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What to do as retirement nears

A lifetime of work, and suddenly the end is in sight. You’re 10 years or less from being able to retire, fulfilling those dreams of a well-earned break from the daily grind.

But if you want those retirement years to be all you’ve imagined, you need to make sure you’re taking all the steps possible to make that happen.

That last working decade, while there’s still time to make some changes, is an important time to take inventory.

“The No. 1 thing is to make sure you’re saving enough to reach your desired income in retirement,” says Greg Womack, a certified financial planner in Edmond, Okla.

Yes, this seems like a no-brainer. But financial planners say it’s surprising the number of people who come into their offices with hopes of retiring in a few years but with completely inadequate savings to make that happen.

Here’s an easy, step-by-step guide to make sure you're ready when the big day comes.

Find out how much you'll get from Social Security

Social Security used to send everyone annual statements showing lifetime earnings and expected retirement benefits. Now those paper statements only go to Americans 60 and over.

However, that information is still available online. You’ll need to create an account on the Social Security website. If you run into problems, you can call the agency or schedule a visit at a local office.

You can collect Social Security retirement benefits as early as age 62, but you’ll get less by doing so. You earn more by delaying your retirement. Benefits increase up to age 70. Beyond that, there’s no further benefit in waiting.

Social Security remains the primary source of income for a majority of retired Americans, according to Gary Koenig, an economics analyst for AARP’s Public Policy Institute. It makes sense to start your retirement planning by taking a careful look at what you’ll receive.

Click here for our 6-step guide on when to start collecting Social Security

Determine your pension benefits

Defined benefit pension plans, which pay a guaranteed monthly amount upon retirement, were once a regular part of the American employment landscape. They’ve become much rarer in recent decades.

But if at some point in your working years you were employed in a unionized shop or part of certain sectors of the economy, particularly manufacturing, you may have earned benefits from such a pension plan.

Those benefits could still be out there, even if you’ve moved on to another job or career, or even if the company where you once worked has been bought, sold or gone out of business.

If there’s any chance you're eligible for a defined benefit pension, now is the time to dig through that old paperwork and find out. You can check online to see what entity is now responsible for administering the pension plan.

Yes, it’s a headache, but it could mean a monthly check.

Determine how much income you'll need

The amount of money you'll need for a rewarding and secure retirement depends on you.

If you're paying off big medical bills or want to see the world, you'll need more than if you’re debt-free and have no big plans to travel.

If you decide to retire early, you'll need to factor in the cost of health insurance until you qualify for Medicare at 65.

But the most common rule of thumb is that we should be able to replace 70% of our pre-retirement income after we stop working.

You’ll want to tally up your guaranteed retirement benefits from Social Security and any pensions and see how close you are to meeting the 70% rule — or the percentage you’ve determined you need.

Most people will fall short, which bring us to your personal retirement savings — the money you’ve been putting aside through a 401(k) or IRA.

See how your savings measure up

Personal savings is a critical source of retirement income. But how quickly can we draw down our 401(k)s, IRAs and other investment accounts without running the risk of outliving our savings?

A staple of retirement planning is something known as the 4% rule. It says you can expect your savings to last about 30 years if you withdraw an inflation-adjusted 4.5% a year.

The record-low interest rates we're enduring today have caused some investment advisers to question whether that's too much. But it still provides a reasonable starting point.

Multiply the balance in all of your retirement accounts and other savings by 0.045, then divide by 12 to get amount you can safely withdraw each month. Add that to your Social Security and pension payments to get a good estimate of your monthly retirement income.

Now, are you approaching 70% of what you're making today?

Make a final savings push

If you only have enough savings to replace 50% or 60% of your current income, counting pensions and Social Security, there’s still time to boost the balances in your retirement accounts.

But you need to be smart about it. If you’re behind on saving, the temptation is to make a long-shot bet on a risky investment to get ahead.

