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The five-year runway to retirement is one of the most significant periods for your financial future. Rather than simply checking off a list of tasks, this critical window demands a focused approach. Most people measure readiness by a single number: how much they've saved. The ones who retire with real confidence are the ones who use this final phase to get all the variables working together, regardless of how large the nest egg is.
Why This Window Is Different
The transition into retirement is defined by a cluster of pivotal, interconnected choices. Decisions about tax planning, debt elimination, income design, and Social Security timing all converge within this five-year window. Without a proactive strategy, default outcomes will steer you and not your own choices.
Think about it like a magnifying glass: even with the right lens and plenty of sunlight, you cannot start a fire unless you concentrate the light into a single, sharp point. Many individuals in their late 50s and early 60s have significant resources, yet they often struggle because they split their efforts across competing priorities. Success in this phase requires narrowing your focus to transform those resources into a sustainable retirement reality.
Get Your Balance Sheet as Clean as Possible
One common thing we see in the years before retirement is people carrying debt into their 60s and treating it as a math problem. Every dollar of required debt payment is a dollar of required income. If the mortgage is paid off before you retire, you need less income, which means you draw less from your portfolio, which means it lasts longer, and you have more room to respond to the unexpected. Baby Step 7 structurally reduces the amount of retirement income your money must produce each month.
Run the Social Security Numbers Before You Assume
The choice of when to claim Social Security is among the most irreversible decisions a retiree faces, yet many proceed without analyzing the long-term financial implications. Opting for benefits at age 62 permanently fixes your monthly payment at the lowest possible level for the remainder of your life.
If you're married, your timing decision determines what your spouse receives if you pass away first, because your spouse inherits the higher of the two benefits in your household. Once Social Security is active, up to 85% of that benefit can become taxable depending on your other income, which can push IRA withdrawals into a higher bracket than you expected. These decisions interact, and this window is the right time to model them together.
Understand Your Tax Picture Before Retirement Changes It
For some people, the gap between when they stop working and when Social Security begins is one of the best tax planning opportunities they'll ever have. Income is often lower in that window, which means IRA withdrawals and Roth conversions can be executed at a more favorable rate. Whether that makes sense depends on your bracket, your account balances, and your long-term income needs, but it's a question worth asking now, not after the window has closed.
Know What Retirement Actually Costs Before You Retire
Don’t underestimate the power of this simple planning question: how much are you actually going to spend? The difference between $5,000 per month and $10,000 per month in retirement isn't a minor preference.* It's a factor of two in the portfolio required to sustain it.
Healthcare costs shift. A mortgage goes away, or doesn't. Travel often increases in the early years. If you don't know what you'll spend, you can't know what you need, and if you don't know what you need, the rest of the plan is built on guesswork.
If you're within five years of retirement and haven't walked through your income, tax, and Social Security picture together, that's the starting point. Reach out at safeharborwm.com to schedule a retirement readiness review.
* Illustrative purposes only. Numbers approximate.
This material is intended for informational/educational purposes only and should not be construed as investment/tax advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.