The Five-Year Countdown to Retirement: A Complete Checklist

Most retirement writing is about the long middle: save early, invest steadily, let compounding do its quiet work for thirty years. Far less is written about the final approach, even though the last five working years are when the most consequential and least reversible decisions get made. When to claim Social Security. How to cover health insurance. How much cash to hold. Which account to tap first. Whether the number you have is actually enough for the life you want.

The good news is that none of this requires genius. It requires sequence. Certain decisions depend on other decisions, and if you work through them in the right order, each one gets easier. This guide walks through the final five years as a countdown, one year at a time. Your own timeline may compress or stretch, and that is fine. The order matters more than the calendar.

Why the last five years are different

During your accumulation years, mistakes are mostly recoverable. A bad fund choice, a year of undersaving, a market drop at 45: time fixes most of it. In the five years before retirement, three things change at once.

First, your portfolio is probably the largest it has ever been, so percentage swings translate into life changing dollar amounts. A 20 percent drawdown on $100,000 stings. The same drawdown on $900,000 can delay a retirement date.

Second, you are entering the window where sequence of returns risk is at its peak. Poor markets in the years just before and just after you stop working do more damage than the same markets would at any other point, because you are selling shares to live on while prices are down.

Third, several decisions in this stretch are one way doors or close to it. Social Security claiming can only be undone within narrow limits. Medicare enrollment windows come with late penalties that can last for life. Pension elections are usually permanent. The countdown exists to make sure you walk through those doors deliberately.

Five years out: get your real numbers

Year five is about replacing guesses with data. You cannot make a single good downstream decision until you know three numbers: what you spend, what you have, and what your guaranteed income will be.

Figure out what you actually spend

Not what you think you spend. Pull twelve months of bank and card statements and total what actually left your accounts. Then clean the number up in two directions. First, strip out items that are not really spending: transfers between your own accounts, and credit card payments when you are already counting the individual card purchases, since counting both double counts every swipe. Second, only subtract future savings for costs that actually appear in the total. Payroll taxes and 401(k) contributions withheld from your paycheck never reach your bank account, so they were never in the statement total to begin with, and subtracting them again quietly understates what retirement will really cost. Do subtract genuine statement items that end at retirement, such as commuting or any saving you do from your checking account, and add the costs that start or grow: health insurance premiums before Medicare, travel, and hobbies.

One refinement is worth adding: separate your regular spending from the lumpy expenses that arrive every few years. Roofs, cars, family weddings, and big medical deductibles rarely show up in a single twelve month window, but they will absolutely show up in a thirty year retirement. A reasonable approach is to estimate those irregular costs over a decade, divide by ten, and fold that amount into your annual spending figure. Remember too that your spending number is a today number. Prices rise over time, so any projection you run should assume your costs grow even if your lifestyle does not.

Inventory every account

Make one list: every 401(k), 403(b), IRA, HSA, pension, brokerage account, and bank account, with current balances, whether the money is pre tax, Roth, or taxable, and who the beneficiaries are. People who changed jobs several times often discover forgotten balances. If you suspect you left money behind somewhere, our guide on finding old and lost 401(k) accounts walks through the search tools.

Pull your Social Security statement

Create or log in to a my Social Security account at ssa.gov/myaccount and download your statement. Check your earnings history for errors, because your benefit is computed from your highest 35 years of earnings and a missing year quietly lowers your check. Note the estimates at 62, at your full retirement age, and at 70. For anyone born in 1960 or later, full retirement age is 67, per the Social Security Administration.

Run the gap math

Now the honest moment. Estimated annual spending, minus Social Security and any pension, equals the amount your savings must produce each year. Compare that to what your portfolio can plausibly support. If the gap is uncomfortable, year five is the cheapest possible time to find out, because you still have levers: save more, work a year longer, trim the spending plan, or some blend. Discovering the same gap at 66 leaves you far fewer options.

