Retirement Planning Checklist: What to Do 5 Years Before You Retire

The 5-Year Countdown to Retirement

Retirement isn't an event; it's a transition that requires years of careful preparation. The five years leading up to your retirement date are crucial for solidifying your financial strategy, ensuring your healthcare is covered, and optimizing your income streams. According to the Social Security Administration, careful planning can significantly increase your lifetime benefits and peace of mind.

This year-by-year checklist will help you navigate the complex decisions surrounding Social Security, Medicare, and retirement income planning. The goal is to move from accumulating assets to distributing them efficiently while minimizing taxes and maximizing your standard of living.

Consider this checklist a living document. You should revisit it every year, adjust your projections based on market performance and personal health, and consult with professionals as the rules around Medicare and Social Security evolve.

5 Years Before Retirement (Age 55-60)

At the five-year mark, you are entering the critical "retirement red zone." This is the time to start gathering data and creating a realistic baseline for your future.

Review Your Social Security Earnings Record

Create or log in to your "my Social Security" account on SSA.gov. Review your earnings record for accuracy. Since your eventual benefit is based on your highest 35 years of earnings (adjusted for inflation), a missing year or incorrect data can permanently reduce your monthly check. If you spot errors, you will need to provide W-2s or tax returns to the SSA to correct them now, while the paperwork is still relatively easy to locate.

Estimate Retirement Expenses

Start projecting your essential and discretionary expenses in retirement. Will your mortgage be paid off? Will you travel more? Will you need a new car? Establishing a baseline budget is the first step in determining how much income you will need. Try tracking your current spending for three months to get a realistic picture of your outflow.

Max Out Catch-Up Contributions

If you haven't already, take advantage of IRS catch-up contributions. At age 50 and older, you can contribute additional funds to your 401(k), 403(b), and IRAs above the standard annual limits. This can significantly boost your nest egg in the final years of your career, taking advantage of your peak earning years. For 2026, those limits are higher than ever, providing a prime opportunity to supercharge your tax-advantaged savings.

Define Your Retirement Vision

Beyond the numbers, start thinking about what retirement actually looks like for you. Will you volunteer? Start a part-time business? Relocate to a different state? Your answers will dictate your tax strategy and healthcare options. For instance, if you plan to move across state lines, you need to understand how that impacts your Medicare Advantage network or Medigap availability.

4 Years Before Retirement (Age 56-61)

With four years to go, shift your focus to healthcare and tax strategies. These two areas are often the most overlooked but can have the biggest impact on your retirement security.

Healthcare Gap Planning

If you plan to retire before age 65 (when Medicare eligibility begins), you need a solid strategy to cover the "healthcare gap." Options include COBRA (which lasts up to 18 months), purchasing an Affordable Care Act (ACA) marketplace plan, or joining a younger working spouse's employer plan. Start pricing these options now, as healthcare can easily be one of the largest pre-Medicare expenses, often costing over $1,000 a month for a couple.

Evaluate Roth Conversions

Review your current tax bracket with a professional and consider whether a Roth IRA conversion strategy makes sense. Moving money from pre-tax accounts (like a traditional IRA or 401(k)) to a Roth IRA requires paying taxes now, but the funds grow tax-free and are not subject to Required Minimum Distributions (RMDs) later in life. This can be a powerful way to control your taxable income in your 70s and beyond, which is crucial for managing Medicare premiums.

Analyze Your Debt

Focus on aggressively paying down high-interest debt. Carrying credit card debt or a hefty car loan into retirement increases your "burn rate" (the amount of income you need every month). Entering retirement debt-free gives you far more flexibility to ride out market downturns.

3 Years Before Retirement (Age 57-62)

Three years out is the time to start getting serious about the specific rules of the massive federal programs you will soon rely on.

Assess Your Social Security Claiming Strategy

Age 62 is the earliest age you can claim Social Security retirement benefits, but doing so will permanently reduce your monthly check by up to 30% compared to waiting until your Full Retirement Age (FRA). Work with a Registered Social Security Analyst (RSSA) to evaluate your break-even age, spousal benefit options, and the impact of claiming early versus delaying. If you are married, coordinating when each spouse claims is the single most important decision you can make. If you choose to claim at 62 but continue working, you also need to understand the Retirement Earnings Test, which can withhold $1 in benefits for every $2 you earn above a certain threshold (in 2026, the limit is $24,480). It's a complex puzzle that is heavily dependent on life expectancy, current health, and family longevity history.

