Retirement planning should ideally begin from the day you have your first job.
However, even if you have made no special financial preparations for your retirement, you could still start on plan while retirement is just 15 years away.
Consider the following steps to fortify your retirement plan over the next 15 years.
Take stock of your finances
While you may want to avoid a harsh reality check, an objective evaluation of your current financial position will help you determine the potential shortfalls and find ways to overcome them while you still have time.
Assess the accumulated funds in your retirement accounts, such as a 401(k), 403(b), and IRA. Do not include emergency funds or any savings that you have earmarked for large future expenses in this assessment.
Consider all income sources
While your retirement savings may be largest component to finance your monthly retirement expenses, they might not be the sole source. You could have additional income from external sources, such as a rental property.
If you have pension plan coverage, consider the monthly income from it as an additional source. If you have the skills and plan to do a part time business or job in retirement, this could be another external income source during retirement.
Assess retirement goals
To create a meaningful 15-years-to-retirement plan, it is vital to have clarity about your retirement goals.
If your aim is to significantly downsize your current lifestyle and enjoy a modest retirement at a low-cost destination, your financial needs during retirement are going to be different from someone who wants to maintain a luxurious house and spend on foreign travel, leisure activities and dining out during retirement.
Determine the age at which to retire
If you plan to retire early, for instance at the age of 55, your 15-years-to-retirement plan must be in place latest by the age of 40.
On the other hand, if you are in no hurry to leave the workforce, you might have time until you turn 50 for your retirement planning to begin.
Remember that life expectancy has significantly gone up over the decades and costs such as gasoline, food, and taxes will rise as well. A retirement that lasts for as many as 35 years is going to require a different level of planning from a retirement that is expected to last about 20 years.
Focus on potential shortfalls
All of the initial steps in your retirement plan will finally lead to the ultimate question: Is there a gap between your accumulated retirement funds and the amount you might need to enjoy a financially secure retirement?
If the gap is considerable, it is time to consider strategies to bolster your retirement assets while you still have about 15 years of active working life. You can review your monthly expenses to see if there are any avoidable expenditure items or high-interest debts that should be cut down.
At the same time, you must look at ways to increase your income so that your savings receive a strong boost. Based on an increased savings rate, you can make necessary adjustments to your 401(k) and IRA contributions.
Create a diversified portfolio
As you keep nearing your retirement age, make sure that your retirement investments remain in sync with your risk tolerance levels. You should ideally focus more on conservative portfolio allocations to preserve core capital, which may include government or corporate bonds as well as blue chip dividend stocks and mutual funds.
Consult with a financial planner to help ensure that your retirement plan is insulated as best as possible from unforeseen market risks and extreme volatility.