The most important financial moves to make five years before you retire

Five years before retirement is the make-or-break window that determines whether your exit from work feels liberating or financially reckless.

Picture yourself waking up on a Tuesday morning with absolutely nowhere to be and nothing on your schedule but coffee and sunshine. The transition from the daily grind to total freedom sounds like a dream, but it can quickly turn into a financial nightmare if you aren’t prepared for the shift. Most people spend more time planning a two-week vacation than they do planning a retirement that could last decades.

Five years might feel like a lifetime away, but in the grand scheme of your career, it is really just the final stretch of a marathon. This is the critical window where you can catch up on savings, fix your portfolio, and figure out what you actually want to do with your time. If you wait until your farewell party to think about these things, you are going to be in for a rude awakening. Let’s look at what you need to handle right now so you can walk out the door with confidence.

Crunch The Numbers On Your Budget

You cannot know how much money you need until you know exactly how much you spend every single month. It is time to sit down with your bank statements and get brutally honest about where your cash is going right now. Tracking your expenses for just three months will reveal spending leaks you probably didn’t know existed.

Once you have a baseline, you need to adjust those figures for your post-work life since you won’t be buying suits or commuting. Empower suggests replacing about 80% of your pre-retirement income to maintain your current standard of living. You might spend less on gas, but you will likely spend way more on travel and hobbies.

Maximize Your Catch-Up Contributions

Uncle Sam actually gives you a break when you get older, and you need to take full advantage of it while you are still on the payroll. If you are age 50 or older, the IRS allows you to stash extra cash into your 401(k) and IRA accounts. This is your chance to supercharge your nest egg before you lose that steady paycheck.

Think of these extra contributions as a turbo boost for your savings right before you cross the finish line. For 2025, workers over 50 can contribute an additional $8,000 to their 401(k) plans, pushing the total limit to a massive $32,500. Every extra dollar you save now reduces your taxable income today and grows tax-deferred for tomorrow.

Test Drive Your Retirement Location

Moving to a beach town sounds romantic until you realize it is dead quiet in the winter and the nearest hospital is an hour away. Instead of just browsing Zillow, you should use your vacation time to live like a local in your potential new city. Rent a house in the off-season to see if you can handle the weather and the pace of life.

You need to know if the culture and the cost of living actually fit your personality and your wallet. Buying a home in a new location without spending significant time there first is one of the biggest regrets retirees face. Don’t commit to a mortgage until you are sure you won’t miss your old neighborhood.

Crush Your High-Interest Debt

Carrying credit card balances or a hefty car note into retirement is like trying to swim while wearing lead boots. Your fixed income will be much tighter, and monthly debt payments will eat away at your freedom to enjoy life. Attack those balances now while you still have your full salary coming in every two weeks.

Prioritize the debts with the highest interest rates first to stop the bleeding and free up cash flow. A Bankrate report revealed that 29% of U.S. adults have more credit card debt than emergency savings, a dangerous position for anyone nearing retirement. You will sleep much better knowing you don’t owe anyone a dime when you wake up unemployed.

Get A Realistic Health Care Estimate

Medicare is fantastic, but it definitely does not cover everything, and the gaps can be incredibly expensive. Many people are shocked to learn that dental, vision, and hearing aids are generally not covered by traditional Medicare. You need to research supplemental plans now so the premiums don’t blindside you later.

Start saving specifically for medical costs because they will likely be your biggest expense later in life. According to the Fidelity Retiree Health Care Cost Estimate, a single 65-year-old retiree may need approximately $172,500 just to cover health care expenses in retirement. That is a sobering number that requires serious planning and a dedicated savings bucket.

Plan For The Social Security Gap

Deciding when to claim your benefits is a huge decision that permanently affects the size of your monthly checks. While you can file as early as 62, your monthly benefit will be permanently reduced by up to 30% compared to waiting for full retirement age. You have to weigh the pros of getting cash now against the cons of a smaller check for life.

Log in to the Social Security website to see your estimated benefits at different ages so you can strategize. According to the Social Security Administration, the average monthly retirement benefit as of January 2026 is roughly $2,071. If that isn’t enough to cover your basics, you might need to work a bit longer.

