How To Plan For Retirement in 10 Years

Retiring in as little as 10 years may be possible, but it requires proper planning, a diversified investment strategy, and lots of discipline.

Retiring in 10 years starts by taking a snapshot of where you are now and where you eventually want to be.
Strategies such as diversifying investments and maximizing your retirement savings may help expedite your timeline.
Other tactics, such as keeping your expenses to a minimum and paying down debt, might be helpful toward expediting your progress.

There could be many reasons for wanting to retire in 10 years. Perhaps you got a late start on saving and would like to accelerate toward the finish line. Or perhaps you'd rather wrap up sooner than your peers so that you can pivot to other hobbies and interests. Regardless of the reason, your goal may be more attainable than you think.

Define Your Retirement Vision and Goals

Set the numbers aside for a moment. Before getting bogged down in the "how", the first question you should ask yourself is "why"? Why do you want to retire?

More specifically, what would you do in your first month or even year of being retired?

Spend more time on leisure activities?
Start that new venture you've always dreamt about or begin volunteer work that you're passionate about?
Travel the world?
Spend more time with family and friends?
Relocate to another state or country?

There are no wrong answers. What's important is to mentally prepare for a life where your current job is not the primary activity of each day.

Additionally, be sure to discuss your vision openly with your partner and take into consideration their wishes as well. Together, your intentions may shape how much money you'll ultimately need to support your desired goals and new lifestyle.

Assessing Your Current Financial Situation

The first step to making a plan that's practical is to understand where you stand today financially and where you'll need to be.

What's Your Current Financial Situation?

Create a snapshot of your current financial picture. This is usually best captured with a net worth calculation as follows:

Net worth = Total assets - Total liabilities

Your total assets include everything you've saved or own that has value. This includes:

Tax-advantaged retirement accounts, such as a an employer-sponsored 401(k) plan account or IRA
Taxable investment accounts
Checking / Savings accounts
Equity in your home or any other valuable assets you own
Etc.

Your total liabilities include any money that you owe to others. This includes:

Your mortgage
Other loans, such as those used to buy a vehicle or pay for college
Credit card balances
Etc.

Estimating Your Retirement Expenses

Next, determine how much money you may need each month to live comfortably.

Be realistic. Shooting too high may make it harder for your plan to succeed, while aiming too low might leave it underfunded.

If you're unsure about what value to use, many financial advisors recommend a figure close to 80% of your current living expenses. This allows you to maintain your current standard of living while assuming you may not have as many expenses once you're retired.^[1]

Calculating Your Retirement Assets Target

Take your annual estimated retirement expenses and multiply them by 25. This is the approximate amount you will need for your retirement planning.

The multiple "25" assumes that you'll be able to live off approximately 4% of your retirement assets per year. It's a popular financial planning metric known as the safe withdrawal rate, which originated in the 1990s and remains widely recognized today.^[2]

Of course, your retirement assets target may vary depending on other sources of income or expenses. For example, if you plan on receiving Social Security or a pension when you retire, then you may subtract these benefits from your retirement expenses resulting in a lower retirement assets target. Likewise, if your mortgage will be paid off in the next 10 years, then this may also be subtracted from your retirement expenses.

Creating and Implementing Your Strategy

The gap between your current net worth and your retirement assets target is approximately how much funding is still needed. Now that you know what that value is, it's time to lay out a plan for how you'll get there.

Investment Mix

Investing in a good mix of assets for a reasonable rate of return may be helpful in growing your net worth. Try PNC's Retirement Calculator to see how much your annual return rate can make a difference.

Consider equity-based investments such as index funds that track the S&P 500 stock market benchmark (or other similar funds). As you get closer to your retirement date, it may be tactful to begin transitioning your holdings to more conservative assets such as funds that invest in bonds. This often helps maintain portfolio stability and reduce volatility.

Maximize Retirement Assets

Another way to get closer to your retirement assets target is to invest as much as possible using your retirement plans. These accounts have special tax incentives that effectively help you to grow your retirement assets more than if you were using regular savings or brokerage accounts.

If possible, aim to max out your retirement plans each year. Don't forget that if you're over age 60, the IRS allows for additional catch-up contributions to help expedite your progress.

Employer Matching Contributions

If your employer offers matching contributions for your 401(k), then this may also be a big help towards your goal. Matching contributions are when companies put money into their employees’ retirement plans alongside their own contributions — sometimes dollar-for-dollar (up to some preset limit). This increases the overall growth of your retirement assets, which may bring you gradually closer to your ultimate goal.

Other Helpful Strategies

Saving and investing for optimal growth aren't the only tools at your disposal. Consider these other helpful strategies.

Pay Down Your Debts

Since your retirement assets target is based on your estimated living expenses, it may be beneficial to eliminate any debt you're currently carrying.

The debt snowball method is often praised by many for its effectiveness and simplicity. To use it, prioritize paying down your smallest balances first and work your way up to the larger ones. Eventually, you may eliminate them all and free up cash flow that can be used to help accelerate your savings.^[3]

Minimal Lifestyle Creep

Lifestyle creep is the tendency for your expenses to grow over time — particularly as you begin making more money. Examples might be taking more extravagant vacations than you have previously or financing a second vehicle purchase. If retiring in 10 years is truly your priority, then try to keep expenses to a minimum for as long as possible.^[4]

Monitor Your Progress

Regularly check in on your finances to ensure you're moving toward your financial goals in a timely manner. It may help to keep a record or spreadsheet where you can document your progress and make forecasts about where you may be. If it doesn't seem like you'll hit your targets, then adjust as needed.

Final Thoughts

It can be challenging to figure out how to retire in 10 years. However, it may be possible with some planning and sacrifice to get there.

If you're unsure of what to do next or just want a second opinion, be sure to speak with a professional financial advisor who can provide you with the proper guidance.

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