Get acquainted with what’s likely to happen down the road.
Effective retirement planning is a key component to broad financial planning. By the time you turn 50, you might start to consider what life may be like after you decide to stop working a traditional job, and how the myriad aspects (both financial and non-financial) of a work-free life could impact your happiness overall.
Here are four things to do when you’re about 10 years away from retirement.
1. Read your company’s 401(k) plan document
You’ll want to check for a provision called the rule of 55, which allows for penalty-free retirement distributions at age 55 or older. The only catch is that you’ll need to have separated from your most recent employer to take advantage of the penalty waiver. Note that while you’ll be able to skip out on the 10% penalty on any amounts withdrawn, you’ll still be liable for ordinary income tax on what you take out.
This is why it’s key to know if your 401(k) plan has any special provisions around retirement withdrawals, and to make sure that you’re compliant with all of your plan’s rules to avoid any costly errors.
2. Check your Social Security projection
Having a sense of what you’ll receive in Social Security income can help you figure out how much you’ll need to have saved by the time you retire. For instance, if you find out that you’ll receive $30,000 per year in Social Security benefits, and you spend $80,000 per year, you know you’ll have to come up with another $50,000 worth of income to be able to cover your costs in retirement.