The Financial Decisions That Matter Most in the Five Years Before Retirement
The five years before retirement are some of the most important planning years of your financial life.
Not because everything has to be perfect. It will not be. But because the decisions made in this window often determine how much flexibility you have once the paycheck stops.
This is the period when Social Security, Roth conversions, pension options, healthcare costs, portfolio risk, cash reserves, tax brackets, and estate planning all start to collide. The mistake many successful families make is treating those decisions separately.
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The Short Answer
The most important financial decisions in the five years before retirement are not simply about investments. They are about building a coordinated plan for income, taxes, risk, healthcare, Social Security, and flexibility. Done well, this window can create options. Done casually, it can lock in tax costs, unnecessary risk, and avoidable stress.
If you want the bigger framework, this related article on building your retirement bridge step by step covers the broader planning process.
1. Decide What Retirement Actually Needs to Fund
A retirement plan that starts with a portfolio balance is incomplete. The better starting point is lifestyle.
What does retirement need to pay for? Regular spending, travel, family help, healthcare, home projects, charitable giving, vehicles, grandchildren, taxes, insurance, and unexpected events all belong in the discussion.
Many people say, “I think we will spend less in retirement.” Sometimes that is true. Often, the first five to ten years are more expensive than expected because people are healthy, active, generous, and finally have time.
A good plan does not shame people for wanting to enjoy retirement. It helps fund the life they actually want while understanding the tradeoffs.
2. Build the Income Plan Before the Paycheck Stops
The transition from saving to withdrawing is emotional. For decades, the habit was accumulation. Then one day the paycheck stops and the portfolio is supposed to become the paycheck.
That shift feels different than people expect.
This is why the income plan should be built before retirement begins. Which account will fund the first year? What cash reserve should be available? How will dividends, interest, IRA withdrawals, Roth assets, and taxable accounts work together? What happens if the market falls 20% in the first year?
For a deeper look at how this structure works, this article on how affluent retirees generate income without constantly selling investments walks through the mechanics.
3. Revisit Portfolio Risk
The portfolio that helped you build wealth may not be the same portfolio that should carry you into retirement.
That does not mean moving everything to cash. In fact, too much cash can quietly damage purchasing power. But it does mean understanding how much downside the portfolio can experience, what that would feel like in dollars, and whether your income plan can survive it.
A 25% decline on a $3 million portfolio is $750,000. On a $5 million portfolio, it is $1.25 million. Those are not just percentages. They are emotional events.
The right allocation should be connected to the income plan, tax plan, and behavioral plan. That is especially important because the first years of retirement are when sequence-of-returns risk can matter most.
4. Identify the Roth Conversion Window
For many retirees, the best Roth conversion years may occur after retirement but before Social Security, pensions, and required minimum distributions stack up.
The five years before retirement are when this should be modeled. Not guessed. Modeled.
How much income will disappear when work stops? What tax bracket will you be in? When do RMDs begin? How large could the traditional IRA become? How will Medicare premiums be affected? What happens to a surviving spouse if one spouse dies and the tax filing status changes?
Roth conversions are not automatically right. But the opportunity can be missed forever if no one maps the window ahead of time. I wrote more about this in The Hidden Cost of Waiting on a Roth Conversion.
5. Make Social Security a Planning Decision, Not a Guess
Social Security timing is often framed as a break-even math problem. That is too narrow.
The decision affects lifetime income, survivor benefits, tax brackets, Roth conversion windows, Medicare premium exposure, and portfolio withdrawal pressure. For married couples, the survivor benefit is often one of the most important parts of the analysis.
The right answer is not always “delay.” It is also not always “claim early.” The right answer depends on health, income needs, tax planning, portfolio size, pension income, and the role Social Security plays in the overall plan.
6. Review Pension and 401(k) Options Before You Are Forced to Choose
Some retirement decisions come with paperwork that looks simple but carries permanent consequences.
Lump sum or monthly pension? Single life or joint survivor? Leave the 401(k) where it is or roll it over? Use company stock NUA rules or not? Consolidate accounts or maintain separate structures?
These decisions deserve more than a quick signature. If you have a large employer plan, this piece on whether to roll over a $1 million 401(k) in retirement may help frame the tradeoffs.
7. Build a Healthcare and Medicare Timeline
Healthcare planning is not just about choosing a Medicare supplement at age 65.
It includes bridging coverage if you retire before Medicare eligibility, understanding HSA strategy, planning around IRMAA, evaluating long-term care exposure, and making sure healthcare costs are represented realistically in the retirement plan.
Healthcare is one of the places where optimistic assumptions can do real damage.
8. Clean Up the Estate Plan
The years before retirement are a natural time to review beneficiary designations, wills, trusts, powers of attorney, healthcare directives, titling, and whether the estate plan still matches your life.
Retirement often changes priorities. Children are older. Parents may have passed. Assets may be larger. Charitable goals may be clearer. A trust created 15 years ago may not reflect the family today.
Estate planning is not just about death. It is about reducing confusion for the people you love.
Final Thought
The five years before retirement are not the time to coast.
They are the time to get organized, reduce unnecessary risk, create tax flexibility, and make sure the major decisions are being made in the right order.
Retirement is much easier to enjoy when the big questions have already been answered.
At One Bridge Wealth Management, we help families make thoughtful, tax-aware decisions about retirement, investments, and wealth planning.
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About the Author: John Wahl is a CFP® and ChFC®, co-founder of One Bridge Wealth Management, and was named to the Forbes 2025 Best-In-State Next-Gen Wealth Advisors list. One Bridge is a fee-based independent wealth advisory practice serving high-net-worth families in the St. Louis area. One Bridge Wealth Management acts as a fiduciary when managing assets.
2025 Forbes Top Next-Gen Wealth Advisors, created by SHOOK Research. Presented in Aug 2025; based on 03/31/25 data. Advisors pay a fee to hold out marketing materials. Not indicative of advisor’s future performance. Your experience may vary.
This content is for informational purposes only and does not constitute personalized tax, legal, or investment advice. Please consult a qualified tax professional regarding your specific situation.