“People feel I’ve got to catch up. They start taking chances in the market,” says Cathy Pareto, a certified financial planner in Coral Gables, Fla.

“That’s not a game people win. You play catch-up by putting more into savings and finding ways to reduce your living expenses.”

Doing so doesn’t have to be painful. One analysis found Americans waste 15% of their income on things they don’t really need.

Would bringing your lunch to work twice a week really be so bad? It could allow you to save an additional $80 a month at a time in your life when every dollar counts.

Rebalance your portfolio

Even If your overall retirement savings are on target, you still need to look carefully at how you have that money invested.

The closer you get to retirement, the less risk you want to take, which means less money in markets that can swing wildly like stocks or commodities. Otherwise, a sudden market downturn could wipe out a big hunk of your hard-earned savings right when you need it.

Formulas exist for how you should invest for retirement at different points in your life, but consulting a professional can be wise in this case, especially if you have a complicated savings portfolio.

Another option is to put your money in a mutual fund that automatically shifts the balance of your investments as you age. These “target-date retirement funds” provide a good choice for those of us who don’t want to have to monitor our retirement savings closely.

Pay off those credit cards

On a fixed-income retirement budget, every dollar counts. If you’re still paying for things you bought years ago — plus interest — that means you’re going to be living on less when you quit working.

Financial planners appear unanimous in strongly suggesting that any kind of credit card debt or other unsecured consumer loans should be paid off by the time you get to retirement.

A credit card reform law passed in 2009 stipulates that your monthly statement now includes a table illustrating how much you can save by paying more than the minimum.

Targeting the cards charging the highest interest rates is the recommended route. But sometimes it can help to simplify things and provide a psychological boost to clear off those with the smallest balances first.

Either way, make a plan and stick to it. (This credit card calculator can help.) Seeing your balance hit zero is a very good feeling.

Cut off the kids

Financial experts aren’t suggesting you kick your young or teenage children out on the street.

But a recent study by the Pew Research Center found that 27% of all adults ages 40 to 59 are the primary source of financial support for a grown child.

Unless you’re very wealthy, that’s a monthly expense you shouldn’t be paying when retired.

“If it’s some dire emergency, I understand,” says Cathy Pareto, a certified financial planner in Coral Gables, Fla. “But when mom and dad aren’t bringing in their own money anymore, they really can’t afford to have the kids on the payroll, so to speak.”

We all want to help our children, but the years before retirement are ones when it’s important to focus on getting your own financial house in order. Your children need to understand and step out on their own.

After all, the sooner they become financially independent, the better it is for their own long-term financial health.

Pay off the house — or not

The traditional advice has been to pay off your mortgage, if possible, before retiring. But the real estate market bubble, followed by the crash of 2007, made that decision more complicated.

Many people took out sizable home equity loans before 2007, making it unlikely they can pay off their homes soon. At the same time, mortgage rates remain very cheap by historical standards.

If you’re close to paying off your mortgage, it can still make sense, reducing your monthly expenses significantly while also providing a sense of security.

But if you still have a lot of time on a mortgage, then you should consider refinancing, even extending the term.

“Locking in a low, fixed, long-term rate might be the best move,” says Greg Womack, a certified financial planner in Edmond, Okla. “It could lock in this part of your living expenses for a long time and (free up money) to earn higher rates of return from investments.”

Start preparing mentally for life without a job

Our jobs are often a big part of our identity, and as much as we daydream about the day we’re done, the truth is, many of us find ourselves at a loss about exactly what to do once we’ve retired.

You might think scheduling a daily round of golf is all the plan you’ll need, but retirement can last a long time, and financial planners and other retirement counselors say they find that most people eventually need a way to transfer the energy and passion they brought to work to other meaningful causes or projects.

A new hobby, volunteering, returning to school, even working part-time in a completely different field — you have an opportunity now to explore them all.

So, this is the final item on your checklist: Figure out what will really make you happiest in your retirement years, and start preparing. You’ve earned the right to make those plans.