Retirement Retirement Planning

8 Worst Things People Do Within 5 Years of Retirement

These common moves can shrink income right when you need it most.

By Katy Willis

Edited by Esther Carlstone

Updated March 25, 2026

Add Us On Google

Retirement can feel close enough to touch when you're within five years of leaving the workforce. That can be exciting, but it's also when small bad choices can do some major damage. There's less time to recover from a big loss, fix a tax mistake, or make up for years of putting off a plan.

This is also a smart time to check up on your retirement readiness, before you lock yourself into decisions that are hard to undo later. Keep reading to learn more about some of the most common mistakes people make in that final stretch before retirement.

Get a protection plan on all your appliances

Did you know if your air conditioner stops working, your homeowner’s insurance won’t cover it? Same with plumbing, electrical issues, appliances, and more.

A home warranty from Choice Home Warranty could pick up the slack where insurance falls short.

For a limited time, you can get your first month free with a Single Payment home warranty plan.

Get a free quote

Stop saving because the finish line feels close

Some people ease off their retirement savings when they can finally see the end of full-time work. That's a mistake. The last few working years are often when earnings are highest, and the tax breaks are still valuable.

In 2026, workers can put up to $24,500 into a 401(k), with an extra $8,000 catch-up contribution if they are 50 or older. People ages 60 to 63 can contribute up to an additional $11,250 in catch-up contributions.

Who really has the cheapest auto insurance in your area? Check your zip code here.

Get too aggressive with investments

Trying to make up for lost time by taking big risks could backfire badly when retirement is near. A sharp market drop right before you stop working can shrink the nest egg you were counting on.

The level of risk you accept should match your time horizon, goals, and ability to handle losses. If you're close to the finish line, consider avoiding recklessly trying to squeeze out one last big gain.

Get too conservative too soon

The opposite mistake could be just as costly. Moving too much money into cash years before retirement might leave your savings growing too slowly, especially if you may need that money to last for decades.

Retirement is not a single day. For many people, part of their portfolio still needs growth potential long after the last paycheck arrives.

Get a protection plan on all your appliances

Did you know if your air conditioner stops working, your homeowner’s insurance won’t cover it? Same with plumbing, electrical issues, appliances, and more.

Whether or not you’re a new homeowner, a home warranty from Choice Home Warranty could pick up the slack where insurance falls short and protect you against surprise expenses. If a covered system in your home breaks, you can call their hotline 24/7 to get it repaired.

For a limited time, you can get your first month free with a Single Payment home warranty plan.

Get a free quote

Claim Social Security on autopilot

A lot of people treat Social Security like a switch they flip at 62 or when they get tired of working. But the age you claim can make a big difference to your monthly income for life.

For example, a worker with a $2,000 a month benefit at full retirement age (FRA) would receive just $1,400 per month if they claimed at 62, compared to $2,480 per month if they waited until age 70.

Ignore taxes on retirement income

Retirement doesn't mean your tax bill disappears. Traditional IRA withdrawals are generally taxable when you take them, and some Social Security benefits may also be taxable, depending on your income and the state you live in.

That means it's smart to think ahead. Consider which accounts you will tap first, how much you will withdraw each year, and what impact the decisions you make today will have on your future taxes and Medicare costs.

Miss Medicare deadlines

Missing Medicare deadlines doesn't seem like a big deal. However, if you miss your Medicare Part B enrollment window and don't qualify for a special enrollment period, you may face a late penalty of 10% for each full 12-month period you could have had Part B but didn't sign up.

In 2026, the standard Part B premium is $202.90 a month. If you're one full year late, that adds about $20.29 more each month for life, bringing your premium to about $223.19. If you are three full years late, that adds a 30% penalty, or about $60.87 per month, bringing your monthly premium to around $263.77.

Retirement News: Almost 80% of Americans fear a retirement age increase — here’s the real reason why

Carry expensive debt into retirement

High-interest debt is hard enough to manage while you're working, and it gets even worse when you're living on a fixed or smaller income.

Credit card balances, car loans, and other monthly payments can quickly eat into the money you need for housing, food, and health care. It makes more sense to head into retirement with a clear plan for what debt you want gone first and what payments you can realistically carry.

Pretend health care and long-term care will somehow work themselves out

Many people budget for groceries, utilities, and travel, then get blindsided by health costs. A typical 65-year-old retiring today will spend around $172,500 on health care during retirement. On top of that, someone turning 65 in 2026 has an almost 70% chance of needing some type of long-term care services.

Even if you are strong and healthy now, you should plan for the unknown and assume you'll need some kind of health care services.

Bottom line

The last five years before retirement are not the time to coast and hope it just somehow all works out. This is the period where claiming choices, tax planning, debt, and health care costs can shape how comfortable your retirement will actually be.

It's a good idea to have a retirement plan in place that you review and tweak regularly as your circumstances change and you get closer to your golden years. The choices you make now can affect how much you pay in taxes later, especially once required minimum distributions begin at age 73 for many retirement accounts.

More from FinanceBuzz: