Most people don’t get retirement planning decisions wrong all at once. They get them wrong one deferred conversation at a time. The Social Security question gets pushed to “next year.” The Medicare enrollment date slips past without much thought. The question of what to actually do with four decades of accumulated savings stays vague because it feels too large to sit down with. And then suddenly, you’re two years out, and decisions that should have been made in a considered, unhurried way now have real deadlines attached.
The five years before you retire are different from every other stretch of your working life. They’re not about saving more, exactly, though that still matters. They’re about converting a pile of numbers into a plan that will actually function as income, healthcare coverage, a tax strategy, and a life. The decisions you lock in during this window will shape every year that follows in ways that are mostly irreversible.
What makes this period particularly unforgiving is how much the decisions interact with each other. When you claim Social Security affects your tax picture. Your tax picture affects how much of your Medicare premium you’ll pay. Every choice ripples outward. The people who come out ahead are almost always the ones who started working through these questions early enough to have options, not just deadlines.
1. Nail down your actual retirement income number
Before anything else, you need to know what retirement will cost you, not in a vague “we’ll be fine” sense, but month by month. Most pre-retirees significantly underestimate this figure because they’re thinking about expenses as they exist now, not as they’ll exist when they stop working. Some costs genuinely do go down: no commuting, no work wardrobe, no automatic 401(k) contributions. But healthcare costs rise, travel often increases in early retirement, and housing expenses rarely vanish.
A useful starting point is the 80% rule, the idea that you’ll need roughly 80% of your pre-retirement income in retirement. But it’s a starting point, not a plan. Run your actual projected expenses: fixed costs like housing, insurance, and utilities; variable costs like food, transportation, and entertainment; and irregular costs like home repairs, travel, and gifts. Then add a buffer. The people who run out of money in retirement are rarely the ones who spent too little on discretionary items. They’re the ones who didn’t account for the irregular stuff.
The income number you land on drives every other decision in motion. It tells you how much you need Social Security to provide, what your investment accounts need to produce annually, and whether your current trajectory gets you there. Don’t skip this step in favor of jumping straight to investment strategy.
2. Choose your Social Security claiming age – carefully
This is one of the few retirement planning decisions where the math is genuinely dramatic and the default choice, claiming as soon as possible, is often the wrong one. If you delay claiming benefits, your monthly check increases for every month you wait until age 70, adding up to 8% for each full year you defer past your full retirement age. For someone born in 1960 or later, full retirement age is 67. Delayed retirement credits increase your Social Security benefit by 8% for each year you wait beyond your full retirement age, up to age 70, meaning if your FRA is 67 and you wait until 70, your benefit grows by 24%.
That 24% is permanent. It applies to every check you receive for the rest of your life, and every cost-of-living adjustment compounds on top of the larger base. Research has repeatedly shown that 70 is the best age for the majority of retirees to maximize their lifetime Social Security benefits. The breakeven point, the age at which cumulative lifetime benefits from waiting surpass those from claiming early, lands somewhere around 80 to 81. Given that a healthy 62-year-old has a life expectancy of 84 to 87, most people who can afford to wait should wait.
For married couples, the stakes are even higher. When one spouse dies, the surviving spouse receives the higher of their own benefit or the deceased spouse’s benefit, not both, which makes delaying the higher earner’s claim especially valuable as a form of longevity insurance. There are situations where claiming early makes genuine sense: serious health concerns, a shorter life expectancy, or a household that genuinely cannot sustain itself without the income. But those are real circumstances, not rationalizations. The default should be delay until the math says otherwise.
3. Map out your healthcare coverage before Medicare kicks in
Medicare starts at 65. If you plan to retire at 62 or 63, you have a gap, and that gap can be expensive. Budget $800 to $1,500 per month per person for health insurance coverage between retirement and age 65. For early retirees in their late 50s and early 60s without ACA subsidies, healthcare alone can cost $15,000 to $25,000 per year. That’s a figure that has derailed more than a few retirement timelines.
According to Fidelity Investments’ 2025 Retiree Health Care Cost Estimate, a 65-year-old retiring in 2025 can expect to spend an average of $172,500 in healthcare and medical expenses throughout retirement, a more than 4% increase over 2024 and a continuation of the general upward trajectory of projected health-related expenses since Fidelity’s inaugural $80,000 estimate in 2002. That $172,500 figure is for a single retiree. For a couple, the total climbs to approximately $345,000, and neither number includes long-term care.
