Steps You Must Take Within 5 Years of Retirement

Evaluate Tax Consequences

Will you be in a lower tax bracket in a few years? Then be sure to maximize tax-deductible contributions now. Are you thinking about moving? Up to $500,000 if married ($250,000 if single) of capital gains from the sale of your home may be tax-free(subject to applicable IRS regulations). Do you have company stock that needs to be diversified? Plan for the amount of tax that will be owed the year you sell the stock or spread the sale over several calendar years.

Retirees routinely underestimate the amount of taxes they will pay in retirement. A little planning in this area can keep you out of major trouble later on.

Diversify Your Investments

Watching your portfolio go up and then back down again is never enjoyable, but in the end, as long as you end up with a big enough pot of money, it doesn’t really matter how you got there.

Once you are retired, however, it’s a different story. When you are taking regular withdrawals from a portfolio, volatility has a much greater impact. This is something us retirement planners call sequence risk. Reducing the up’s and down’s can significantly increase the odds that your money will last through your life expectancy.

Spend time figuring out what mix of investments will achieve the rate of return you need while having a level of risk that is reasonable for you. The risk/return characteristics of your portfolio will determine how much income you will have, and how long it will last.

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