Planning to Retire in 2031? Here Are 5 Things You Must Do Before the End of the Year.

If you've decided that 2031 is the year you'll retire, it's a bit too soon to start planning those golf outings and beach vacations. But it's definitely not too soon to start looking at your financial picture to ensure that you're ready to end your career.

Even though you still have a five-year window, the sooner you start making strategic retirement-planning moves, the more likely you may be to close out your career in a stronger place financially. Here are five important action items to tackle before the calendar flips to 2027.

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1. Make sure your retirement savings are on track

If you haven't recently calculated how much income you'll need in retirement, now's the time. Estimate your annual expenses and compare that total to your expected yearly Social Security benefit and retirement plan withdrawal. If you discover a gap, you may need to ramp up on savings to close it.

Here's an example. Say your estimated yearly retirement spending is $80,000, and Social Security will pay you $30,000 a year in benefits. That means you'll need $50,000 a year from your savings.

To see if you've saved enough, a good rule of thumb is to multiply your annual withdrawals by 25. So in this case, you'd multiply $50,000 by 25 to arrive at $1.25 million. If that's roughly the amount you've saved so far, or you're reasonably close, you should be in good shape. If you're a few hundred thousand dollars shy of your goal, you may need to boost IRA or 401(k) contributions in the coming years.

2. Reduce expensive debt

Entering retirement with high-interest debt could put unnecessary pressure on your savings. Now's a good time to assess your debt and come up with a plan to pay down costly balances before your retirement kicks off.

For the most part, that means tackling credit card debt or expensive personal loans. If you have a mortgage at a fairly competitive rate, which may be the case if you signed one or refinanced five or six years ago, then you don't necessarily need to worry about paying it off entirely ahead of retirement.

3. Review your asset allocation

When you're in the process of trying to build retirement wealth, it's smart to load up on stocks in your portfolio. But if that milestone is five years out, it's a good idea to start reducing your exposure to volatility and instead focus on preserving the savings you've built.

Take a close look at how your portfolio is allocated. If you're still heavily invested in stocks, you may want to create a plan to gradually scale back over the next five years.

4. Create a claiming strategy for Social Security

Once you turn 62, you can sign up for Social Security benefits at any time. But if you were born in 1960 or later, you won't receive your full benefits until age 67, which is the full retirement age.

You can also accrue delayed retirement credits for each year you wait on Social Security past full retirement age. Those credits are worth 8% per year and run out when you turn 70. So all told, your benefit at age 70 could be worth 124% of what you'd get at age 67.

Since Social Security may end up being your only source of guaranteed income in retirement, now's the time to figure out a claiming strategy. That should help you determine what monthly benefit to expect, which ties into assessing your savings to make sure you've accumulated enough money.

5. Build a realistic retirement budget

Figuring out your annual spending needs is an important exercise. But don't just base those numbers on what your spending looks like today.

There are certain costs of yours that may decrease once you stop working, such as transportation costs. But other costs, like healthcare, may increase.

Also consider the impact an aging home could have on your budget. If you've been in the same house for 30 years and intend to stay once you stop working, you could face numerous repairs. That's not necessarily a problem, but it is something you have to plan for.

The five-year period leading up to retirement is a crucial time to set yourself up for long-term financial stability. Make these moves sooner rather than later so you have a game plan for that home stretch.

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