Retirement & Tax Planning Answers
A Retirement Checklist for the Final 5 Years of Work
Quick answer
The five years before retirement are the highest-leverage window of your financial life — when small course corrections still have time to compound, and when most of the decisions that shape your first decade of retirement are made. Focus on five things: max out tax-advantaged savings (401(k) and IRA catch-ups, HSA, Roth 401(k) where available); stress-test your withdrawal plan against sequence risk, persistent inflation, and higher tax rates; time Social Security and Medicare deliberately (claim timing for survivor coordination, IRMAA-aware income planning, healthcare bridge if retiring before 65); reduce single-source risks (concentrated stock, single-bucket portfolios, employer-tied insurance); and build a tax-aware sequencing strategy for the first ten years of retirement, when the low-income window between leaving work and Social Security/RMDs is your most valuable tax-planning opportunity.
The years leading up to retirement look ordinary from the outside — same paycheck, same routine, same monthly contribution to the 401(k). But financially, they're not ordinary at all.
They are the last years you'll have a salary working for you. The last years you can contribute to retirement accounts at full capacity. The last years before the decisions you make become difficult or impossible to undo.
Most pre-retirees treat this window like an extension of the accumulation phase: keep saving, keep working, hope the math works. The households that retire well treat it differently — as the planning window itself.
Here's the checklist that matters most.
1. Lock in the tax-advantaged window
Once you stop earning, your access to tax-advantaged accounts narrows quickly. Use this stretch for what it is: a closing window.
For most pre-retirees, that means:
- Maxing 401(k) and IRA contributions through the catch-up provisions starting at age 50, and the larger catch-up window at age 60 if your plan allows.
- Funding the HSA fully if you're on a high-deductible plan. HSA dollars are triple-advantaged and compound undisturbed into retirement — yet most savers underuse them.
- Asking whether your plan offers a Roth 401(k) option. If you've been mostly traditional, adding Roth contributions in your final years builds tax diversity you'll need later.
In the final five years, every contributed dollar compounds for the shortest time — but it does the most to fill the buckets you'll draw from for the next thirty.
2. Stress-test your withdrawal plan
The “4% rule” is the most widely cited number in retirement planning and the most widely misunderstood. It's a starting estimate, not a guarantee.
In the five years before retirement, the question isn't whether you have “enough.” It's whether your plan holds up under the conditions you're actually likely to face. That means stress-testing for:
- Sequence-of-returns risk. A market decline early in retirement does far more damage than the same decline ten years in. Your plan should survive a 2008-style start, not just an average one.
- Inflation persistence. A few high-inflation years can quietly cut purchasing power 15–20% even when portfolio returns look fine.
- A higher tax environment. Current rates are scheduled to sunset, and a higher-tax future is the base case, not the tail case.
If your plan only works under benign assumptions, it's not a plan — it's a hope.
3. Time Social Security and Medicare deliberately
These two timing decisions are larger than most pre-retirees realize, and they're often made by default rather than design.
For Social Security: claiming at 62 is rarely optimal for a married couple. Claiming at full retirement age, or delaying to 70 in some cases, can change lifetime benefits by six figures — particularly through survivor coordination.
For Medicare: enrollment is mechanical, but the surrounding decisions aren't. The IRMAA surcharge — Medicare's income-based premium — kicks in at thresholds many retirees blow past in their first year of withdrawals without realizing it. A Roth conversion done in the wrong year, or a large capital gain taken too early, can quietly add thousands a year to healthcare costs.
If you're retiring before 65, you also need a bridge plan for healthcare between your last paycheck and Medicare eligibility. COBRA, ACA marketplace, spousal coverage — each has trade-offs that interact with your income plan.
4. Reduce single-source risks
Concentration risk is the silent damager of retirement plans. The final five years are the time to identify and reduce it.
Three places it tends to live:
- Concentrated stock. Equity compensation, ESPP shares, or longstanding individual positions that quietly grew into 20–30% of net worth. Diversifying is rarely just a portfolio decision — it's a tax decision, a capital gains decision, and sometimes an estate decision all at once.
- Single-bucket portfolios. Households whose entire net worth sits in pre-tax accounts have less flexibility than those with Roth, taxable, and pre-tax buckets to draw from. The five-year window is where bucket diversity is built.
- Employer-tied insurance and benefits. Life insurance through work, group disability, employer-subsidized health — these disappear when you stop working. Knowing the replacement cost before you retire is part of the plan.
5. Build a tax-aware sequencing strategy
This is the piece most pre-retirees never see. The order in which you draw from accounts in retirement matters as much as how much you've saved.
The years between leaving work and starting Social Security or RMDs are often the lowest-income years of your adult life. They're also the most valuable tax-planning window most people will ever have — and the one most often wasted.
Done well, a sequencing strategy can:
- Use the low-tax window to convert pre-tax savings to Roth at favorable brackets.
- Realize long-term capital gains at the 0% bracket where possible.
- Push future RMDs (now mandatory at 73, soon 75) down to manageable levels before they ever start.
Done badly — or not done at all — the same accumulation can produce a tax bill 30–40% higher over retirement than it had to.
A real scenario
A couple in Surprise, Arizona, both 60, came to us with $2.3M split roughly 80/20 between his 401(k) and a taxable brokerage account. Social Security at full retirement age would replace about 35% of their pre-retirement income. They planned to retire at 65.
The headline answer — “yes, you have enough” — was the easy part. The harder, more valuable answer was the sequencing: a five-year Roth conversion strategy from 65 to 70, before Social Security started, taking advantage of an income gap that would otherwise be wasted. Over their projected retirement, that one decision was worth roughly $400,000 in after-tax wealth.
They didn't have more money than they thought. They had better timing than they realized.
Where people go wrong
The most common mistakes in the final five years are quiet ones.
Pre-retirees keep treating the period like accumulation and skip the planning. They assume Social Security claiming and Medicare enrollment are administrative steps, not strategic ones. They diversify the portfolio but not the tax structure. They focus on the date of retirement and not the decade after it.
None of these are catastrophic on their own. But compounded over a 30-year retirement, they're the difference between comfortable and tight.
The bottom line
The final five years of work aren't the end of accumulation. They're the start of the retirement plan itself.
The decisions made — or missed — in this window shape the next 30 years more than any single year of saving did. Tax structure, Social Security timing, Medicare planning, withdrawal sequencing, concentration risk: these aren't optional details. They're the plan.
The households that retire well aren't the ones who saved more. They're the ones who planned earlier.