Countdown to Retirement – Serving your Future Self

We work with many University professors and administrators and have come to understand some common characteristics. With countless students to support, articles to be published, conferences to prepare for, and research topics all clamoring for attention, retirement is not top of mind. If you are NOT a University professor, you likely have your own list of time demands that keep you from retirement planning. A recent quote on marketwatch.com pretty much sums up the state of affairs:

“People spend more time planning a wedding than planning retirement.”

– Nancy Schlossberg

While we agree that weddings are important, we’d like to remind you that the earlier you spare a moment on behalf of your future self, the easier it will be for your present self to prepare for retirement and the happier both of your selves will be. That is why we created this short guide to get you on track — no matter your time horizon.

If retirement is but a distant dream …

  • Spend less than you make. The impact of this cannot be overstated.
  • Pay down debt. Debt is the enemy of your future self.
  • Maximize your 403(b), 401(k) or IRA contributions.
  • Review your investments to ensure you are minimizing mutual fund fees and expenses.
  • Make use of your 457 plan, if you have one.

If you are 10 years from retiring, then determine how much you should save for retirement …

  • Determine your net worth: The total of your assets that could be sold for cash minus all your debts.
  • Increase contributions to your retirement plans. Contribute more with every raise you receive.
  • Continue to pay down debt, if needed.
  • Estimate your sources of income and fixed expenses in retirement.
  • Assess the probability of having enough money to retire in a 10-year time horizon (a service we provide as part of our planning).
  • If retirement is unrealistic because the projected money is short, reduce spending and supercharge savings.
  • Rinse and repeat.

graphic depicting a word map about this article on retirement

If you are 5 years from retiring …

  • Consider where you will live in retirement. If it will be in a state with a high-income tax rate, then consider contributing to a Roth IRA rather than tax-deferred accounts.
  • Revisit your university or other savings plans (403(b)/457/401(k)). Can you save more? If you are contributing the maximum to these plans, consider a savings and/or brokerage account.
  • Start to think about what you will do in retirement. Those with a clear purpose tend to have a more successful retirement.
  • Consider whether you will work in retirement. If so, estimate and factor in this income.
  • Evaluate investment returns, current savings, and reassess timeline.
  • Adjust asset allocation, if necessary, to reflect a 5-year time horizon. It may be time to shift to a more conservative strategy so you are protected from a severe market correction at the start of your retirement.
  • Be on the lookout for favorable buyout opportunities. We have helped several clients review buyout agreements.  We would be glad to help determine whether a buyout aligns with your goals.

Retirement is one year away …

  • Pay close attention to the date. One additional month of employment could mean a raise in your pension (if available) for the rest of your life!
  • The same applies to retiree health care. If your employer offers retiree health insurance, are you eligible? If not offered, review ACA and COBRA options.
  • Maximize tax-deferred retirement savings this year to minimize taxes. Taxes will still be a factor in retirement, especially once you reach age 72.
  • If you are entitled to lump sum vacation pay, consider deferring it to a year after retirement when your income will be lower.
  • Defer capital gains, if possible, to your retirement years. For example, the sale of a rental property with gains and recaptured depreciation will be much more palatable tax-wise once you retire.
  • For those age 65 or older, file for Medicare Part B and challenge your premiums if you will be in a significantly lower tax bracket after retirement. Will you need a Medigap policy?
  • Evaluate your need for Social Security. Deferring until 70 can greatly increase your benefit!
  • Create a spending plan with shifted sources of income. How and when will you pay yourself?

How can Briaud help you?

These steps may differ for your particular circumstances, but this is a good road map to get you on the right track. If you want some individual guidance on your path, we have a lot of experience working with university professors and many others with similar goals. We would be delighted to help you, too. For more information or to schedule a complimentary initial meeting, call us at (979) 260-9771, email at bfp(at)briaud.com, or learn more about us here.

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