Why the Last Five Years Before Retirement Are the MOST IMPORTANT of Your Financial Life

You’re almost there. The desk is within sight. You can almost feel retirement.

But here’s the brutal truth most financial guides won’t hit you with: the choices you make in the last five years before retirement are far more impactful than the first 25 years you spent building your nest egg.

This isn’t optimism — it’s math, timing, and plain financial reality. Ignore this window and you might still retire, but you won’t retire well.

1. The Clock Isn’t Your Friend Anymore — It’s a Deadline

When you’re 10 or 20 years from retirement, time still grows your money — you benefit from compounding, and you’ve got recovery time if markets dip. Once you hit that last five years, the margin for error shrinks. There’s less time to make up losses, and more reason to protect what you’ve built. Ignoring this fact is planning malpractice.

2. The First Rule of the Final Stretch: Know Your Numbers — EXACTLY

With five years left, you should not be guessing how much you have, what you’ll need, or how long it must last. It’s time for a cold-hearted audit:

• How much is in your retirement accounts?

• How much will Social Security pay you (and when is optimal to start it)?

• What other income sources do you have — pensions, rental income, annuities?

  
  

And — just as important — how much will you spend? Housing, travel, utilities, healthcare — and yes, those big post-work lifestyle plans cost real money. Matching income to realistic expenses now prevents nasty surprises later.

3. Investment Risk Becomes Real Risk

Your portfolio isn’t a theoretical number anymore. A sharp downturn right before or during your retirement changes everything. This is where sequence-of-returns risk bites — and why advisors often reduce portfolio risk and build a cash buffer in the last 3–5 years. You don’t want to be selling low when markets tank the year you retire.

4. Tax Moves Matter — Now, Not Later

The final years before retirement are the only time you can shape how Uncle Sam takes his cut:

• Should you convert some of your traditional IRA to a Roth?

• Do you need to rebalance or realize gains strategically?

• Can you minimize future required minimum distributions (RMDs)?Every dollar you save on taxes today stays in your retirement pocket tomorrow.

5. Healthcare and Long-Term Care Aren’t Optional Planning Items

Once work benefits end, you face Medicare eligibility thresholds, enrollment windows, and rising healthcare costs — and Medicare doesn’t pay for long-term care. Planning for these costs in the last five years can save tens of thousands, even hundreds of thousands of dollars.

6. Debt and Budget Discipline Become Urgent

Heading into retirement with high-interest debt is like starting a marathon with ankle weights. If you still have credit card balances, personal loans, or expensive car payments, decide now how you’ll eliminate them or adjust your lifestyle around them.

7. Estate Planning Isn’t About Dying — It’s About Living With Confidence

This isn’t a macabre task; it’s practical. Beneficiary designations, wills, powers of attorney — these aren’t “nice to have,” they’re essential. You want your financial house in order before you step away from regular employment. Waiting until after retirement adds stress your new life doesn’t need.

The Bottom Line — And It’s Simple

Most people think retirement starts the day they leave their job. But financially, retirement begins in the five years before you stop working. In that window you:

✔ Confirm whether you can afford the retirement you imagine

✔ Adjust portfolios to protect what you have left

✔ Make tax and healthcare moves that save tens of thousands

✔ Cut debt and finalize estate plans that protect your family

✔ Benchmark your real spending against your ideal retirement lifestyle

Ignore this window and retirement becomes a guessing game. Respect it — and you control your number, your timing, and your comfort.

This five-year stretch doesn’t just help you retire — it determines how well you’ll live in retirement.

Sources

• SmartAsset: Why the Last Five Years Before You Retire Are Critical — review income, expenses, savings gap, and income sources.

• Economic Times (US): Why the Last 5 Years Before Retirement Can Make or Break Your Future — budgeting, risk shift, and lifestyle alignment.