Start Medicare Research

Familiarize yourself with the alphabet soup of Medicare: Parts A, B, C, and D. Understand the fundamental difference between Original Medicare (pairing Parts A and B with a Medigap supplement and a standalone Part D plan) and Medicare Advantage (Part C). Visit Medicare.gov to start learning about the structural differences, network rules, and out-of-pocket maximums associated with each path.

Assess Long-Term Care Needs

Medicare does not pay for long-term custodial care (like a nursing home or extended home health aide). Now is the time to evaluate long-term care insurance or hybrid life insurance policies. Premiums increase significantly as you get older, and your health status can disqualify you from coverage if you wait too long.

2 Years Before Retirement (Age 58-63)

Two years from retirement is when the clock starts ticking on your future Medicare premiums.

Understand IRMAA Implications

The Income-Related Monthly Adjustment Amount (IRMAA) is a surcharge added to Medicare Part B and Part D premiums for higher-income earners. The CMS determines your IRMAA based on your Modified Adjusted Gross Income (MAGI) from your tax return from two years prior. This means your income at age 63 will dictate your Medicare premiums at age 65. Careful tax and income planning during this year is essential to minimize future surcharges.

Stress-Test Your Plan

Run your retirement income projections through different scenarios. What happens if inflation spikes again? What if the stock market drops significantly in your first year of retirement (known as sequence of returns risk)? What if you need long-term care? Ensuring your plan can withstand economic shocks and personal health crises will provide peace of mind and reveal any adjustments you need to make now.

Review Beneficiaries and Estate Documents

Ensure your will, power of attorney, and healthcare directives are up to date. Review the beneficiaries on your 401(k), IRAs, and life insurance policies. Remember, beneficiary designations on financial accounts supersede whatever is written in your will.

1 Year Before Retirement (Age 59-64)

The final year is about execution and making definitive choices.

Prepare for Medicare Enrollment

As you approach age 65, your Initial Enrollment Period (IEP) for Medicare begins. This seven-month window starts three months before your 65th birthday month. Decide whether you will enroll in Original Medicare or a Medicare Advantage plan.

If you plan to continue working past age 65 and have creditable employer coverage (for companies with 20+ employees), you may be able to delay Part B enrollment without penalty. However, you must follow strict rules to avoid late enrollment penalties. If you contribute to an HSA, you must stop contributions six months before applying for Medicare to avoid tax penalties.

Finalize Your Income Strategy

Determine exactly which accounts you will draw from first (taxable brokerage accounts, tax-deferred IRAs, or tax-free Roth accounts) and solidify your exact Social Security claiming date. Ensure your coordinated withdrawal strategy minimizes your effective tax rate and maximizes the longevity of your portfolio.

Consolidate Accounts

If you have multiple 401(k)s from old employers or various stray IRAs, consider consolidating them into a single IRA. This makes managing your portfolio, tracking your asset allocation, and eventually calculating your RMDs much simpler. It also reduces the administrative burden on your spouse or heirs.

Plan for the "Go-Go" Years

Retirement spending isn't a flat line. Most retirees experience the "Go-Go" years (higher spending on travel and hobbies early in retirement), followed by the "Slow-Go" years (reduced activity), and finally the "No-Go" years (increased healthcare spending). Budget for a spike in discretionary spending in your first few years of freedom, but ensure your long-term plan can still support you when healthcare costs rise later.

The Year of Retirement

You've made it. The planning is done; now it's time to put the plan into action. This year is about making the transition smooth and permanent.

Execute the Plan

File for Social Security benefits online or at your local office (usually 3-4 months before you want payments to begin). Complete your Medicare enrollment paperwork during your IEP. Transition your investment portfolio from accumulation (growth) to distribution (income) mode, ensuring you have enough cash or cash equivalents to cover 1-2 years of expenses.

Take time to review your budget against your actual spending in the first few months. It's normal to make adjustments as you settle into your new routine. Remember to stay flexible, as inflation and tax laws will change over a 20- or 30-year retirement.

Most importantly, take a deep breath and enjoy the transition! You've done the hard work over the last five years, and now it's time to reap the rewards of careful preparation and step confidently into your next chapter.