Retirement Planning Steps: Key Moves in Your Final 5 Years

By Derek D. Villars, CLU®, CASL®, ChFC®

The countdown has started. You’re finally near the finish line of officially retiring. The final five years before you say goodbye to the daily grind are a critical time for fine-tuning your financial plan to set the stage for a smooth transition into your post-career life. These years call for focused retirement planning steps and strategic adjustments; coasting is no longer an option.

1. Choose Your Retirement Date

To choose your official retirement date, it’s important to carefully evaluate your finances and retirement goals. This decision isn’t just about age; it should be based on a strategic alignment of several factors.

Think about the right time to file for Social Security, keeping in mind that your benefits will be 8% higher each year you wait to claim Social Security. It’s also critical to understand how your benefits could be reduced if you claim your benefits before full retirement age (FRA) while continuing to work in some capacity. 

Additionally, a financial plan can help inform you on how much you need to have saved at retirement to be able to comfortably live off each year without running out of money. By equipping yourself with that number, you have a target to track toward.

2. Manage Retirement Expenses

Next, realistically assess your expenses. Some costs like healthcare and the effects of inflation are likely to increase, while other costs (such as mortgage payments or work-related expenses) may decrease. Careful forecasting and budgeting are critical to confirm your retirement income aligns with these shifting needs.

Equally important, plan for potential long-term care expenses and learn about the limitations of Medicare. Medicare doesn’t cover all the costs of long-term care, so supplemental insurance or other funding sources may be required.

3. Maximize Retirement Income

It’s time to maximize your retirement income so you can feel confident your savings can last throughout your golden years.

This retirement planning step requires a comprehensive review of your investing portfolio, adopting a more cautious approach to safeguard the money you’ve accumulated. As part of this step, it’s critical to comprehend withdrawal rates because excessive withdrawals can use up your funds too soon. 

In addition to withdrawal strategies, taxes also play a significant role in optimizing your retirement income. To reduce your tax burden, utilize tax-efficient account distributions by carefully considering the order of withdrawals from taxable, tax-deferred, and tax-free accounts.

Lastly, you need a clear understanding of required minimum distributions (RMDs) and how they affect your tax obligation. Understanding RMDs helps shield your nest egg, allowing you to retire with a well-thought-out strategy for sustainable income.

4. Maximize Retirement Account Contributions

Contributing the maximum to your retirement accounts is a critical step in the last five years prior to retirement.

Maximize your regular 401(k) and IRA contributions to leverage tax-free or tax-deferred growth. Another smart option is a backdoor Roth conversion, which allows you to circumvent income restrictions and make contributions to a Roth IRA.

If you’re age 50 or older, make the most of the catch-up contributions that are available via the majority of retirement plans, including 401(k)s and IRAs. These provisions give people age 50+ the ability to make much bigger contributions ($7,500 for 2025) than the typical caps.

And in 2025, a new “super” catch-up contribution cap of $11,250 is in effect for anyone between the ages of 60 and 63.

5. Review and Adjust Your Investment Allocation

Lastly, set aside time to carefully review and adjust your investment allocation.

The investment goal in these final five retirement planning years is to gradually shift to a more cautious portfolio mix. This type of investment approach reduces exposure to unpredictable assets like equities, while sustaining some growth potential to fight inflation. 

However, given that your retirement could possibly last more than 30 years, this transition should carefully take your personal risk tolerance and time horizon into account. Avoid the temptation to become too conservative too soon, as this could make it more difficult for your portfolio to produce enough income to keep up with rising costs.

A well-rounded strategy that gradually shifts toward a more stable asset allocation provides capital preservation and ongoing growth, bringing your investments in line with the realities of a potentially long retirement.

Reach Out for Help

Actively addressing these essential retirement planning steps helps you firmly establish your financial stability and start on your retirement journey with confidence and excitement.

Our team at Boulevard Wealth Management has the right skills and experience to help you plan with purpose. We’re committed to a fiduciary standard of practice to improve your outcomes; our mission, vision, and values speak to this commitment.

To schedule a meeting, call (877) 664-2583 or email derek@blvdwealth.com.

About Derek

Derek Villars, CLU®, CASL®, ChFC® is the Director of Risk Management at Boulevard Wealth Management, a Bloomington-based financial services firm dedicated to addressing client goals through a team-based, fiduciary approach. With over 22 years of experience in the financial industry, Derek specializes in advanced insurance and financial strategies designed to help clients grow, preserve, and distribute their wealth effectively. His proficiency includes estate planning, business owner benefits, business succession strategies, tax-advantaged retirement planning, and comprehensive insurance performance audits. Derek is known for his focus on security, risk mitigation, and delivering after-tax, risk-adjusted returns, helping clients experience financial peace and confidence.

A graduate of St. Cloud State University, Derek has earned the Chartered Life Underwriter®, Chartered Financial Consultant®, and Chartered Advisor for Senior Living® professional designations. He works closely with pre-retirees, business owners, and individuals with complex financial needs, providing personalized guidance and solutions. Outside of his professional life, Derek is an avid car enthusiast who enjoys smoking meats, charity road rallies, racing, auto restoration, and trips with family and friends. To learn more about Derek, connect with him on LinkedIn.