Retirement Readiness:
Five-to-Ten Years from Retirement

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With five or ten years left before retirement, you can still afford to be somewhat casual about it. A lot will happen in that span, including much that is likely to surprise you. Still, this is the time when you should start thinking about it seriously. You are heading toward one of life’s most important transitions, and you don't want it to catch you unprepared. Starting to re-orient your life and your finances, even this far ahead of time, can help make your retirement the best time of your life.

These pages will help you make a great start on it. And as you get closer to retirement, you can continue to use them, and the resources they point you to.

1. What do you want your life to be like when you’re retired?

Your retirement transition will go much more smoothly, and your retirement years will be much more fulfilling, if you think of retirement as a continuation, even a completion, of your life, rather than just a change from working to leisure. The best way to make that happen is to start thinking way ahead of time about what your ideal life would be like, and then start moving in those directions now.

How would you fill your day if you suddenly had no work to do (and, hypothetically, enough money). Would you still want to work for pay, if you didn't have to -- and if so, the same kind of work, or different? Would you do volunteer work? Would you spend more time with family, or traveling? Would you pursue hobbies - old ones, or new ones?

If you start thinking about such things now, you can gradually take steps along those lines. This will not only prepare you much better for your future in retirement, it will probably make your life better in the intervening years as well. Why wait until retirement to figure out just who you are and just what you want? Very likely, you don't have as much spare time as you'd like right now to make huge changes, but you can at least start thinking about them, and maybe take some baby steps here and there.

A successful retirement is not any easier than a successful career. But you have time to do it right, and it is not too early to get underway, if you haven't already.

One helpful way to think about your retirement, and for that matter your current life as well, is with what we call the SPLASH model. This model divides all the key issues and concerns in your life into six categories, with the most fundamental ones at the bottom, and the less concrete (but arguably the most important ones) at the top. Here is what the model looks like, and a few of the key issues that relate to each area.

Spirit: What matters beyond the physical details of your life
Purpose: Activities that give meaning to your daily life
Love: Your connections to others you care about
Avocation: What else gives you joy and satisfaction
Security: Providing financial and physical shelter
Health: Taking care of your physical and mental well-being

    Spirit: What matters beyond the physical details of your life
  • What is the meaning of life, and of your particular life?
  • How do you connect with whatever religious, spiritual, or other reality you believe in?
  • Are you prepared to deal with aging and death, in yourself and those you care about?
    Purpose: Activities that give meaning to your daily life
  • Should you be doing paid or volunteer work in retirement?
  • How do you engage productively and satisfyingly with your community, the nation, or the world at large?
  • What legacy do you want to leave behind?
    Love: Your connections to others you care about
  • How to make the most of your marriage (or relationship with another kind of life partner or significant other)
  • How do you develop and maintain solid relationships with other family and friends?
  • How do you manage when care-giving is required?
    Avocation: What else gives you joy and satisfaction
  • What leisure activities make sense for you now?
  • What opportunities should you take to continue to improve and exercise your mind?
  • How do you maintain your lifestyle as you age, and as you become less physically or mentally adept?
    Security: Providing financial and physical shelter
  • What financial decisions need to be made to assure you of continued means to live as you wish?
  • Where and in what kind of domicile should you live, and how do you maintain it as you get older?
  • What legal or financial steps should you take to prepare for incapacity or death?
    Health: Taking care of your physical and mental well-being
  • What should you be doing in the way of exercise, nutrition, and sleep?
  • What medical professionals should you consult, and what kinds of medications or therapies should you be using?
  • What can you do to fight off harmful attitudes, feelings, and habits, and to promote happiness and wellbeing?

Click any of the six main topic areas Spirit, Purpose, Love, Avocation, Security, or Health – or better yet, try them each in turn, to explore in more detail the specifics of what each is, and why they all matter. As you may already realize, some of the items listed above could fit into more than one category. This is unavoidable: Life does not actually fit into neat boxes. The intention here is to cover all the key areas in one place or another, and as you visit each section, we will explain the main connections to the other sections.

2. Are you really on track to retire when you want to, and if not, what would have to change?

All of the issues in the previous section are important, but you also need a reality check. Are you anywhere near able to retire at the age you prefer, with the kind of life you prefer?

Simple calculators that try to tell you how much you still need to save will not answer this question adequately. You are at an age now where you need a more powerful tool. What you should have is a financial model - simple enough so that it doesn't claim to give you every answer that will be perfect for your still somewhat distant future, but detailed enough so that important and partially foreseeable changes over time can be taken into account.

Fortunately, there is an excellent tool available that does just this job, and it has been specifically built for people in your situation. It offers a less detailed input mode, which will still take you about an hour to go through, but that is probably sufficient for your needs today. And when you get closer to retirement, you can switch to the more detailed mode, and get more precise and reliable analysis. It is better than what all but the most expensive personal financial planners can do for you, at a small fraction of the cost.