3 steps to the retirement finish line

You're almost there—but these three steps can help you in the final sprint.

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We don't have firm retirement dates yet, but my wife and I know that we have more working years in the rearview mirror than ahead of us. Still, we have begun seriously looking at ways to reduce our debt as we prepare for our eventual sprint toward retirement. We're also increasing our retirement plan contributions while we begin to get the hang of how much money we'll really need.

Here are three steps we're taking to prepare for the future.

1. Revisiting our debt

The biggest change we made to our debt picture was via our mortgage payments. With interest rates at an all-time low, we realized that we could save a significant amount in interest payments if we refinanced our 30-year mortgage. After shopping around, we ultimately found a low-rate 15-year mortgage with no points and very little costs. We pay a little less with the new, 15-year mortgage and will have more equity when the time comes to sell. While this strategy works for us, you should do your own math to make sure refinancing works for you. For some people, paying off the mortgage before retiring might give a better sense of control over retirement.

2. Increasing retirement plan contributions

Shrinking our mortgage payments leaves us with more to contribute to our 401(k) plan and IRA. Other steps you might take include putting some or all of your raises, bonuses, and other financial windfalls into your retirement plans—like a 401(k) plan, 403(b), tax-deferred annuity or other tax-qualified retirement plan. You won’t miss the extra money if you never had it. An added bonus is that contributions may be tax deductible, lowering your present-day tax bill, and potential growth is tax-deferred.

3. Understanding retirement expenses and income needs

I confess I'm lax with this third step, but I know what we have to do: estimate our retirement costs and expenses. Although I don't anticipate fully retiring unless I can no longer write for a living, I understand I need to start thinking about a strategy now.

Any retirement strategy starts by understanding your retirement expenses. Learn as much as possible about Medicare and its various components, which will help you meet some of your healthcare costs during retirement. Know that these costs can be prohibitive. A Fidelity study shows that healthcare expenses for a couple, both age 65 and retiring this year, are an estimated $796 each month (for the couple) throughout retirement.1

Housing is the next expense I'll tackle. We plan to eventually downsize and reduce housing costs substantially. While we won't have commuting and other work-related expenses, we anticipate spending more on travel, at least during our first few years of retirement. There are other expenses, including transportation, food, and utilities, which we realize won't stop just because work does. And there are always emergencies, which will require us to create a fund to meet their costs.

After estimating your expenses, begin to think about an income strategy for retirement. When will you begin withdrawing money and from where? My thus-far informal strategy is to use my retirement savings first and delay taking Social Security payments until age 70 to increase my monthly payments. I also might investigate annuitizing some of our retirement plan balances to ensure some guaranteed income.

Preparing for this final sprint to retirement is harder than blowing out extra birthday candles, but it's worth the effort. Creating a strategy before reaching that moment in your life won’t guarantee a perfect retirement landing, but it beats doing nothing at all.

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1. 2015 Fidelity analysis performed by its Benefits Consulting group. Estimate based on a hypothetical couple retiring in 2015, 65-years-old, with average life expectancies of 85 for a male and 87 for a female. Estimates are calculated for "average" retirees, but may be more or less depending on actual health status, area of residence, and longevity. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government's insurance program, Original Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care. Life expectancies based on research and analysis by Fidelity Investments Benefits Consulting group and data from the Society of Actuaries, 2014.
The statements and opinions expressed in this article are those of the author. Neither Fidelity Investments nor your employer can guarantee the accuracy or completeness of any statements or data.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

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Take the next step: Prepare for retirement

We can help you create a retirement strategy that meets your needs. Use our tools, tips, and other services to set savings goals, create an income plan, and manage your portfolio.


Learn more about Fidelity retirement planning, or talk with your advisor.

Take the next step: Prepare for retirement

We can help you create a retirement strategy that meets your needs. Use our tools, tips, and other services to set savings goals, create an income plan, and manage your portfolio.


Learn more about Fidelity retirement planning, or talk with your advisor.

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