


If you are eligible for a pension from a current or former employer be sure that you understand the benefits that you are entitled to and how to go about claiming these benefits. In the case of a former employer, be sure to contact them to ensure that they have your contact information. 

Some pensions offer several options to claim your benefits. There might be one or more options to annuitize your benefit. Additionally, in some cases, you might also have the option to take your benefit as a lump-sum that could be rolled over to an IRA account

Retirement and Investment Accounts 

It’s important to be sure that you have a handle on any retirement and other investment accounts that you own. This might include IRAs, 401(k)s, 403(b)s, or other employer retirement accounts plus any taxable investment accounts. First, it's important to ensure that there are no old accounts that are not being managed. We see this all too often with old employer retirement accounts that people have just forgotten about. 

The years leading up to retirement are a good time to consolidate accounts if needed. If you have a few old 401(k) accounts and several IRA accounts, perhaps it makes sense to consolidate these accounts into a single IRA account to facilitate managing these assets.

Additionally, you will want to look at your overall asset allocation across all types of accounts to ensure that your investments have the proper balance between potential return and downside risk protection

Other Retirement Resources 

Beyond the items listed above, you might have additional financial resources that can be tapped to help fund your retirement, including: 

  • Real Estate – your residence or investment property
  • Stock-based compensation such as restricted stock units, stock options or other grants of company stock
  • An ownership interest in a business
  • An inheritance
  • Annuities
  • Cash-value life insurance 

Health Care Costs 

Healthcare expenses in retirement are large and often overlooked retirement expenses. Fidelity Investments’ latest survey pegs the cost of healthcare in retirement for a hypothetical couple both aged 65 at $295,000. And this doesn’t include any potential costs for long-term needs. 

If you are planning to retire or are forced to retire due to a job loss or another issue, prior to age 65 you will need to have a plan to obtain health insurance prior to being eligible for Medicare. If you have access to a health savings account (HSA) you should consider funding it and not spending the money prior to retirement, in order to use these funds to help cover some of your healthcare costs in retirement on a tax-free basis

Other factors 

Other factors to consider as you approach retirement might include: 

  • Will you have dependent children in retirement?
  • Do you still have a mortgage on your home?
  • Do you or your spouse have any significant health issues? 

These or any other unique factors in your personal situation can have an impact on your retirement spending. 

Your Retirement Lifestyle 

During this time frame it's important to take at least a preliminary look at your retirement lifestyle and the anticipated cost of this lifestyle. 

You will want to ask and answer questions like: 

  • Will I downsize my residence in retirement?
  • Will I relocate to another area of the country or outside of the U.S.?
  • What activities will I engage in during retirement?
  • Will I work full or part-time in retirement? 

The answers to these and a number of other questions will form the basis of a preliminary expense budget for retirement. You will need to factor in the impact of any of the other factors listed above as well.

It’s understood that things may and often do change in the years leading up to retirement and once you are retired for a while. But doing a preliminary budget might be the first time that you’ve actually taken a look at what your desired retirement lifestyle will actually cost on a monthly basis. 

Your Potential Retirement Income 

Taking your various investment accounts, Social Security, a pension if applicable, and the other resources you might have, you will want to try to come up with an annual level of income and cash flow that your resources might generate. 

Where Do You Stand? 

Comparing your preliminary expense budget to your anticipated retirement income will tell you if your projected retirement income will be sufficient or whether you will have a shortfall. Either way, it's better to have an idea of where your stand with some time remaining until retirement versus being unpleasantly surprised at the last minute. 

If you do come up with a shortfall you have sufficient time to make adjustments. Perhaps this means you will need to work for a few extra years. Perhaps this means you will need to adjust your projected expenses in retirement. 

This type of analysis is not a one-time shot, you should revisit this periodically in the years leading up to retirement in case your situation changes. 

This is the type of pre-retirement planning we routinely do with our clients. If you’d like some help with your retirement financial planning please give us a call.

Saratoga County: 518-885-3230

Collier County: 239-435-0090

Bill Canty, CFP®, CPA

Ed Canty, CFP®

Maureen Walsh, EA, Investment Advisor Rep.

Tina Alteri, CPA, Tax Advisor

Joe Canty, Investment Advisor Rep.

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