How to Build a Retirement Income Plan if You're 10 Years From Retiring

When you’re in your 20s and 30s, it can be difficult to focus too much on retirement because it seems so far away. But when you’re, say, in your 50s, it starts to feel much more real.

Some will be in a position of strength, with significant savings already built up, while others will realize they have some catching up to do. The good news is that with 10 years to go, there’s still plenty of time to significantly increase your savings.

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The key is to make a plan, whether it’s on your own if you have financial knowledge, with a friend who is knowledgeable, or with a financial advisor. Here’s how to build a retirement plan if you’re a decade out from retiring.

Make a holistic, well-thought-out plan

If you’re feeling behind on your retirement savings, there’s no need to panic, but you need to start taking things seriously.

The first step is to review your current retirement fund options. For people with full-time employment, that likely means a 401(k) account. For those with other work arrangements, you might have an individual retirement account (IRA) or a Roth IRA. Either way, you should be trying to max out annual contributions at this point.

For a 401(k), the max contribution limit is $24,500, and if you’re over age 50, there’s an additional catch-up contribution of $8,000 (that increases to $11,250 for ages 60-63). Now, this will be a tough amount to contribute for most, but it allows people to play catch-up quickly, even if you’re just contributing a fraction of the max 401(k) contribution. The maximum contribution for an IRA and Roth IRA is $7,500, with an additional catch-up contribution of $1,100.

Once you’re contributing to your retirement fund, the next step is to invest this money prudently. Over a decade, investors can still take a long-term investment thesis that can smooth out volatile periods of the stock market. So, you still likely want to have most of your portfolio invested in stocks, although there’s no one-size-fits-all strategy.

Also, just because you max out your retirement contributions doesn’t mean you have to stop there. Most people can tighten their budgets and cut wasteful spending if they really take a hard look.

It can be small items, like unnecessary subscriptions, or trying to do things more affordably, such as getting a cheaper haircut or finding a less expensive vacation. Even if you can scrounge up an extra few hundred dollars each month, that can go a long way over a decade, especially if invested properly. A financial advisor or friend can help you find tax-efficient ways to invest funds outside of your retirement account.