Retiring in the Next 5 Years? 11 Game-Changing Financial Moves to Make Right Now

If you’re within five years of retirement, you’re running low on time to prepare for leaving the workforce. Take these 11 steps now to set yourself up for a comfortable retirement.
Updated May 1, 2024
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If you’re planning to retire within the next five years, you have a lot to look forward to — but you also have a lot to plan. It can be a huge adjustment to go from working every day to not having that responsibility.

Likewise, if you aren't working to some degree then you'll be living on a fixed budget, which can be overwhelming. It's important to grow your wealth and prepare your finances before retirement day.

The good news, though, is whether you’re retiring in one year or five, you have time to get ready for retirement. These 11 tips will prepare you — and your finances — to move successfully into the next phase of your life.

Do you dream of retiring early? Take this quiz to see if it's possible.

Pay off remaining debts

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Your savings will last much longer if you can put that money toward your post-retirement living expenses, not past debts. 

Plus, the longer you go without doing your best to get out of debt, the more interest you accrue and the bigger your debt becomes. Do what you can to prioritize paying off your biggest debts and/or the ones with the highest interest rates before retiring.

Make sure your investment portfolio is age appropriate

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When you first started an investment portfolio, you could afford to take risks in the hopes of a big payout. If your risks weren’t rewarded, you likely had plenty of time to recoup your losses. 

But now that retirement is just five years away (or less), you can’t afford to take those same kinds of investing risks. Check-in with your financial advisor to make sure your current investment strategy is fairly conservative and low-risk to reflect how close you are to retirement.

Downsize now, not after retirement

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You can always wait until after you’re retired to downsize, but why not start now? Moving to a smaller house while you’re still working lets you start saving on housing costs even earlier. 

Plus, the stability of working your full-time job can take some of the stress out of moving. Retirement is a big change all on its own, so getting one major change out of the way now could help you feel more stable five years from now.

Decide what you want your retirement to look like

Jenny Sturm/Adobe happy senior couple doing sprints in forest

Have you always dreamed about traveling during retirement? Are you a homebody who’s been looking forward to spending your golden years surrounded by nieces, nephews, and grandkids? 

No matter what type of retirement you’re hoping for, you’ll have a much better chance of bringing your dreams to life if you make concrete plans well in advance, especially financial plans.

Talk to a retirement planner

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Of course, even if you know what you want out of retirement, you might not know the exact dollar amount required to make that dream reality. 

A retirement planner can walk you through the most important post-retirement expenses to plan for. 

A good adviser can also help you draw up a savings plan for the next five years that puts you in the best possible financial position once you finally retire.

Save, save, save

Ferenc/Adobe senior lady holding pennies and dollars in hand

The five-year stretch before you retire is the last chance you’ll have to save money for retirement — so make the most of the time you have left in the workforce by saving as much as you can. 

While you should do your best to avoid taking on debt, especially high-interest consumer debt, saving what you can now is a great way to help you feel financially secure once you no longer have a steady income.

Calculate taxes

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Don’t forget to keep taxes in mind while creating your retirement budget. If you have a traditional 401(k), you haven’t yet paid taxes on the money you’ve saved. 

Instead, you’ll pay taxes when you withdraw money from the portfolio, which means the amount of money you see in your 401(k) won’t all be income for you, some of it will have to be paid in taxes.

Stay on top of your health

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Take advantage of the stability that comes with being on a company insurance plan by getting regular checkups, picking up prescriptions, and taking care of major medical issues like surgery before retirement. 

Remember that Medicare doesn’t cover everything, so along with planning to pay for supplemental insurance, take care of your most pressing medical needs ASAP. Don’t put crucial procedures off until later.

Think about additional sources of income

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Retiring from your current full-time job doesn’t have to mean leaving the workforce entirely. 

Whether you want to build a future-vacation slush fund or you’re worried you haven’t saved enough to retire comfortably, you might want to plan on picking up a part-time job or side gig once you retire. 

Having an extra source of cash can give you a sense of financial security and peace of mind.

Be strategic about when to claim Social Security benefits

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American workers can start claiming their Social Security benefits as early as age 62. 

But if you opt to start receiving benefits before you reach the official retirement age, you’ll receive a lower monthly payment than you would if you’d waited a few years to claim benefits. 

Your financial advisor can help you figure out when it makes the most financial sense for you to claim benefits.

Talk to your kids or dependents about the future

Vergani Fotografia/Adobe African American senior lady with young lady standing at window holding cup of black coffee at home

Are you currently spending money on adult children who are capable of taking care of themselves financially? If so, now is the right time for hard conversations about what you can and can’t afford in retirement.

Your fixed income could be stretched thin enough as it is without you having to set cash aside for otherwise independent adults. 

Plus, you need to spend the next five years saving as much as possible, not spending money on other adults. Cutting your kids off now can get them used to their new financial reality while helping you build your nest egg.

Bottom line senior female psychologist sitting on couch checking client history on clipboard

Living on a fixed income can be a huge adjustment that takes a lot of getting used to, whether you retire early, or wait for your mid-70s.

The financial decisions you make now will impact your financial lifestyle well into your retirement years. 

Following these 11 tips now (instead of when you retire) can help ensure the retirement you’ve been looking forward to is ready to go once you walk out of the office for the last time.

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Author Details

Michelle Smith Michelle Smith has spent a decade writing for and about small businesses. She specializes in all things finance and has written for publications like G2 and SmallBizDaily. When she's not writing for work at her desk, you can usually find her writing for pleasure near large bodies of water.

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