Getting ready for retirement takes on a real urgency during the last 10 years of your career.
On the one hand, your financial situation is probably at its strongest. You are likely in your peak earning years, your kids could be out of college, and your mortgage might finally be paid off.
With all that, it suddenly feels possible to do more, explore more and become more.
On the other hand, your window for preparation is closing. The impact of a bad decision—or a tough market environment—is magnified, with the potential for serious harm to your financial situation.
At its best, your retirement should be a celebration of everything you’ve accomplished and everything you’re going to do next. Still, those 10 years leading up to the big day require some important work. You want to be ready to make the most of your next act.
If you’re beginning to get a sense for your estimated time of retirement, here are some ideas on what to do during the homestretch to finish strong.
Focus on your future
Imagining what your retirement will become can be incredibly satisfying. We work nearly our whole lives to reach this inflection point, a moment of change where we can become something new.
Some of us will visit the grandchildren and arrange trips for our extended family. Others might pursue a new passion—helping out in the community, taking up yoga, or even building a new home. And, of course, there’s a good amount of newly found free time to master what had seemed out of reach—to that tricky 18-foot putt on the third hole, are you hearing me?
The opportunities are endless, and the beautiful thing is you don’t have to pick just one. Hopefully, you will have the energy and the ability to take on everything you want.
To live out your dream retirement, you’ll have to begin thinking about what you want this next phase of your life to look like. You have to create the vision if you want to achieve the vision.
Read: Are annuities so bad? Why they are the right thing for some investors.
Connect with a pro
Once you’ve established your blueprint, it’s time to turn to a professional.
The strategies that have helped get you to this point may need to be recalibrated. Most likely, you have been focused on achieving three financial goals—creating wealth, building savings, and investing for growth. Now, as retirement begins to approach, you’ll shift to some different objectives—planning income, protecting assets, and perhaps leaving a legacy.
The benchmarks by which you defined success may also need to be reset. The size of your portfolio and the return on investment are still important, but it’s time to begin income planning. You’ll want to estimate your future income needs and likely income sources—and how you’ll convert your accumulated savings to an income that you can count on throughout retirement.
If you don’t already have a financial professional, now’s the time to get one. While the transition to retirement might be starting to sound complicated, it doesn’t have to be. A financial professional, especially one with experience advising clients around retirement, can point you to solutions designed for your evolving situation.
Remember, you’re not alone. Next year, more than 12,000 Americans will turn 65 every day, and the U.S. will have more 65-year-olds than ever before.
Your financial professional will want to understand your entire financial situation, including how you see your retirement playing out. He or she will have suggestions for strategies and products to help you meet your retirement goals, tailoring the plan for you, your portfolio, and any other financial demands—both those you are expecting and some you may not be thinking about.
Consider annuities
June is Annuity Awareness Month, and those of you in the homestretch to retirement may start hearing more about them from your financial professional. Annuities are financial products specially designed for solving the challenges that are unique to retirement.
Read: Should you buy an annuity for your retirement?
As an example, steep negative investment returns at just the wrong time—either just as you’re getting ready to retire or just as you’ve begun your retirement—can do significant damage to your portfolio’s ability to generate the lasting income you’ll need.
The technical term for this possibility is sequence-of-returns risk, and annuities can provide a dose of protection against this risk. Many annuities offer optional features to protect your retirement income from market volatility, so you may feel more comfortable staying invested when the markets dip.
Income is another retirement challenge that annuities are specifically designed to address. Chances are you’ve spent your working years receiving a paycheck every two weeks. You knew how much of that was going to be spent on essential expenses like housing, utilities, groceries and healthcare.
But, before the paycheck stops and your retirement begins, you’ll want to figure out where your income will come from when you’re in retirement and how much income you will need to sustain your quality of life.
Many annuities deliver a cash flow that you can rely on for either a predetermined period of time or for the rest of your life. Retirees can then structure the income they receive from their annuities to align with their essential expenses.
Inflation has been a concern over the last few years, which is a good reminder that estimating your essential expenses is just that, an estimate, and may require some planning and flexibility. Some annuities adjust payment levels directly with inflation, and other annuity products with growth potential can help offset the impact of inflation.
Additionally, it is helpful to remember a larger point—annuities should be thought of as one part of a diversified retirement portfolio. Annuities and the income they can provide can serve as a foundation to build around, where other parts of your retirement portfolio can focus on different objectives, like keeping pace with inflation.
Annuities can play an important role in a diversified retirement portfolio, and the case for annuities is strong right now. The 10-year Treasury yield has risen significantly in the last 18 months, which has allowed annuity providers to raise crediting rates and the income levels for these products, with these benefits being at some of their highest levels in decades.
There are several different types of annuities, and sometimes the choices can appear a bit daunting. You and your financial professional can simplify things by focusing on your individual needs and circumstances and narrowing the options to what is most appropriate for your overall retirement plan.
It is important to understand the costs, benefits and different features of annuities, as well as how you plan to use these products alongside your other sources of income. Make sure you have chosen a financial professional you trust and spend the time to review all your retirement goals and desires.
We all have a different retirement in mind. Now that you’re on the final leg of your journey, the future really is in sight.
Bryan Pinsky is president of individual retirement at Corebridge Financial.
This material is general in nature, was developed for educational use only, and is not intended to provide financial, legal, fiduciary, accounting or tax advice, nor is it intended to make any recommendations. Applicable laws and regulations are complex and subject to change. Please consult with your financial professional regarding your situation. For legal, accounting or tax advice consult the appropriate professional.
Annuities are long term financial products designed for retirement. Withdrawals may be subject to federal and/or state income taxes. A 10% federal early withdrawal tax penalty may apply if taken before age 59½.
An investment in a variable annuity involves investment risk, including possible loss of principal. All contract and optional benefit guarantees, including any fixed account crediting rates or annuity rates, are backed by the claims-paying ability of the issuing insurance company.
Annuities issued by American General Life Insurance Company (AGL), The Variable Annuity Life Insurance Company (VALIC) and The United States Life Insurance Company in the City of New York (US Life). Variable annuities distributed by AIG Capital Services, Inc. (ACS), Member FINRA. AGL, US Life, VALIC and ACS are wholly owned subsidiaries of Corebridge Financial, Inc.