Retirement Planning Checklist: Five Years Before Retiring

Five years out: establish the baseline

List essential expenses, discretionary spending, debt, housing, and expected care needs. Gather retirement accounts, pension terms, and Social Security estimates. Separate gross income from the amount available after deductions and taxes.

Build scenarios for retiring as planned, working longer, and stopping earlier than expected. Include a market decline and higher health costs. Planning reduces uncertainty; it cannot guarantee financial security.

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Four years out: review investment and debt risks

Identify which assets support near-term spending and which support longer-term goals. Cash, appropriately structured insured deposits, and Treasuries have different inflation, maturity, liquidity, and interest-rate considerations. Verify deposit-insurance limits and any early-withdrawal penalties; selling bonds before maturity can produce a loss.

High-yield corporate bonds are below-investment-grade debt with greater default risk. They should not be described as a stable cash substitute merely because they pay interest. Review the portfolio's actual risks and fees rather than relying on asset labels.

Three years out: map health coverage

If retiring before Medicare eligibility, compare available employer or spouse coverage, Marketplace coverage, and other applicable options. COBRA after employment ends usually lasts up to 18 months, with extensions in certain circumstances; it is not a general five-year bridge from age 60 to 65. Compare premiums, networks, deductibles, and enrollment dates for the entire gap.

At Medicare age, review Parts A and B, drug coverage, and any supplemental coverage choices. Medigap and Medicare Advantage have different functions; purchasing one is not a universal mandatory choice. See enrollment periods and Advantage considerations.

Two years out: decide how income will begin

Compare Social Security claiming months with the cost of funding a delay. The 8% annual delayed-credit rate applies to a worker's retirement benefit after full retirement age for relevant birth years, up to age 70. It is not an 8% increase for every year of waiting from 62.

Evaluate each spouse's work, benefits, and survivor situation together. There is no automatic rule that the lower earner should claim early. Use the household decision checklist.

One year out: rehearse and confirm

1. Try living on the projected retirement budget while still working.
2. Confirm benefit application dates, pension elections, and healthcare effective dates.
3. Review beneficiary designations and necessary legal documents with appropriate advisers.
4. Set a withdrawal and cash-management process, including tax payments.
5. Decide which spending could change after a poor market year or new care need.

Record the assumptions and revisit them regularly. A plan is useful when it helps you respond to change, not when it promises that nothing will go wrong.