If You’re Retiring in the Next 5 Years, These 7 Decisions Matter More Than Ever
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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For many people, retirement planning feels abstract until the calendar makes it unavoidable. But the five years leading up to retirement are unique and extremely important to consider in your planning.
Financial planners and estate experts said the choices you make here often determine whether you have a comfortable retirement or a restrictive one once paychecks stop.
Why the 5 Years Before Retirement Are So Consequential
With fewer working years left to recover from mistakes, decisions around income, taxes and risk make a greater impact at this stage “because decisions made during this window are often irreversible once paychecks stop,” according to Julian B. Morris, CFP and principal at Concierge Wealth Management. Many near retirees underestimate how quickly flexibility disappears after retirement begins, he stressed.
1. Social Security Timing Can Shape Lifetime Income
Social Security claiming decisions carry more weight in the final five years because they permanently determine the size of a retiree’s income floor.
“Claiming early so you can ‘get something now’ can feel comforting, but it often locks in a lower lifetime benefit at the exact moment retirees are most vulnerable to inflation and rising healthcare costs,” Morris said.
Many people focus on the emotional comfort of starting benefits as soon as possible, without fully accounting for how lower monthly payments interact with rising healthcare costs and longer lifespans. “The regret that follows is frequently difficult and excruciating because the decision can’t be undone,” he said.
2. Careful Tax Moves Before Retirement
The years just before retirement often represent the last meaningful opportunity to shape how taxes will affect income later on, Morris pointed out. Strategic moves such as repositioning assets or reducing the impact of required minimum distributions (RMDs) during this period can create more flexibility in how income is drawn in retirement. “Waiting until retirement to think about taxes often results in higher taxes and less optimal cash flow,” Morris said.
Additionally, many retirees don’t realize how closely tax decisions in these years are tied to healthcare costs later. “Medicare uses a two-year income look-back for IRMAA, and pre-65 Affordable Care Act (ACA) subsidies hinge on modified adjusted gross income, so what you earn and realize now can raise or lower premiums later,” according to Jay Yu, an estate planning lawyer with Yu and Yu Law.
The order you draw from taxable, tax-deferred and Roth accounts drives both lifetime taxes and benefit costs, as well, so sequencing matters as much as investment selection, Yu explained.
3. Shifting Your Focus on Investment Returns
As retirement approaches, the sequence of investment returns becomes more important than long-term averages, according to Robert R. Johnson, a CFA and professor of finance in the Heider College of Business at Creighton University.
“A large downturn in the equity markets immediately preceding retirement can have devastating effects on an individual’s standard of living in retirement,” Johnson said.
But the mistake many people make, Morris added, is focusing on average returns instead of sequence of returns risk, which is far greater at the beginning of retirement than at the end.
It’s important to evaluate investments differently in the years leading up to retirement, with a focus on protecting income sustainability rather than maximizing growth.
4. Leaving Room for the Unexpected
While many retirees focus on hitting a specific savings target, retirement spending is not static, and unexpected expenses can quickly strain even well-funded plans. Kevin Quinn, estate planning attorney and president at Legacy Counsellors, PC, suggested that the simplest method when looking at a retirement number is to take what you spend or want to spend in retirement and divide it by .04. “It is also important to factor in unexpected expenses.”
Estimating future income using simple rules of thumb can be helpful, but those estimates must be stress-tested against real-world uncertainties, including healthcare needs, inflation and changes in family circumstances.
5. Don’t Underestimate Long-Term Care and Family Obligations
One of the most commonly overlooked risks in retirement planning is the cost of care, both for oneself and for loved ones. Quinn pointed out that approximately 70% of Americans will need long-term care, and “many people will need up to half a million [dollars] for this expense,” he said.
Long-term care expenses can arrive suddenly and last longer than expected, placing significant pressure on retirement savings. At the same time, many retirees underestimate how often they will provide financial or caregiving support to spouses, parents, children or other dependents. Building margin for these responsibilities can prevent difficult tradeoffs later.
6. Purpose May Be the Most Overlooked Retirement Decision
Retirement planning often emphasizes the financial end of things, yet how retirees spend their time can shape both their happiness and their financial needs. “When looking at retirement, the most important thing to consider is your purpose in retirement rather than just a number,” Quinn said.
Clarifying purpose — whether through part-time work, volunteering, creative pursuits or family involvement — can bring structure to spending and income decisions. Aligning money with meaning can make retirement feel less like an ending and more like a sustainable next chapter.
7. Clarity Matters More When You Feel Behind
Retirees who feel behind should “prioritize clarity over optimization,” Morris said. “This means understanding their true spending needs and stress testing their retirement income plans under less-than-ideal scenarios.”
Treating retirement as a transition rather than a finish line allows retirees to adjust expectations and make choices that support stability rather than unnecessary risk.
The final five years before retirement don’t require flawless decisions, but they do reward thoughtful ones — especially those made with an eye toward flexibility, resilience and the life you want to live after work ends.
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