Four years out: fill the tanks

With real numbers in hand, year four is about maximizing what goes in while a salary is still arriving. The tax code is unusually generous to people in exactly your position.

For 2026, the IRS allows employees to defer up to $24,500 into a 401(k), 403(b), governmental 457, or the federal TSP. Workers 50 and older can add a catch-up contribution of $8,000, and under the SECURE 2.0 rules, workers aged 60 through 63 get a higher catch-up of $11,250 instead. IRA contributions are capped at $7,500, plus a $1,100 catch-up at 50 and older. Those figures come straight from the IRS announcement for tax year 2026, and they adjust most years, so check the current numbers when you read this.

A new rule also takes effect in 2026 and lands squarely on late career savers. Under SECURE 2.0, if your prior year Social Security wages from the employer sponsoring your plan were more than $150,000, any catch-up contributions you make must go in as Roth contributions, with no current year deduction on that money, per the IRS. If your plan offers no Roth option, affected workers cannot make catch-up contributions at all, so check your plan documents early in the year rather than in December. The threshold is indexed over time and is measured per employer, not against household income.

Few people can hit every ceiling, and that is fine. The point is directional: these are often your peak earning years, and sheltering more now matters. Just be precise about the tax mechanics, because not every contributed dollar trims the current tax bill. Pre tax 401(k) deferrals reduce this year's taxable income. Roth contributions do not; their payoff comes later as tax free growth. And the deduction for a traditional IRA contribution can shrink or disappear at higher incomes if you or your spouse are covered by a workplace plan.

Decide your pre tax versus Roth mix on purpose

Late career is also when the traditional versus Roth question gets interesting. If you expect your tax rate to fall in retirement, pre tax contributions still make sense. But building some Roth money before you retire buys flexibility, because qualified Roth withdrawals do not add to the income that determines how much of your Social Security is taxed or whether you pay Medicare income surcharges. The word qualified matters. For earnings to come out tax free, you generally must be at least 59 and a half and satisfy a five year rule that starts on January 1 of the year of your first Roth IRA contribution, and a designated Roth 401(k) runs its own separate five year clock. Someone who opens a first Roth at 64 and withdraws earnings at 66 can owe tax on the earnings portion, and that taxable income counts like any other. That is a strong argument for starting the Roth clock early in the countdown rather than at the finish line. If your plan offers one, a designated Roth account inside your 401(k) has no income limits on contributions.

Use the HSA for what it is actually good at

If you are on a qualifying high deductible health plan, a health savings account offers deductible contributions, tax free growth, and tax free withdrawals for qualified medical expenses. Eligibility has real conditions: you must be covered by the high deductible plan, have no other disqualifying health coverage, not be enrolled in any part of Medicare, and not be claimable as someone's dependent, per IRS Publication 969. For 2026 the contribution caps are $4,400 for self only coverage and $8,750 for family coverage, plus an extra $1,000 at age 55 and older.

One caution about a popular myth: the HSA is not a general fund for the insurance premiums of the bridge years before Medicare. Ordinary marketplace premiums are generally not qualified expenses, so paying them from the account triggers income tax and, before 65, a penalty. The exceptions in Publication 969 are COBRA continuation premiums, premiums paid while you are receiving unemployment compensation, a capped amount of long term care insurance premiums, and most Medicare premiums from 65 on. Where the account shines in early retirement is everything else: deductibles, copays, dental, vision, and hearing costs, all reimbursable tax free at any age.

Point the surplus at expensive debt too

Contributions are not the only good use for late career cash flow. If you carry credit card balances or other high interest debt, eliminating it before retirement is one of the few guaranteed returns available anywhere, and every monthly payment you retire shrinks the income your portfolio has to produce later. Lower rate debt such as a mortgage is a closer call, and reasonable people land on both sides depending on the rate, the balance, and how much they value simplicity. The broad principle still holds: walking into retirement with fewer fixed obligations makes every decision that follows easier.

Three years out: de-risk and build the cash cushion

Year three is where you shift from maximizing growth to protecting the retirement date itself.

