#Boomers: These 5 Years Will Be the Most Important of Your Retirement, According to Wealth Managers

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Entering a new stage of life is always a challenge, whether you’re heading to Kindergarten or preparing for retirement. No matter which stage you enter, it’s important to set a positive tone early and adopt the right habits. That’s especially true of retirement, which could take you through another quarter-century or longer.

The most important five years of retirement might vary depending on different factors. But for most baby boomers, the most important are the first five years, according to a YouTube video from Safeguard Wealth Management.

Relative Youth and Strong Finances Mean Spending Confidence

One reason the first five years are important is that you are still young and financially secure enough to “spend confidently” on things you might enjoy. The problem is, many new retirees go in the opposite direction by fretting over their finances rather than developing mindsets that keep them active and vibrant.

“Too many times I see retirees ease a bit too slow into retirement and I get it — retirement can be a big adjustment, especially the part with no longer having that income flowing in,” the Safeguard narrator said. “Because of this I see added frugality in the first couple years of retirement. You might have big dreams like a family trip to Hawaii or maybe a romantic trip with your partner to Europe, to France, to some of the beautiful areas across the seas.”

Safeguard suggested that the first five years of retirement are the “best time” to fulfill those dreams, because eventually your spending will decline.

“Just because you spend $120,000 in the first year of retirement doesn’t mean you have to run a simulation and look at $120,000 for the rest of your retirement,” the narrator detailed. “It’s extremely unlikely that that will need to be sustained.”

The Time To Travel Is Now

If you spent your working years looking forward to travel and adventure in retirement, then you should take advantage early on in retirement when you have the best opportunities.

Another reason the first five years are important is because it’s the “best time for tax planning,” according to Safeguard. That’s because if you retire early enough, you won’t have “forced income” such as Social Security benefits or required minimum distributions (RMDs) from 401(k)s or other retirement plans.

The oldest you can claim Social Security with no further financial benefit to waiting is age 70. RMDs kick in when you reach age 72 (or 73 if you reach age 72 after Dec. 31, 2022). Once those come into play, you might move into a higher tax bracket that increases your income taxes. A good time to plan for those taxes is during your first five years of retirement.

Finally, the first five years of retirement are also when the performance of your financial portfolio will have the biggest impact on the rest of your life — so it’s important to get things right. One way to ensure better returns is to consult with a financial advisor.

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