What does this mean in practice? Medicare doesn’t cover everything, and the gaps matter. Medicare leaves significant holes in dental, routine vision, hearing aids, and long-term custodial care, and original Medicare has no annual out-of-pocket maximum, meaning a serious illness can generate tens of thousands in uncovered costs without a supplemental Medigap policy or a Medicare Advantage plan’s out-of-pocket cap. The time to understand your options is before you’re sitting in a Medicare enrollment window, not during it.
4. Maximize your HSA while you still can
If you have access to a health savings account through a high-deductible health plan, the five years before retirement are the best possible time to treat it as a secondary retirement account, not just a spending account for copays. An HSA carries what’s sometimes called a triple tax advantage: contributions reduce your taxable income today, growth inside the account is tax-deferred, and withdrawals for qualified medical expenses come out completely tax-free.
For 2026, IRS Revenue Procedure 2025-19 allows individuals to contribute up to $4,400 per year to an HSA, with the family limit set at $8,750. Five years of maxing out a family HSA comes to $43,750 before any investment growth, a meaningful cushion against the costs that Medicare won’t cover. The practical move is to pay current medical expenses out of pocket if you can afford to, and let HSA assets accumulate and grow. After 65, you can use HSA funds for any expense, not just healthcare, though non-medical withdrawals are taxed as ordinary income, making it function essentially like a traditional IRA.
Only 15% of people aged 55 to 64 have an HSA, and of that group, more than half don’t know it can be used as a retirement savings vehicle. That’s a missed opportunity with real dollar consequences. If you’re eligible, put the conversation about HSA maximization on the calendar now.
5. Understand your required minimum distributions before they arrive
Required minimum distributions, or RMDs, are the annual withdrawals the IRS mandates from traditional IRAs, 401(k)s, and most other tax-deferred retirement accounts once you reach a certain age. Think of them as the government collecting its share of money that’s been growing tax-deferred for decades. The age at which most retirees must begin taking RMDs is currently 73, up from 72 under prior law, and this change applies to individuals who reach age 72 after 2022 and age 73 before 2033. For those who turn 73 after December 31, 2032, the RMD age will rise again to 75, beginning in 2033.
The key reason to understand this five years out is that RMDs can force taxable income in retirement whether you need it or not. A large traditional IRA that looked perfectly sized during your accumulation years can generate mandatory withdrawals large enough to push you into a higher tax bracket, trigger Medicare income surcharges, or cause a portion of your Social Security benefits to become taxable. None of that is a crisis if you saw it coming. Waiting to take distributions allows savings to grow longer, but a larger balance can result in significantly larger RMDs and a bigger tax bill once you retire. If you’re concerned about this, you can make penalty-free withdrawals from tax-deferred accounts once you reach age 59½, which still count as taxable income but will reduce the size of future RMDs.
The five-year window before retirement is the right time to model what your RMDs will look like and whether a partial Roth conversion strategy, moving some traditional IRA funds into a Roth IRA and paying tax now to avoid larger forced withdrawals later, makes sense for your situation.
6. Decide whether Roth conversions make sense for you
A Roth conversion means taking money out of a traditional pre-tax IRA or 401(k), paying ordinary income tax on it now, and moving it into a Roth IRA where future growth and qualified withdrawals are completely tax-free. It makes more sense in some years than others, particularly if your income will be lower in some of those final working years or if you have room in your current tax bracket before retirement.
If you’re under age 59½, each Roth conversion has its own five-year rule before you can make distributions tax- or penalty-free. Under the Roth contribution five-year rule, you also need to have at least one Roth account open and funded for five years before you can make tax-free withdrawals of earnings, even after age 59½. Starting the clock on a Roth account now, even with a modest conversion, means you won’t be constrained by the five-year rule once you retire. Timing matters here in a way it doesn’t with most other retirement decisions.
In some years the best move is to intentionally pull more from IRA accounts or convert IRA funds to Roth while you’re in a lower bracket, especially before RMD age. Doing this steadily across five years almost always produces better results than trying to compress it all into a single tax year, which tends to push you into a higher bracket than you’d have landed in otherwise.
7. Get your asset allocation right for the transition
The investment strategy that built your wealth is not the same strategy that should carry you through spending it down. A portfolio that’s 90% equities works beautifully when you have 25 years of contributions ahead of you. In the five years before and after retirement, a major market drop at the wrong moment, what financial planners call sequence-of-returns risk, can permanently reduce what your portfolio can sustain.
The standard advice is to shift gradually toward a more balanced mix as you approach retirement, holding enough in bonds and stable assets that a market downturn doesn’t force you to sell equities at a loss to cover living expenses. How you calibrate that shift depends on your overall picture: how much guaranteed income you have from Social Security and any pension, how many years of runway you’re planning for, and how much volatility you can genuinely tolerate without making reactive changes.