Check your stock exposure against your stomach and your math

There is no single correct allocation, but there is a useful question: if stocks fell 30 percent next year, would your plan survive? If the answer is no, you are holding more equity risk than your timeline can afford. Many target-date funds handle this glide path automatically; if you manage your own mix, this is the year to start stepping it down deliberately rather than reacting to a headline later.

Start building the cash and bond buffer

A common approach, often called the bucket strategy, is to hold one to two years of planned withdrawals in cash equivalents and several more years in high quality bonds by the day you retire. The purpose is simple: when stocks have a bad year early in your retirement, you spend from the buffer instead of selling shares at depressed prices. Building that buffer gradually over three years, by redirecting new contributions or trimming winners inside tax advantaged accounts, avoids both a big taxable event and the temptation to time the market. Our full guide to the retirement bucket strategy covers the mechanics.

A clearly hypothetical example

Suppose a couple plans to withdraw $40,000 per year from savings on top of Social Security. A buffer of two years of cash ($80,000) plus three years in short and intermediate bonds ($120,000) means roughly $200,000 positioned defensively. On a $1,000,000 portfolio, that still leaves 80 percent invested for growth. These numbers are invented to show the shape of the math, not a recommendation, and your own split should reflect your spending, other income, and risk tolerance.

Where you hold the buffer matters nearly as much as its size. Building it inside an IRA or 401(k) lets you sell appreciated stock funds and buy bonds or cash equivalents without triggering capital gains tax along the way. If part of the buffer lives in a taxable account for easy access, high yield savings accounts, money market funds, and short term Treasury funds are the usual candidates. The goal is not to chase yield. The goal is for this money to be boring, liquid, and there when you need it.

Two years out: make the big timing decisions

Year two is decision year: when to claim Social Security, how to cover health care, and what to do with any pension.

Social Security: the stakes in plain numbers

For someone with a full retirement age of 67, claiming at 62 reduces the monthly benefit by 30 percent, according to the Social Security Administration. Waiting past full retirement age earns delayed retirement credits of 8 percent per year up to age 70, which lifts the check to 124 percent of the full amount for those born in 1960 or later, per SSA's delayed retirement schedule. Using SSA's own illustration, a $1,000 monthly benefit at full retirement age becomes $700 if claimed at 62 and $1,240 if claimed at 70.

Neither early nor late is automatically right. Claiming early can make sense with health concerns, an urgent income need, or a plan built around a lower earning spouse's benefit. Delaying tends to reward long lives and protects a surviving spouse, because the survivor generally keeps the larger of the two checks. Married couples should decide jointly, not individually. For the deeper tradeoffs, see our comparison of claiming at 62 versus 67 versus 70. Decide the strategy now even though you will file later; the claiming age drives how big your buffer and early withdrawals need to be.

Health insurance: the bridge and the enrollment window

If you will retire before 65, you need a bridge to Medicare: a spouse's employer plan, COBRA for a limited period, or a marketplace plan, where premium tax credits depend on your income, something you have real control over in early retirement. Price this bridge now, because for many early retirees it is the single largest line item in the budget.

At 65, Medicare's Initial Enrollment Period is a seven month window that starts three months before your birthday month and ends three months after it, per Medicare.gov. Missing it can mean late enrollment penalties that persist for as long as you have coverage, plus a wait for the next enrollment window. If you will still have employer coverage at 65, special rules may let you delay without penalty, but verify your specific situation with Medicare or your benefits office rather than assuming. Our Medicare basics guide maps the parts and the deadlines.

Pension elections, if you have one

If a pension is part of your picture, year two is when to request benefit estimates for the options: single life, joint and survivor, and any lump sum offer. These elections are typically irrevocable, and the right answer depends on both spouses' health, other income, and your comfort managing a lump sum. Take the full year to think; do not decide in the HR exit meeting.

One year out: practice, paperwork, and the dress rehearsal

The final working year is about proving the plan works before you depend on it.

