The last five years of your career are a critical sprint. The decisions you make now can have an outsized impact on the next 30 years of your life. While it’s easy to keep your head down and focus on the finish line, this is the time to be proactive.
Here is a financial checklist to help you navigate this important transition with confidence.
1. Get Clear on Your “Why.” The first step isn’t a calculation; it’s a conversation. What do you want your retirement to look like? Will you travel? Spend more time with grandkids? Work part-time? “Retirement” means something different to everyone. Before you can run the numbers, you need to define the vision. This vision will determine the single most important number: your retirement budget.
2. Run the Numbers (and Then Stress-Test Them). Once you know your target budget, you can answer the big question: “When can I retire?” This involves a detailed projection, looking at your savings, pensions, and other assets to see if they can support your desired lifestyle. But don’t stop there. A good plan isn’t just a best-case scenario. It should be “stress-tested” against market downturns, inflation spikes, and other risks to ensure its resilience.
3. Maximize Your “Catch-Up” Savings. In the year you turn 50, the IRS allows you to make “catch-up” contributions to your 401(k) and IRA accounts. In your final working years, your income is likely at its peak. This is your last, best chance to supercharge your tax-deferred savings. Make every effort to maximize these contributions.
4. Create a Social Security Strategy. You can claim Social Security as early as 62, but doing so can permanently reduce your benefit by up to 30%. Waiting until your “Full Retirement Age” (around 67) or even age 70 can dramatically increase your monthly, inflation-adjusted paycheck for life. The right answer depends on your health, other income sources, and (if you’re married) a coordinated strategy with your spouse. This is one of the most important financial decisions you’ll make—don’t make it lightly.
5. Plan for Healthcare. If you retire before age 65, you will need a plan to bridge the gap before you’re eligible for Medicare. This often means budgeting for COBRA or an ACA Marketplace plan, both of which can be expensive. Furthermore, even once you’re on Medicare, you’ll still have premiums, co-pays, and long-term care to consider. These projected costs must be part of your retirement budget.
These five years are about shifting your mindset from accumulation to distribution. Taking these proactive steps now is the key to building a clear, confident path to the retirement you’ve earned.