HomeFinanceAvoid the 'retirement-fear quotient' with these 6 steps

Avoid the ‘retirement-fear quotient’ with these 6 steps


Making some key moves towards retirement while you’re still working can give you time to identify potential shortfalls and make adjustments before it’s too late to eventually ease into retirement.

“Retirees say transitioning from saving to living off their savings is one of the biggest challenges of retirement,” says Rob Williams, managing director of financial planning at Charles Schwab.

“But thinking through some of the most critical questions early on – like how much you’ll have, how much you’ll need, when to take Social Security, and how taxes could affect your savings – and then putting a realistic plan in place can help take some of the pressure off.”

Here are six things you can do now to set yourself up for a smoother retirement transition.

Assess your situation

In your 20s and 30s, your retirement plan could be as simple as ‘save and get your employer match,’ Williams said. Then life gets a little more complicated with buying a home and having kids and the more strains on your finances can make retirement savings harder.

Then, in your 50s, many Americans are in what’s called the ‘sandwich generation’ when you have both kids and parents to help out financially.

“It’s a lot,” Williams said. “Take a breath and find out where you stand – that’s number one. Assess where you are. Simple plans and retirement calculators can be a great place to start,” Williams said.

As you get closer to retirement, it’s key to make sure you’re on track. 

“Five to 15 years out from retirement can be a regrouping time. Do it with a partner or certified financial planner and get some advice. We don’t know what we don’t know,” Williams said.

Boost your savings, if needed

Your 50s are crucial years when you’re often in your peak earnings years and you still have time to save for retirement. Once you’ve done your assessment, this is the key time to hunker down and save the most you can, Williams said. 

Read: It’s a big ‘aha’ moment — why 50 is a wake-up call for retirement planning

“Examine your savings and boost your saving rates. Use those catch-up limits to help. Now is the time to dig in and boost savings,” Williams said.

Plan ahead for Social Security

“In the old days, it was viewed that 62 was retired. But that’s just the Social Security Administration saying you can retire – but when you actually take your Social Security is a major decision,” Williams said. “If you can, wait until 70 and get higher payments.”

Full retirement age for those born in 1960 or later is 67, but you get higher Social Security benefits by waiting until 70.

“If you’re thinking of taking Social Security at 62, consider other options and talk to someone about it. What are other income sources you might have that you can use instead of taking Social Security then?” Williams said.

Consider tax-smart strategies now

If you’ve only been saving for retirement through your 401(k), consider diversifying your tax strategies by also contributing to a Roth IRA or a Roth 401(k), Williams said.

While traditional 401(k)s allow you to contribute pre-tax dollars now and pay the taxes later when you make withdrawals. Meanwhile, Roth products allow you to make after-tax contributions now, meaning you won’t pay taxes on the withdrawals.

Having a mix of tax strategies can help hedge against higher taxes in the future and maximize your retirement income, Williams said.

Get a head start on future healthcare costs

“One of the biggest fears we hear is the unknown cost of healthcare,” Williams said. “Educate yourself on Medicare well before 65. Fear often comes from not addressing the issue. There’s a fear around healthcare.”

Healthcare expenses for an average retired couple are estimated to be $315,000, according to Fidelity Investment’s 2022 report.

“Assess where you are on healthcare. At 55 or so, break out expenses by category and add a healthcare expense in your plan. Identifying it and putting a name on it lets you track it and know more about what it really is,” Williams said.

For people with high-deductible health insurance plans, consider a health savings account to save for qualified medical expenses, Williams said. Such accounts are considered triple tax-advantaged in that the contributions are pre-tax and there’s no taxes levied on the HSA’s earnings and distributions.

Start thinking about retirement income

“In your 50s and 60s, the retirement-fear quotient kicks in for many people. But start thinking about what you will have in income – savings, pensions, 401(k), Social Security,” Williams said.

“Investors should be making the transition from growth to preparations to taking income. It’s a move from an accumulation stage to a protection phase to eventually a divestment phase,” Williams said. “You don’t have to do that in one day, though. Target-date funds do this, too, but you can do this on your own – slowly shift your assets towards protection.”

“Take a look and ask yourself if you have the right mix of investments? Every person is an individual and what you’ll need and be comfortable with is different,” Williams said.


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