The five-year window is also a good time to establish a cash buffer, generally one to two years of living expenses kept in cash or a high-yield savings account, separate from your long-term investment portfolio. This buffer gives you the ability to cover living expenses without touching equities during a downturn, which is one of the most effective practical tools for avoiding the sequence-of-returns problem.
8. Decide when and how to draw down your accounts
Knowing the order in which you pull money from different account types in retirement can meaningfully affect how long that money lasts. The general framework goes like this: start with taxable brokerage accounts, then move to tax-deferred accounts like traditional IRAs and 401(k)s, then preserve Roth accounts for later when tax-free income is most valuable. But this is a framework, not a rigid rule. Spending taxable assets first, taking targeted tax-deferred withdrawals to fill lower ordinary-income brackets, and preserving Roth accounts for late-retirement flexibility and potential heirs is the general sequence, but the best move in any given year may be to pull intentionally from IRA accounts when it keeps you in a lower bracket.
The withdrawal sequence matters most in the gap years between retirement and when you start taking Social Security and dealing with RMDs. This period can be an underappreciated tax-planning opportunity: your income may be lower than at any other point in your adult life, which creates room to realize capital gains at a lower rate or do Roth conversions more cheaply.
9. Make a plan for long-term care
This is the retirement planning conversation most people avoid right up until it becomes unavoidable. Long-term care, which covers help with daily living activities like bathing, dressing, and eating, either at home or in a facility, is not covered by Medicare for extended periods. An individual who reaches age 65 has about a 70% chance of needing long-term care services at some point in their remaining lifetime. That’s not a fringe scenario. It’s the most likely outcome.
The four basic options to cover long-term care are personal savings, government benefits such as Medicaid, traditional long-term care insurance, or a hybrid product that combines long-term care coverage with life insurance or annuities, and which may allow for a life insurance death benefit to beneficiaries if long-term care is ultimately not needed. Traditional standalone long-term care policies have become harder to price and in some cases harder to obtain, which is why hybrid products have grown in popularity over the last decade. The five years before retirement is one of the last windows when most people can qualify for coverage at a reasonable premium before age-related health changes complicate the underwriting. Have this conversation now, even if the answer is that you’ll self-insure using your portfolio.
10. Figure out what retirement actually looks like for you
This one tends to get skipped because it doesn’t feel like a financial decision, but it is. The research on retirement satisfaction consistently finds that people who retire into something, a clear sense of purpose, structure, and connection, fare substantially better than those who simply retire away from work. The sudden loss of identity, routine, and daily social contact hits harder than most people expect, and it affects spending patterns, health outcomes, and relationships in ways that eventually do show up on a balance sheet.
Concretely: know what your days will look like. Part-time work, volunteer commitments, caregiving, travel, creative projects, community involvement. The specifics matter less than having thought them through honestly. A retirement that costs $80,000 a year might be deeply satisfying if it’s built around things that matter to you, and a retirement that costs $120,000 might feel hollow if it’s primarily about filling time. The financial planning only does its job if the life it’s funding is one you actually want to show up to.
This is also the time to talk explicitly with your partner, if you have one, about what retirement looks like for each of you. The assumption that you’re both picturing the same version is often wrong, and finding that out five years out is vastly better than finding it out five months after you’ve both stopped working.
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None of these decisions are made in isolation, and none of them have one-size answers. What makes the five years before retirement genuinely different from every other financial period is that the decisions compress and start to interact with each other. When you claim Social Security affects your Roth conversion math. Your Roth conversion math affects your RMDs. Your RMDs affect your Medicare premiums. The whole thing is a system, and the people who come out ahead are the ones who started modeling it before everything was urgent.
It’s also worth acknowledging that this list can feel overwhelming if you’re staring at it all at once. It doesn’t have to be done all at once. Pick the one decision that would relieve the most uncertainty if you had a clear answer. For most people, that’s either the income number in item one or the Social Security question in item two. Start there. Getting two or three of these locked down with real confidence does more for your peace of mind than having vague answers to all ten.
And if some of them still feel unresolved as you get closer to the date? That’s normal. The goal isn’t a perfect plan. It’s a plan you’ve actually thought through, where the choices you made were choices, not just things that happened to you because you ran out of time to decide otherwise. That distinction, between a retirement you designed and one that just arrived, is where most of the difference lives.
AI Disclaimer: This article was created with the assistance of AI tools and reviewed by a human editor.