If You’re Retiring in the Next 5 Years, These 9 Decisions Matter More Than Ever

If you're nearing retirement, you may be looking forward to all the traveling or just taking some time for yourself. But if you're within five years of the big day, you'll need to consider your decisions carefully. With less time to recover from financial mistakes, it's even more important than ever to coordinate savings and spending strategies in a way that creates meaningful returns.

These nine retirement moves can have a bigger impact on your retirement plan than you first realize. Learn them so you can set yourself up for success.

Decide your Social Security claiming strategy

Full retirement age (FRA) is 67 for people born in 1960 or later, so those who claim early (around 62) can permanently reduce benefits by about 30%.

However, delaying benefits past FRA increases your benefits by roughly 8% per year in delayed retirement credits, up to age 70. Your exact approach depends on your health, life expectancy, whether a spouse needs survivor benefits, and how long you plan on working.

Once you file, changing your strategy can be costly and limited to a strict window. Leaving the choice of when to claim until the last minute leaves you vulnerable to choices that you might not otherwise make.

Shift your portfolio from growth to protection

It's not wise to just "let it ride" when it comes to your investment portfolio. That's because large market losses right before retirement can damage your nest egg around the same time you're starting to withdraw.

Consider a shift from aggressive, stock-heavy allocations to a more balanced and conservative mix of stocks, bonds, and cash equivalents. Your advisor can help determine your risk tolerance, but aim to separate near-term cash needs from long-term growth opportunities.

Build a realistic retirement budget

By five years before retirement, your budget should look less like a back-of-the-napkin scribble and more like a solid, data-driven spreadsheet. Include housing, health care, food, transportation, taxes, and fun money, with the assumption that certain costs can and will likely go up.

It should go without saying, but if you've never budgeted before, don't save it for retirement. Get a handle on what you spend now through receipts and account statements, so you have a realistic baseline to build from. And don't forget that Social Security is only designed to cover 40% of your pre-retirement salary.

Get health care and Medicare right

Most people sign up for Medicare during the seven-month Initial Enrollment Period around their 65th birthday. This prevents lifetime late-enrollment penalties for Parts B and D.

But if you're working and still covered by a workplace plan — or a spouse's — you may need to confirm with HR or a benefits specialist how this will affect you. 

Generally speaking, missing key deadlines can be costly, but picking the wrong plan is also expensive. Before you enroll, directly compare Original Medicare and a gap plan with Medicare Advantage to see whether they cover your choice of providers, essential treatment services, and prescriptions. These numbers can change from year to year.

Max out catch-up contributions

Once you turn 50, the IRS allows you to make "catch-up contributions" that are larger than what you are allowed in your younger years. The limits vary for each type of plan and are usually updated each year.

For those who are behind on their plan or want the extra cushion, this boost in the last five years can really make a difference.

Pay down high-interest debt

Credit cards and personal loans with high Annual Percentage Rates (APR) eat into the returns from investments and leave less of your monthly budget for necessities. Work on eliminating as much of this debt as possible in the last five years before you retire.

Consider automated payments for much more than the monthly minimums to see the most traction.

Get a handle on deferred expenses

Once retired, you're limited to retirement benefits and withdrawals. Any major expenses could cause you to have to raid your savings. If you've been putting off that roof repair for someday or avoiding major dental repairs, it may be time to get it done.

These costs are rarely cheaper if you wait, and for now, you still have employment income to help cover them if the bill ends up higher than expected.

Review your estate plan

If you already have a will, you're well on your way, but there are other important matters to settle before you retire. These include powers of attorney, health care directives, and beneficiary designations (essentially, who gets what and who has the say in important decisions).

Rather than push these off until retirement, handle them now, when you're already dealing with account balances and withdrawal details. Check to see who is listed on all your accounts, and work with an attorney to make sure your decisions are iron-clad, legal, and clear. Having up-to-date documents ready when you pass reduces family conflict and speeds up asset transfers.

Coordinate Social Security and tax-efficient withdrawals

Not all retirement accounts are taxed the same. A proper withdrawal order ensures you take the right money from the right buckets in a way that doesn't cause undue tax burden. It also considers income tax brackets, minimum distributions, and estate goals.

Because this can be complicated and dependent on individual needs, it's best handled with the help of a professional. If done well, however, it stretches your nest egg further, since you won't pay more than necessary to the IRS.

Bottom line

These years are some of the most powerful to ensure you're on track for retirement. It's close enough to retirement that you can form a realistic picture of your later years, but not so close that you've lost the ability to make meaningful changes. Instead of trying to fix everything at once, start with the area that feels most urgent and then layer in the others over the next few years.

Because this is the window when you lock in many of your key assumptions, it's crucial to get as much of it right as you can. Even getting help in just one or two areas — like your Social Security claiming strategy or Medicare plan choices — can reduce overwhelm and improve the decisions that matter most.