You need a clear, simple one that fits your real life and covers the basics: income, health care, housing, taxes, and family. Here’s what to focus on in these last five working years.
Table of contents
- 1. Get brutally honest about your retirement budget
- 2. Decide how and when you’ll claim Social Security
- 3. Use the last five years to supercharge savings
- 4. Clean up debt and right-size your big bills
- 5. Decide where and how you’ll live
- 6. Tune your investments so they match this new phase
- 7. Map out health insurance and Medicare
- 8. Understand taxes and required minimum distributions
- 9. Build a real cash cushion outside your investments
- 10. Track down old accounts and fix your beneficiaries
- 11. Get your legal and medical decision-making documents done
- 12. Test-drive your retirement life before you quit
- Learn how to stretch your retirement savings and maximize your Social Security benefits for a comfortable retirement:
1. Get brutally honest about your retirement budget
Before anything else, you need a realistic picture of what retirement will actually cost. Not the dreamy version, the real monthly bills: housing, food, gas, health insurance, phones, streaming, gifts for grandkids, travel, home repairs, and the random stuff that always pops up.
Use a simple worksheet or online tool to map your current spending and then adjust for a retired life. The Consumer Financial Protection Bureau has basic retirement-planning tools to help you think through income and expenses.
Then list your expected retirement income: Social Security, any pensions, withdrawals from 401(k)s or IRAs, part-time work, rental income, and so on. Compare the two numbers. If the income number is lower than the expense number, that gap is your five-year marching order.
This isn’t about judging past choices. It’s about seeing the truth on paper so you can decide what to change, lowering some bills, saving more, or shifting your retirement date or lifestyle expectations.
2. Decide how and when you’ll claim Social Security
Your Social Security decision is one of the biggest levers you have in these years. You can usually claim as early as 62, get your full benefit at your full retirement age, or boost your check by waiting up to age 70.
Use the Social Security benefit calculators to estimate what you’d get at different ages based on your actual earnings record. Check your “my Social Security” account to make sure your earnings history is correct; mistakes there can cost you for the rest of your life.
Five years out is also a good time to think about how Social Security fits with the rest of your plan. If you expect a shorter life, heavy physical wear and tear, or no other income, claiming earlier might make sense. If you’re healthy and can cover early years from savings or work, waiting can act like buying yourself a bigger inflation-protected pension.
There’s no one right answer. What matters is that you’ve run the numbers for your situation instead of picking an age because “that’s what everyone does.”
3. Use the last five years to supercharge savings
Your final working years are prime time to shovel money into retirement accounts. Once you hit age 50, you can make “catch-up” contributions to most workplace plans and IRAs, on top of the regular limits.
For example, the IRS has raised 401(k) employee deferral limits and catch-up amounts for people 50 and older, so by 2026 many workers can put significantly more into their plans each year. That extra five-year push can easily add tens of thousands to your nest egg once you factor in investment growth.
If you can’t max everything out, that’s fine. Aim to increase your contribution rate every year when you get raises, or anytime a debt drops off. Even moving from 5% to 10% of your pay going into a 401(k) matters. If your employer offers a match, treat getting the full match as non-negotiable, it’s part of your compensation.
You’ll feel the squeeze in your take-home pay now, but that’s better than feeling the squeeze every month for the rest of your life.
4. Clean up debt and right-size your big bills
High-interest debt is a problem at any age, but it’s especially brutal when you’re about to live on a fixed income. Credit cards, personal loans, car loans, and “buy now, pay later” plans can crowd out essentials once your paycheck shrinks.
Five years out, make a simple list of all your debts, interest rates, and minimums. Focus first on anything over about 8–10% interest,/
that’s the stuff quietly eating your retirement. You might use part of a bonus or tax refund to knock down the worst balances. If you’re overwhelmed, talking to a reputable nonprofit credit counselor can help you see whether a debt management plan makes sense.
This is also the time to look hard at your big fixed expenses. Can you refinance or pay down a mortgage before retirement? Swap an expensive car for something cheaper while you still qualify for a loan? Drop unused subscriptions and extras? Every big bill you reduce now is one less thing to stress about later.
The goal isn’t to be debt-free at all costs. It’s to walk into retirement with payments you can comfortably handle on your new income.
5. Decide where and how you’ll live
Housing will likely be your largest expense in retirement. Five years out is the right time to get honest about whether your current home still makes sense.
Make two lists: what you love about where you live, and what worries you. That might include stairs, property taxes, yard work, being far from medical care, or simply having more space than you want to maintain. Tools and checklists from retirement and aging organizations can help you think through costs and lifestyle tradeoffs.
If you want to downsize, move closer to family, or relocate to a lower-cost area, start scouting now. Research property taxes, insurance, and the cost of living, not just home prices. If you plan to “age in place,” factor in the cost of future home modifications like grab bars, ramps, or bathroom changes.
Moving in retirement isn’t just a money question, it’s also about community, weather, and health. But whichever way you lean, making the decision while you still have steady income gives you more control and better financing options.
6. Tune your investments so they match this new phase
The portfolio that worked when you were 35 and had decades to ride out crashes may be too aggressive when you’re 60 with a five-year runway. On the flip side, going all cash can leave you exposed to inflation for 20 or 30 years. The average 65-year-old today can expect to spend roughly 18–20 years in retirement, sometimes more.
Five years out is a good time to check your mix of stocks, bonds, and cash. Many big firms offer free online retirement checkups and tools that show whether your current mix lines up with your age and risk tolerance.
You don’t have to day-trade or chase hot funds. Usually, it’s about gradually shifting some money from pure growth into more stable investments, while still keeping enough in stocks to help your money grow over a long retirement.
If you’re not confident doing this yourself, consider a session with a fee-only financial planner or a CFP professional. One or two hours of advice can prevent very expensive mistakes.
7. Map out health insurance and Medicare
Health care becomes a central budget line in retirement, and the rules are not simple. If you’re retiring before 65, you’ll need a plan for coverage until Medicare kicks in, employer retiree coverage, a spouse’s plan, or a Marketplace plan through HealthCare.gov.
For Medicare, your Initial Enrollment Period is a seven-month window around your 65th birthday, starting three months before you turn 65 and ending three months after that month. Missing that window when you don’t have other qualifying coverage can mean late enrollment penalties that follow you for life.
Use this five-year window to learn the basics: the difference between Original Medicare and Medicare Advantage, how Medigap works, and what drug coverage looks like. Compare that to your current employer plan so you’re not shocked by the change in premiums and deductibles.
If you have a Health Savings Account through a high-deductible plan, remember that HSA money can be used tax-free for qualified medical expenses in retirement.
8. Understand taxes and required minimum distributions
Retirement is not a tax-free zone. Traditional 401(k)s and IRAs are taxed when you withdraw. Social Security can be partly taxable. And at a certain point, the IRS forces you to take money out of tax-deferred accounts through required minimum distributions, or RMDs.
Right now, most people must start RMDs from traditional IRAs and many workplace plans at age 73. If you wait until the April 1 deadline for your first RMD, you may have to take two in the same calendar year, which can spike your taxable income. Planning withdrawals a few years ahead can keep you out of higher tax brackets and avoid penalties.
Five years before retirement, look at all your accounts: pre-tax, Roth, and taxable. Think about which ones you’ll tap first. Some people work with a tax pro to see whether partial Roth conversions make sense while their income is still relatively high but before RMDs begin.
You don’t have to become a tax nerd. But knowing the basics lets you keep more of what you’ve already saved.
9. Build a real cash cushion outside your investments
Retirement will still have flat tires, leaky roofs, and surprise medical bills. If every unexpected expense has to come out of investments at the worst possible time, you’ll constantly be selling low.
Aim to build a dedicated cash buffer, usually three to six months of essential expenses in a savings or money market account, separate from your daily checking and separate from long-term investments. Some older adults find tools like budget calendars or digital budgeting checkups helpful for seeing how much cash they truly need on hand.
Five years out is a good time to redirect part of each raise or bonus into this cushion. You can also park part of any big windfalls, tax refunds, inheritances, severance, here.
The point is not to hoard money in savings forever. It’s to give yourself a shock absorber so you’re not forced to raid retirement accounts every time life throws a curveball.
10. Track down old accounts and fix your beneficiaries
If you’ve changed jobs a few times, there’s a good chance you have old 401(k)s or pensions floating around. Losing track of these is more common than you’d think; government and nonprofit tools exist just to help people find missing retirement money.
Make a simple inventory of every retirement account you’ve ever had: employer name, plan type, current balance if you know it, and contact info. Decide whether to leave each one where it is, roll it into your current employer plan, or consolidate into an IRA. Fewer accounts usually means less chaos and fewer forgotten RMDs later.
While you’re at it, review your beneficiaries on every retirement account and life insurance policy. Those forms usually override your will, so you want them up to date with your current reality, not an ex from 20 years ago. Most plans let you update this online in a few minutes.
This is boring, unglamorous work. It’s also the difference between your money going where you intend and going somewhere else.
11. Get your legal and medical decision-making documents done
Five years before retirement is prime time to get your paperwork house in order. That usually means a will, powers of attorney for finances and health care, and some kind of medical directive or living will.
The National Institute on Aging has a straightforward checklist of documents to consider when “getting your affairs in order”. An estate planning attorney or legal clinic can help you translate those ideas into documents that fit your state’s laws.
This isn’t just about what happens after you die. Powers of attorney and health-care directives also protect you if you’re alive but can’t manage things for a while because of illness or injury. Without them, your family may have to go to court just to pay your bills or make medical choices.
You don’t need a mansion for this to matter. Even if all you have is a modest house, a car, and your retirement accounts, putting things in writing is one of the most generous gifts you can give your future self and your family.
12. Test-drive your retirement life before you quit
If you can, use these five years to practice retirement instead of jumping into it blind. That has two parts: testing the money and testing the lifestyle.
On the money side, try living for a few months on what your retirement income will be, while you’re still working. Take the difference between your current pay and that “practice retirement income” and send it to savings or debt. You’ll see quickly whether your budget assumptions are realistic, and you’ll build up extra cash at the same time.
On the lifestyle side, think about what your days will actually look like when work is no longer filling 40 or more hours a week. Start exploring hobbies, volunteering, part-time work, or small side gigs now. Trusted resources on retirement planning all stress that non-financial planning, how you’ll spend time and stay connected, matters just as much as the dollars.
The more you can “preview” retirement while you still have a paycheck, the fewer shocks you’ll have when you finally step out of full-time work.get them done, then keep going. Five years is enough time to make your future retired self a lot more comfortable than you might think.
Learn how to stretch your retirement savings and maximize your Social Security benefits for a comfortable retirement:
18 ways to stretch your retirement savings without feeling poor: The goal isn’t to pinch every penny — it’s to protect the big stuff and trim quiet leaks. Here are simple moves that keep freedom high and stress low.
18 budgeting rules that actually work for people over 50: Money habits change as we age. In this post, discover budgeting rules that fit your income and shift of priorities when you’re over 50.
15 clever strategies to maximize your Social Security benefits: Use the facts in this post to make choices that raise your monthly check for years.
Byline: Katy Willis
