A strong retirement planning checklist five years before you retire should cover your spending target, your income sources, your investment risk, your tax strategy, your healthcare timing, and your estate basics. The goal is simple: take the scattered pieces of your financial life and turn them into one clear plan with next steps you can follow.
Five years out is the ideal planning window. You still have time to adjust savings, tighten your budget, review risk, and prepare for key deadlines like Medicare enrollment and Social Security timing, all without the pressure that builds in the final year before retirement. This guide walks through every major item you should check, as part of a coordinated retirement planning approach.
Key Takeaways
- Know your retirement spending number.
- Map income sources and timing.
- Stress test for market drops and inflation.
- Build a tax-aware withdrawal plan.
- Confirm healthcare, estate documents, and beneficiaries.
Start With Your Retirement Date and Spending Target
Every checklist starts with a target retirement date. Once you have one, you need a realistic picture of what your life will cost. Planning gets much easier when you can answer one question: how much income do we need each month to live the way we want?
Estimate Your Baseline Monthly Needs
Start with fixed, required expenses. These are the bills you still have to pay, even in a rough market year, and they form the “floor” of your retirement income plan. Common baseline categories include housing (mortgage or rent, property taxes, HOA, repairs), utilities, phone and internet, food and household basics, transportation, and insurance premiums.
A practical approach is to review the last 6 to 12 months of spending and sort it into “needs” and “wants.” It does not need to be perfect. It just needs to be honest.
List Your "Wants" Like Travel and Hobbies
Retirement is not only about covering the basics. It is also about using your time the way you want. List the lifestyle items you hope to fund, then estimate what each may cost each year, including travel, hobbies, memberships, dining out, family support or gifting, and home projects.
This step helps prevent a common issue. People plan well for necessities but underestimate lifestyle spending in the early “go-go” years of retirement, when energy and interests are high.
Build a Buffer for Surprises
Inflation and healthcare costs can push spending higher over time. Many people add a buffer of about 10% to 20% so the plan has breathing room. The buffer exists to protect you from real-life surprises, not to encourage extra spending.
Inventory Your Accounts and Benefits
Most households have retirement money spread across multiple places. Pulling everything together now helps you avoid missed details later and makes it easier to build a coordinated withdrawal plan.
401(k), IRA, Roth, Brokerage, and Bank Savings
List every account and include the institution, the account type (401(k), Traditional IRA, Roth IRA, brokerage, bank savings, HSA), the approximate balance, and a simple note on how it is generally taxed (taxable, tax-deferred, or potentially tax-free).
This exercise helps you spot overlap, like old 401(k)s invested in similar funds, or a portfolio that is more concentrated than you realized.
Social Security Estimate
Create or log in to your my Social Security account to access your Social Security Statement, verify your reported earnings, and review your benefit estimates. Checking your earnings record matters because your benefits are based on your lifetime earnings history, and errors do happen.
Pension Choices (If Applicable)
If you have a pension, request the latest benefit estimate and review your payout options. Some plans offer a lifetime monthly benefit, while others may offer a lump sum. The right choice depends on cash flow needs, survivor goals, taxes, and how the pension fits into your overall plan.
Build an Income Plan You Can Follow
A retirement income plan shows where your monthly “paycheck” comes from once the regular salary stops. Without a written plan, retirement can feel uncertain, even when your savings are strong. A coordinated income planning strategy makes the first year of retirement much smoother.
What Pays the Bills in Your First Year of Retirement
Your first year often includes the most change, from leaving work to shifting health coverage and setting up withdrawals. Many retirees build a clear “year one” funding plan so they are not forced to sell long-term investments at the wrong time, especially if markets are down.
How Much Comes From Social Security or a Pension
Social Security and pensions can provide steady income and reduce how much you need to withdraw from investments. Social Security can be claimed as early as age 62, with reductions for claiming early, and benefits can increase when delayed past full retirement age up to age 70.
What You Withdraw From Investments and When
The order you pull from accounts can affect both your taxes and your Medicare premiums. A common approach is to map withdrawals year by year instead of guessing, especially if you have a mix of taxable, tax-deferred, and Roth accounts.
Keep required minimum distributions (RMDs) on your radar as well. Many retirees must begin RMDs at age 73 or 75, depending on birth year, and your first deadline is generally April 1 of the year after you reach that age. Our RMD guide for retirees walks through the rules in plain English.
Plan for a Market Drop Before Retirement
A market drop near retirement can be disruptive, because withdrawals may begin around the same time. Planning ahead helps you build flexibility so short-term volatility does not force long-term decisions.
Cash Reserve and Short-Term Needs
Many retirees keep a cash cushion of about 6 to 24 months of planned spending to reduce the chance of selling investments during a downturn. The right amount depends on your guaranteed income, your spending needs, and your comfort level with market swings.
Risk Check and Rebalancing Plan
Five years out is a good time to confirm whether your current risk level still matches your timeline. A rebalancing plan helps you manage risk consistently instead of reacting emotionally when markets move. Our guide on whether to adjust your portfolio in retirement walks through what to review first, and a thoughtful investment management approach keeps the whole picture aligned.
Avoid Big Changes Based on Headlines
Headlines are designed to grab attention, but retirement plans are built to keep you steady. If you feel tempted to make a major change, go back to your written plan and long-term goals before acting. That simple habit prevents most of the biggest planning mistakes.
Reduce Tax Surprises
Taxes can be one of the largest ongoing expenses in retirement. A tax-aware plan helps you estimate take-home income more accurately and avoid unnecessary surprises later. A strong tax planning approach coordinates your withdrawals with everything else.
