5 Steps Before Retirement


Preparing for retirement is a step-by-step process. But what are most essential steps?

No two houses are exactly alike. Yet the construction of every house begins with the same basic steps: Pour the foundation, build the frame, install the wiring and so forth. Ignore these steps and you may end up with a shack instead of a house you can depend on for comfort and protection. These same principals are also true when it comes to retirement planning. Today I’m going to talk about the Five Essential Steps to Take Before You Retire. I’ll cover setting your goals; evaluating your savings; reducing your debt; trying to maximize your Social Security; and shifting your investment strategy from growth to – say it with me now – that’s right, income!

First, let’s start where any major project should start: your goals. If you think of the house analogy, your goals are your floor plan or blueprint. Would you ever try building a house without such a plan? Of course not. Yet millions of people enter retirement without clearly defined goals. If you’re like most people, you probably already have a general idea of what you’d like your retirement to look like. Now it’s just a matter of coming up with some specifics and writing them down. Here are a few tips that may help: One, don’t think about finances yet. Just think about what you want to do, where you want to be, and how you want to feel. Two, include a rough timeline. Knowing when you want to retire and achieve specific goals will help with all the financial steps that follow. And three, be as specific as possible.

Once you’ve taken step one, you’ll get a lot more out of step two: evaluate your savings. Many people find this step intimidating because they automatically assume they haven’t saved enough. According to the Federal Reserve, only 36 percent of Americans think their retirement savings is on track. Still, the only way to really know where you stand is to take a hard, honest look and do the math. Consider all your potential sources of retirement income: 401ks or similar plans, IRAs, pensions – and, of course, Social Security. Include your home if it’s paid off or nearly paid off and you plan to sell it. Once you’ve taken this step, you may be pleasantly surprised to realize your situation is better than you thought. Of course, your calculation also needs to account for the amount of debt you’re carrying.

It’s no secret debt is huge problem for many people – including many who are retired or close to it. Carrying some debt into retirement is okay – but retiring in the red is obviously a situation you want to try and avoid. Debt can easily siphon away your retirement income and undermine your goals. Therefore, make it a priority to pay down your debts while you still have working income. Focus first on credit cards and other high interest debts and avoid taking on new debt.

Now let’s talk about Step Four, trying to maximize your Social Security – which is more important today than ever. I recently did a whole show about changes and updates to Social Security for 2022. Regardless of those changes, the process of trying to maximize your benefits hasn’t really changed. There are three crucial steps: One, make sure your earnings record is accurate – which you can do by visiting SSA.gov. Two, wait until your full retirement age to start collecting. That falls between 65 and 67, depending on when you were born. And three, make sure your Social Security strategy is properly aligned with your broader retirement income plan overall. That last step is what helps many people recognize the strategic value of investing directly for income during retirement – and of making the shift to an income strategy before you actually retire whenever possible.

Although you probably won’t start collecting Social Security income until after you retire, preparing your strategy ahead of time is the best way to help ensure you’ll get the most out of it. By the same token, shifting your investment focus from growth to income five to ten years ahead of retirement can help you maximize the strategic value of the income model in at least two ways: First, by preserving your savings from a major market loss in the years when you can least afford it. And second, by generating more reliable income return that you can use to continue growing your portfolio organically. The point here is that since you still have working income, the interest and dividends you earn before retirement is money you don’t need yet. Therefore, you can use it to keep growing your nest-egg in order to generate an even higher rate of income return once you do retire.

Now, is all of that as easy as buy-and-hold investing for capital gains? No, but that’s what makes investing for income a true strategic approach rather than a gamble. It’s more complex because it’s based much more on known factors than unknowns. And if you’re like most people, you’d probably rather have a financial plan based on things you know are likely to happen rather than on things you only hope will happen. A strategy that provides consistency, stability, and peace of mind throughout retirement, and – whenever possible – in the critical years just before.


Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. Arbor Financial Services of Florida, Inc. and Sound Income Strategies, LLC are not associated entities. Arbor Financial Services of Florida, Inc. is a franchisee of the Retirement Income Store. The Retirement Income Store and Sound Income Strategies LLC are associated entities.

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