Live on the retirement budget for real

For at least three months, and ideally six, live on exactly the income your plan says retirement will provide, banking the surplus. This dress rehearsal does two things. It stress tests the spending estimate from year five against reality, and it builds confidence that the number works, which matters more than people expect. Retiring is partly a math problem and partly a nerve problem.

The rehearsal should cover time as well as money. If you can, use a stretch of vacation to practice an ordinary retired week at home rather than traveling. Many people discover that the first few unstructured days feel wonderful and the second week feels aimless. That is useful information to have while you still have time to line up volunteering, part time work, classes, or whatever else will give the calendar some shape. A spouse's expectations belong in this conversation too, especially if one of you will retire first and the other will keep working.

Design the withdrawal order

Decide which accounts you will draw from first. The conventional starting point is taxable accounts first, then pre tax, then Roth, but the smarter version manages your tax bracket each year, sometimes blending sources or converting pre tax money to Roth in low income years before required minimum distributions begin. The details are in our guide to which retirement accounts to tap first. The goal for this year is simpler: know where the first 24 months of withdrawals will come from, to the account and dollar.

Clean up the paperwork

Confirm beneficiaries on every account, because beneficiary forms override wills. Update or create your will, powers of attorney, and health care directives. Consolidate stray accounts where it simplifies life, using direct rollovers so nothing becomes accidentally taxable. Decide what happens to your current 401(k): leaving it, rolling to an IRA, or rolling to a new plan each has tradeoffs around fees, investment options, and creditor protection.

Set the date with your employer in mind

Small timing details can be worth real money: retiring after a bonus pays out, after another vesting date passes, or after the date that qualifies you for retiree benefits. Check your plan documents, and remember that if you leave your employer in or after the year you turn 55, the rule of 55 may let you take 401(k) withdrawals from that plan without the 10 percent early withdrawal penalty, though ordinary income tax still applies.

The mistakes that show up again and again

Retiring on a market high without a buffer. Strong recent returns make portfolios look invincible right up until they are not. The buffer exists precisely for the moment optimism fails.

Treating the Social Security estimate as a promise about the far future. Your statement's estimates assume you keep earning at roughly your recent level until you claim. The benefit itself is computed from your highest 35 years of earnings. If you already have 35 years of work on record, retiring at 62 and claiming at 67 does not insert zeros into the average; the real cost is that strong final years never arrive to replace weaker early ones in the top 35, so the actual benefit often comes in somewhat below the estimate. Zeros enter the calculation only when your record holds fewer than 35 years of earnings in total. Either way, rerun the numbers with SSA's calculators using your true stop work date.

Forgetting that taxes do not retire. Pre tax account withdrawals are ordinary income, up to 85 percent of Social Security can be taxable depending on your other income, and required minimum distributions eventually force withdrawals whether you need them or not. A plan that ignores taxes overstates its income by a meaningful margin.

Ignoring inflation in a long plan. A spending plan that looks comfortable in year one can feel tight by year fifteen if it quietly assumes prices never move. Build rising costs into the projection from the start, and revisit the plan every year or two rather than setting it once and trusting it forever.

Making the Medicare window an afterthought. The seven month enrollment window is easy to miss during the chaos of a retirement transition, and the penalties are a bad souvenir.

Planning the money and not the life. The retirees who struggle most in year one are often the best savers, because saving was the identity. Spend some of this countdown deciding what the time is for, not just how to fund it.

If your countdown is shorter than five years

Plenty of people pick a date eighteen months out, or have one picked for them. The sequence compresses but does not change: numbers first, then contributions and allocation, then the Social Security and health care decisions, then the dress rehearsal, even if the rehearsal is only a month or two. The single most valuable step at any speed is the first one, replacing guesses about spending and income with actual figures. Every other decision gets easier once the real numbers are on the table.

Retirement planning has a way of feeling like one giant, unanswerable question. Broken into five years of ordinary homework, it turns out to be a series of small, answerable ones.