Which Accounts Create Taxable Income
Traditional IRAs and 401(k)s are generally taxed as ordinary income when withdrawn. Taxable brokerage accounts may create taxes through capital gains, dividends, and interest. Roth withdrawals can be tax-free if they meet IRS rules, but the details matter. Knowing which accounts raise taxable income lets you withdraw with intention instead of by accident.
What Higher Income Can Change (Medicare and Brackets)
Higher income does not just affect your tax bracket. It can also increase your Medicare premiums through income-related monthly adjustments, often called IRMAA, for Part B and Part D. These adjustments are based on a two-year income lookback, so decisions made today can raise your Medicare costs years later.
Year-by-Year Tax Planning Before Retirement
Five years out is when year-by-year planning becomes especially valuable. Small moves, made at the right time, can lower future taxes. Some retirees explore Roth conversions, coordinate the timing of Social Security, and plan around RMDs as part of a broader tax-efficient withdrawal strategy.
Confirm Healthcare and Insurance
Healthcare is a major variable in retirement, so the costs and timing of coverage decisions can affect both your budget and your tax plan. A coordinated healthcare planning approach keeps the pieces aligned.
Medicare Timeline If You Are Close to 65
Medicare’s Initial Enrollment Period (IEP) is a seven-month window that begins three months before you turn 65, includes your birthday month, and ends three months after. Missing that window can lead to late enrollment penalties, and the Part B penalty can increase your premiums by 10% of the standard premium for each full 12-month period you were eligible but did not enroll.
Long-Term Care Planning Basics
Long-term care planning prepares you for the possibility of home health care, assisted living, or nursing care. Many people start by choosing an approach, such as using insurance (if it fits the plan and budget), or setting aside assets and building flexibility into the plan (often called “self-insuring”). This is a personal decision, but it should still be intentional and informed.
Life Insurance and Liability Review
As retirement gets closer, review whether you still need life insurance and what purpose it serves, and whether your liability coverage still fits your assets and risk profile. Many policies were selected for a working-life stage and may need updating once income, dependents, and assets change.
Update Estate Basics and Beneficiaries
Your retirement plan should also cover two important questions: what happens if I am no longer here, and who can step in if I cannot manage things myself? Addressing these questions now helps protect your wishes and reduce uncertainty for the people you care about. A coordinated estate planning strategy makes the whole process smoother.
Beneficiary Check (IRA, 401(k), Life Insurance)
Beneficiary forms matter because they often control who receives the assets, sometimes overriding what your will says. Review your beneficiaries across retirement accounts and insurance policies to make sure they match your current wishes and your estate documents.
Power of Attorney and Healthcare Directives
A durable power of attorney and healthcare directives allow someone you trust to make financial and medical decisions if you cannot. Having these documents in place provides clarity and protection for your family during a difficult time.
Coordinate With an Attorney
A financial advisor and estate attorney can work together to confirm account titling, beneficiary alignment, and how assets should transfer. Coordinating these details now reduces confusion and delays later, especially for more complex estates.
What to Bring to a Retirement Planning Meeting
If you meet with a professional, it helps to arrive prepared. Bring a one-page summary of your assets (account types and balances), your Social Security Statement with a quick earnings record review, a basic budget covering needs, wants, and a buffer, your most recent tax return, your insurance policy summaries, and any estate documents you already have, such as a will, trust, or POA. Having everything in one place turns the first meeting from an information-gathering session into a real planning session.
FAQs
You are generally on track if your reliable income (like Social Security and a pension, if applicable), combined with a sustainable withdrawal plan from savings, can cover your projected monthly expenses, taxes, and healthcare costs, with a reasonable buffer. It also helps to stress test the plan for scenarios like a market downturn or higher-than-expected inflation.
Start by listing every account in one place, and then decide whether simplification would help. Some people consolidate old 401(k)s into an IRA (or into a current employer plan, if allowed) to make tracking easier and help coordinate future RMDs.
It depends on your interest rate, cash flow, and comfort level. Paying it off can lower your monthly “floor” of expenses, while keeping it may preserve liquidity and flexibility. The right decision is the one that supports your written income plan and stress test.
A common approach is holding 6 to 24 months of spending in cash or highly liquid accounts, so you are less likely to sell long-term investments during a down market. The best amount depends on your guaranteed income and how predictable your expenses are.
Start at least five years before retirement so you can coordinate claiming timing with your tax plan and withdrawal plan. Social Security explains that claiming early can reduce benefits, and delaying past full retirement age can increase benefits up to age 70.
Common mistakes include taking more risk than they realize, not having a clear first-year withdrawal plan, delaying Medicare planning, and not understanding how retirement income will be taxed. Medicare enrollment timing and penalties are also important to get right.
An annual review is common. You should also review your plan after major life changes (job change, health event, marriage/divorce, death in the family) and after major market moves.
Bring your recent tax return, account statements, Social Security estimates, and a list of monthly expenses. You can access your statement and verify earnings using a my Social Security account.
Ready to Turn This Checklist Into a Clear Plan?
A retirement planning checklist is most valuable when it becomes a real, written plan you can follow year by year. The earlier you start, the more options you have.
If you are within five years of retirement and want a second set of eyes on your plan, Bauman Wealth Advisors can help. Schedule a complimentary consultation with one of our CFP® professionals to review your retirement spending target, income sources, tax strategy, and key deadlines like Medicare and Social Security.
We do retirement, so you can do life.
