There are three big areas on which to focus your attention in your pre-retirement years.
Sufficient Retirement Capital
You likely need more than you think to provide sufficient retirement income. There are lots of 'rules of thumb' you may hear like 'you need 70% of your pre-retirement income.
Don't rely on these simplistic rules. If you want to do it right, get a copy of J&L Retirement Planner software (about $100) and go through the painstaking task of entering all of the numbers permitted. This robust software allows you to enter year by year events such as the world cruise for your 65th birthday, or the fact that your deferred compensation starts when you reach age 67.5 or that you plan to move to a condo at age 72 and thereby free up $300,000 for investments and eliminate your mortgage payment. Take the time to get your pre-retirement planning done with as much precision as possible (or hire a retirement planning professional). If it's too much of a bother, then don't complain if you run out of money at age 85 and live on food stamps for 15 more years.
If you start your calculations and you don't have enough for your targeted retirement date, you will find that tightening your belt pre-retirement to save and invest more has a much smaller impact than working another one or two years. During that extra work time, your retirement investments continue to grow rather than be consumed. This additional growth is likely to be much more money than you can put away in additional savings. Don't worry about retirement investing at this point. Get to the retirement 'starting line' before reallocating your portfolio to live in retirement.
Retirement plan Options
Prior to retirement, you will be asked by your employer to make choices about how to distribute your 401k or receive pension payments. This area is so fraught with rules you are unlikely to know, get the help of a retirement professional. IRS has constructed a minefield of rules and waits for you to step in the wrong place and blow up.
Health Insurance and Health Care
You may feel great now but it is naive to assume everyone else becomes an old codger but not you. You too may be shuffling across the intersection trying to beat the countdown before the traffic light changes color. Therefore, take the probability of illness and aging seriously. Not only do you need comprehensive health insurance but also long term care insurance, both of which you want to get pre-retirement. Many health insurance plans are regional and not national so before you retire, be sure you are content to remain living in the area in which you retire. Your health plan may not be portable. Buy long term health care coverage. If you don't know anything about long term care insurance, talk to your retirement planner or do your Internet research.
You might also like:
Really boiling it all down planning for the worst possible scenario is really the way to go. Sure you may have some investments spring up or maybe your house will appreciate in value greatly, but odds are something will happen be it an illness, a recession or whatever so plan for the worst and if you have more than you need then your children will have a nice inheritance on their hands.
Its scary that at 30 years old I need to be focused on a retirement plan, but it would be worse to run out money and have to get a job at a coffee joint when I am 80. Retirement should be about having a cute little home and cruising, not working.
I don't think I would mind working at a coffee joint in comparison to flipping burgers. My mother has been suck in the fast-food industry for the majority of her life, and has to provide for her 50-year-old daughter and her 18 year-old grandson. I really hope that her retirement plan is worth it!