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Navigating Your Last Five Years Before Retirement


It might seem far away if you still have five years before retirement, but those last years can be crucial for setting yourself up for financial comfort and worry-free retirement. With some planning and effort, you can make the most of this time to ensure a smooth transition into your golden years. 

The last five years before retirement are the time to fine-tune your financial strategy and set the stage for a comfortable retirement. By making smart decisions and getting expert advice, you can handle the complicated aspects of this critical time. When you manage your money wisely, you’re preparing for a comfortable and enjoyable retirement.

Let’s guide you through how to make the most of those last five years.

Seek Professional Advice

Consider working with a financial advisor who specializes in retirement planning. They can help optimize your retirement income strategy, ensuring it aligns with your goals. A professional will provide insights on tax planning, investment adjustments, and pension options. They can help you navigate the sometimes complex financial decisions associated with your approaching retirement, optimize your investment strategy, and provide guidance tailored to your specific goals.

Assess Your Finances

Take a close look at your current financial situation. Calculate your assets, savings, investments, and any outstanding debts. Take stock of your anticipated retirement income from sources like CPP, workplace pensions, and any retirement accounts. Compare these figures to your estimated expenses in retirement. Adjust your investment strategy to balance growth and protection. Consider healthcare costs and create a budget for your retirement lifestyle. All this will give you a clear picture of where you stand and help you set realistic retirement goals.

Fine-Tune Your Retirement Plan

With retirement approaching, you probably have a clear picture of your finances and goals. Reviewing your retirement plan and making necessary adjustments is still a good idea. Some examples of adjustments you might make include your investments to reduce risks and ensure stable income or the amount of money you are contributing to your retirement accounts. Being proactive will help you enter retirement confidently, with a solid strategy, allowing you to enjoy your hard-earned retirement years without financial worries.

Reduce Debt

If you have any remaining high-interest debts, such as credit card balances and personal loans, now is the time to get them paid off. Reducing or eliminating debts, like credit cards or loans, lightens your financial load and frees up more money for retirement enjoyment. With fewer monthly payments, you’ll have greater flexibility to cover living expenses and unforeseen costs. By focusing on debt reduction, you create a smoother transition into retirement, ensuring your hard-earned savings are directed toward your well-being and the experiences you want during this well-deserved chapter of life.

Diversify Investments

Ensure your investment portfolio is well-balanced and diversified to mitigate risk. As retirement approaches, consider shifting some of your investments from high-risk stocks to more stable options like bonds or dividend-paying stocks. This strategy can help protect your savings while still allowing for potential growth. As retirement nears, a diverse portfolio can offer stability and protect against market fluctuations. 

Pay Off Your Mortgage

If possible, work towards paying off your mortgage before retiring. With the burden of a mortgage lifted, you can confidently allocate funds to other priorities like healthcare or leisure activities. This strategy creates a smoother financial transition into retirement, allowing you to enjoy life without the weight of mortgage payments and providing a secure foundation for your well-deserved retirement journey. If paying off your mortgage isn’t feasible, consider refinancing to lower your monthly payments.

Consider Downsizing

If you have a larger home, consider downsizing. Selling your current home and moving to a smaller, more cost-effective one can free up funds for your retirement years. Downsizing also frees up equity, providing extra funds for retirement or new experiences. It’s the perfect time to declutter your belongings and possibly bring in some extra cash through garage sales or online classified ads. With fewer possessions, you gain more time and financial flexibility, allowing you to focus on the activities you love. 

Update Estate Planning Documents

Review and update your estate planning documents. This includes your will, living trust, and power of attorney. Ensure that your beneficiaries are up to date and that your wishes are clearly outlined. This step can help avoid legal complications for your loved ones and ensure your assets are distributed as intended.

Test Your Retirement Budget

Practice living on your projected retirement budget for a few months before retiring. By tracking expenses and assessing your budget, you’ll have a clearer understanding of what your retirement will genuinely entail. This testing phase helps you fine-tune your financial plans, ensuring a smooth and worry-free transition into retirement, where you can relish your golden years without monetary constraints.

Jeff Campbell