The Retirement Decade: Why The Last 10 Years Before Retirement Matter Most

Retirement is the financial goal most people have. While you might set long-term goals that take many years to accomplish, retirement planning often requires decades of saving. However, the final capital letters in retirement planning often refer to the last 10 years before retirement (ages 50-60). This is when an individual starts to take a real look at whether they have saved enough to meet their retirement expectations, including what their future lifestyle will be like and what retirement income will be available to them.

“Most people do not spend the first two-thirds of their lives specifically planning for retirement; instead, they focus on building financial stability. Each decade of your life brings new goals, priorities/hurdles,” says Sachin Jain, Managing Partner, Scripbox, a digital wealth manager.

How Do Our Priorities Change Over Time?

• Ages 20-30: This is a time mainly for education and skill development, as well as starting a career, so that the person will be able to secure the best possible opportunities in life, and develop solid foundations for their profession. Also, this is a time to work on short-term and immediate goals, so detailed retirement planning will be limited.

• Ages 30-40: At this stage of life, responsibilities are increasing and starting to overwhelm a typical young adult. Significant responsibilities include buying a home, planning for a family, and establishing a stable career. Financial commitments continue to increase to the point that retirement planning often takes a back seat to immediate goals.

• Ages 40-50: This is an era of significant life changes regarding both personal and professional development. At this point, a person may be changing careers or experiencing professional turmoil or instability in their work life. In addition, by this point in life, most children will be entering adulthood, developing their own goals and aspirations, and exploring their personal passions and interests, such as travel and other new experiences.

• Ages 50-60: At this point in life, the person is beginning to understand and accept that they will be retiring soon. In this decade, they will assess their financial readiness for retirement and ask questions such as "What will my life be like after I turn 60?"

“Multiple surveys have shown that a substantial proportion of people are not adequately prepared for retirement. As a result, the upcoming decade is an extremely important wake-up call. This is true not only for those who have been successful and saved money during their working years, but also for everyone in the final decade before retirement who needs to review their current status and develop new plans based on the most current data and market conditions,” informs Jain.

Importance Of The Past Decade

• Review Previous Assumptions: Retirement plans developed in earlier phases of life may no longer be valid because lifestyle expectations, economic realities, and family responsibilities often change. At age 50, it is a key time to review your financial objectives and adapt your plan. 

• Reduce or Moderate Investment Risk: In the early years as an investor, many people tend to take on aggressive risk-taking behaviours while seeking to achieve maximum long-term returns. “As you near retirement age, the investment objective increasingly becomes protecting the assets you have accumulated to date, leading most investors to transition away from high-risk investments toward longer-term, more stable, high-quality investments and assets with better liquidity,” says Jain. 

• Examine Health and Future Health Expenses: Understanding your current level of health is important for estimating potential future healthcare costs and medical-related treatments or services, which will be part of the retirement planning process. 

• Family Dynamics: By age 50, the children you raised are generally approaching independence. Where they choose to create their new home could impact your potential visitation/travel plans to see them, the family support you provide, and your long-term financial commitment to each of your children. 

• Define Travel and Lifestyle Goals: At this age, you should have a clear understanding of the types of travel and lifestyle goals you would like to achieve during your retirement years.  Developing travel plans, leisure time, religious/professional interests, and social events will require you to work them into your retirement planning process and budgeting. 

Adjusting Your Retirement Investment Strategy 

The decade leading up to retirement is a good time to adjust your investment strategy. Planning for how much money you will need for retirement at various stages of life is important. The three major life stages for retirement planning are: 

• 60 - 65 Transition into retirement.

• 65 - 75 Years of active retirement during which people spend money on lifestyle activities.

• After 75 years, focus more on having money available for stability and health care needs. 

You need your investments to support these life stages so that you have both financial security and available funds throughout your retirement.

As a general rule, in the last decade before retiring, you shouldn't take many risky investment options unless you're significantly behind your goals. Instead, you should focus on balancing out growth with protection for your principal. 

“If you still feel ten years away from your retirement goals, you may want to make lifestyle changes to make it easier to retire. This can include reducing your expenses, working longer, or taking on part-time work after you retire,” suggests Jain. 

In conclusion, you have only one more decade left to build the financial future that you want. If you're willing to do the work through careful financial reviews, disciplined investing, and thoughtful planning, this decade can transform your retirement from a time of uncertainty to one of stability, independence, and fulfillment.