Diversify Your Investments Beyond Stocks

Having all your money in the stock market for five years is a gamble that could ruin your plans if a crash happens. You need to shift your asset allocation to include more stable investments like bonds or cash equivalents. This protects your principal, so you don’t have to sell stocks at a loss to pay bills.

Talk to a financial advisor about creating a “glide path” that gradually reduces risk as your retirement date gets closer. A balanced portfolio helps you weather market volatility without losing sleep or delaying your retirement date. You want growth, but you need security more than anything right now.

Visualize Your Daily Routine

Retirement is not just an endless vacation; it is a whole new lifestyle that needs structure to keep you sane. Many retirees suffer from boredom and a loss of identity once the initial excitement of not working wears off. You need to figure out what will get you out of bed in the morning when you don’t have a boss.

Start cultivating hobbies and interests that have nothing to do with your current job title. Retirees with a strong sense of purpose and active social lives tend to live longer and happier lives. Don’t wait until Monday morning of your retirement to find a new passion.

Have The Tough Family Conversations

Your adult children might expect you to be the full-time babysitter or the family bank once you stop working. It is vital to set clear boundaries with family members about your time and your money before you retire. If you don’t, you might find your freedom and your savings drained by obligations you didn’t agree to.

Discuss your estate plan and your wishes for long-term care with your spouse and your kids. Getting everyone on the same page now prevents conflict and confusion down the road when emotions are running high. Open communication is the best way to protect your relationships and your assets.

Renovate Your Home For Aging

That master bedroom on the second floor might be fine now, but the stairs can become a real obstacle later on. Use your current income to handle major repairs and accessibility upgrades while you can easily afford them. Installing grab bars or a walk-in shower now is smarter than waiting until after a fall.

Look at your home through the lens of an 80-year-old and ask yourself if it is truly livable. Addressing big-ticket items like a new roof or HVAC system before you retire keeps your emergency fund intact. You want your home to be a sanctuary, not a money pit, in your golden years.

Build A Cash Emergency Fund

Market downturns happen, and you do not want to be forced to sell your investments when they are down just to buy groceries. Financial planners often recommend having one to two years of living expenses in cash or liquid assets. This cash cushion gives you the power to ride out a recession without panic.

Start funneling a portion of your paycheck into a high-yield savings account specifically for this purpose. According to the Northwestern Mutual Planning & Progress Study, U.S. adults believe they will need $1.26 million to retire comfortably. While that number is high, having a solid cash reserve is the first step toward that security.

Network For Post Retirement Gigs

You might decide that you want to work part-time or consult just to keep your mind sharp and the cash flowing. Maintain your professional contacts and let people know you might be open to project work in the future. It is much easier to land a consulting gig when you are still relevant in your industry.

Working a few hours a week can pay for your travel habits and keep you socially connected. A ResumeBuilder survey found that 1 in 8 retirees are likely to go back to work in 2024 due to inflation. Keeping the door open for work gives you options if inflation eats into your budget.

Review Your Life Insurance Policy

You might not need that massive policy anymore if your kids are grown and your house is paid off. Reviewing your coverage could save you thousands of dollars in premiums that could be better spent on travel. On the other hand, you might need to convert a term policy to cover final expenses.

Check to see if your policy has a cash value that you can tap into if necessary. Understanding the fine print of your insurance policies makes sure you aren’t paying for protection you no longer require. Adjusting your coverage is a simple way to optimize your monthly budget.

Audit Your Digital Life

You may have a dozen subscriptions and old accounts floating around that bleed money every month. Go through your credit card statements and cancel streaming services, magazines, or memberships you rarely use. Consolidating your digital accounts also makes it easier for your loved ones to manage things if you get sick.

Organize your passwords and important digital documents in a secure place like a password manager. Simplifying your digital footprint reduces your vulnerability to fraud and saves you a surprising amount of cash. A lean digital life is much easier to manage when you are traveling the world.

Reconnect With Your Spouse

You are about to spend a lot more time together, and you need to make sure you actually like each other. Start planning dates and shared activities now to rebuild the connection that might have faded during the busy career years. Talk about your expectations for daily life so you don’t drive each other crazy.

Retirement changes the dynamic of a marriage, and it takes effort to adjust to the new normal. Couples who communicate their hopes and fears about retirement are far more likely to enjoy a harmonious transition. Invest in your relationship now so you have a partner to share your adventures with.

Like our content? Be sure to follow us.