Too many people wait until they're about to retire to create their financial plan. The narrative goes something like this:

“Okay, I think I’ll retire in the next year or two. I need to make sure I can afford to leave my job. I have Social Security and a 401k, so I should be good – but I’ll just check to make sure.”

There are, sadly, only two possible outcomes to this last-minute strategy:

1. You’re good. You can afford to retire.
2. You can’t afford to retire at your current spending rate -- and it’s too late to do much about it. The only realistic solution: reduce expenses for the rest of your life.

To avoid an incredibly unpleasant age-65 surprise, our prescription is below.

1. At least 10 years before your target retirement, create a financial plan. If you’re a DIY aficionado, great. Otherwise, hire a CERTIFIED FINANCIAL PLANNER™ professional. Make sure they are “fee-only”, with no financial incentive to recommend a particular product like permanent insurance or annuities. Otherwise, I know what their conclusion will be before they start, and it won’t be in your best interest.
2. If your plan indicates that you need to save more, commit to it. Automating savings is a good approach.
3. If your plan indicates that you need to spend less, commit to it. Create and follow a budget. Don’t get caught up in the details – but make sure you track all expenses, not just the big ones. Online apps make tracking your spending easy. Of course, keeping to the budget is on you.
4. Assume you’ll live into your 90s. Most people can’t imagine that will happen. But the odds of a very long life keep rising. You need enough financial resources to cover that possibility.
5. Invest for the long term, starting now. For almost everyone under age 65, that means most of your investment dollars should be in stock funds. Yes, stock is a lot riskier than bonds or cash, at least in the short run. But owning stock is the most dependable way to keep up with inflation and build long-term wealth – which most people need to afford retirement.
6. Identify and protect against your biggest financial risks. That means owning enough life and disability insurance. Don’t delay. It’s a lot cheaper to buy life insurance when you are 40 than it is when you are 60. In your 50s or early 60s, it may make sense to shop for long-term care insurance as well.
7. If you need to start financial planning, today is a good day. Every year you wait makes it harder to achieve your goals.

65 should be just another number – not the age when you start to plan for retirement.