The Final Countdown: Critical Financial Moves for the Pre-Retirement Decade

For those within five to ten years of their target retirement date, financial planners recommend shifting focus from wealth accumulation to income protection. A critical strategy involves designating specific portions of a portfolio for guaranteed income sources, such as Social Security, pensions, or annuities. This 'bucket' approach allows the remaining assets to stay invested in growth-oriented vehicles, providing a hedge against long-term inflation over a retirement that could span 30 years or more.

Managing the transition also involves understanding 'sequence of returns' risk—the danger that a market downturn early in retirement could permanently deplete a portfolio. Experts suggest considering buffer exchange-traded funds (ETFs) and super catch-up contributions to turbocharge savings in the final working years. These specialized tools can reduce the impact of large drawdowns while maximizing the tax advantages available to older workers who are eligible to contribute beyond standard IRA and 401(k) limits.

Finally, pre-retirees should audit their expected post-career cash flow. While some expenses like payroll taxes, commuting costs, and retirement contributions disappear, others like healthcare and leisure spending may rise. Establishing an emergency fund and simplifying tax liabilities, such as planning for capital gains across different states, are essential steps to ensure a smooth transition from a steady paycheck to living off accumulated assets.