Decisions made in the five years prior to retirement and the first five years post-retirement will shape your retirement reality for decades to come.

Effective pre-retirement planning is crucial to achieving long-term financial success. Five years before your expected retirement date, you need to conduct a thorough Retirement Readiness Assessment. This involves first identifying and quantifying three separate aspects of your financial life: your financial assets, your projected income in retirement, and your expected expenses in retirement.

Asset Inventory: Prepare a complete inventory of your financial assets including investments, real estate, bank accounts, collectables, etc. With each asset, identify any related indebtedness, any embedded tax liabilities in the event you sell the asset, the annual cost to keep the asset (such as maintenance or insurance premiums), and the expected annual income or growth rate for each asset.

Projected Income: Identify and quantify all expected sources of external income after you retire. Also identify how this income will be taxed. This may require obtaining pension projections from your employer, reviewing your Social Security estimate of benefits statement and estimating future income from rental properties.

Expected Expenses: Mentally picture yourself in your expected retirement setting and estimate the annual cost in after-tax dollars of maintaining your desired lifestyle in that setting. Resist the rules of thumb that state you'll spend less in retirement. Work out your own budget and be sure it realistically represents the lifestyle you plan to live.

If your projected income from external sources is sufficient to fund your expected expenses, then your retirement should be very secure. Be sure to evaluate this in terms of a surviving spouse as well. If there is a shortfall, you need to determine if your investments can generate the required income without depleting the assets too soon. This is the time to compare the various distribution options available from your retirement plans. Remember that, at age 60, you could easily be looking at three to four decades of income needs. Designing a retirement income plan that will be sustainable over time is probably the most critical component to long-term success. Often, this requires a reallocation of your investment assets from an accumulation strategy to a preservation and income strategy.

Sometimes it involves reevaluating your expenses in retirement. Some people choose a smaller house, some choose a similar house but in a less expensive area of the country.

Lately, many people are choosing to supplement their retirement income with some fulfilling part-time work. In fact, we see many clients embark on entirely new careers in their so-called golden years.

In the early years of retirement, you need to closely watch your actual income, expenses and changes in networth to confirm that your basic assumptions are valid. An income deficit that is identified in the first few years can usually be corrected with small adjustments. Waiting ten years to discover that you are consuming your assets too quickly often requires more drastic and unwelcome changes. Most people spend more time planning their annual family vacation than they do on serious planning for their retirement. Making good use of the years in the Decision Decade can help you to enjoy many years of financial freedom.

Sandra Costin Atkins and Helen L. Modly are principals of Focus Financial Consultants, Ltd., in Middleburg, VA. The firm offers wealth management services, including comprehensive financial planning, fee-only investment management, and specialized divorce-related consulting. Ms. Atkins is a CPA with a specialty designation as a Personal Financial Specialist (PFS). She has been a member of the Middleburg business community for 28 years. Ms. Modly is a Certified Financial Planner, as well as a Certified Divorce Financial Analyst. She has lived in Fauquier County for 20 years.