The five years before retirement are some of the most financially important—and also where people make the biggest preventable mistakes. The three most common missteps are not adjusting investments for income needs, claiming Social Security without a strategy, and mis-timing Medicare enrollment. Getting these right can dramatically improve your long-term financial stability. At Thomas Advisory Services in Winter Haven, FL, Allen Thomas brings 30+ years of experience helping pre-retirees navigate this critical window with clarity and confidence.
This guide breaks down the essential decisions, step-by-step, so you can retire on your terms.
Why the Final Five Years Matter
The five-year countdown to retirement is when everything starts to feel real. Income changes, healthcare decisions, and portfolio shifts can all impact how smoothly your transition unfolds. These years offer a unique opportunity to make high-impact adjustments while you still have consistent income—and before retirement starts placing new demands on your savings.
Allen Thomas and the team at Thomas Advisory Services often remind clients that these five years are the bridge between “saving and growing” and “protecting and distributing.” The financial mindset changes, and your strategy needs to adapt with it.
1. Maximize Catch-Up Contributions
If you’re 50 or older, the IRS allows larger retirement contributions—an important advantage if you're closing the gap between where you are and where you want to be.
For example, if you're 60 and planning to retire at 65, increasing your 401(k) contributions by taking advantage of catch-up limits can add meaningful savings in a short time. Even modest increases—such as redirecting part of a bonus or trimming unnecessary expenses—can help strengthen your retirement foundation.
A second benefit: increasing contributions now can act as a tax strategy. Higher pre-tax contributions lower your taxable income, while additional Roth contributions may provide tax-free income later. A balanced approach often works best, and Allen Thomas helps clients evaluate what mix makes the most sense for their situation.
2. Review Your 401(k) Rollover Strategy
After decades with an employer-sponsored plan, it’s easy to forget that you have options—and those options can affect your long-term income safety and flexibility.
In the five years before retirement, it’s wise to answer questions like:
- Should you leave your 401(k) where it is or roll it over?
- Does moving funds to an IRA give you better investment choices?
- Do you want more control over risk management as retirement approaches?
- Would blending investments with protected income strategies help create a stable retirement paycheck?
Consider an example: A couple in their early 60s came to the Thomas Advisory Services Winter Haven office with most of their money in a single target-date fund inside a 401(k). They didn’t realize how exposed they were to market swings. Through hybrid planning and a structured income approach, they reallocated portions of their assets to better match their upcoming income needs—reducing anxiety about “what happens if the market drops right after we retire.”
A rollover isn’t always the answer, but a strategy review almost always is.
3. Time Your Social Security Claiming Wisely
Social Security is one of the most important decisions you’ll make—and one of the most commonly misunderstood. Claiming too early can reduce lifetime benefits, while delaying may meaningfully increase your guaranteed income.
Key considerations include:
- Your health and longevity
- Whether you are married or divorced
- Your income needs in the early retirement years
- Whether working longer may trigger the earnings test
For example, if you claim at age 62, you may receive 25–30% less each month compared to waiting until full retirement age. Waiting until age 70 can increase your benefit further. The right answer is never one-size-fits-all, which is why Social Security optimization is a core part of pre-retirement planning at Thomas Advisory Services.
4. Prepare Early for Medicare Enrollment
Medicare timing is another area where pre-retirees often stumble—especially those planning to retire before age 65. Your Initial Enrollment Period begins three months before you turn 65, and missing deadlines can lead to penalties or gaps in coverage.
Five years before retirement is the perfect time to start understanding the differences among:
- Medicare Parts A and B
- Medicare Advantage
- Medigap (Medicare Supplement)
- Prescription drug plans
For many retirees, Medigap plans provide predictable costs and wider provider flexibility—something especially valuable in Florida’s healthcare landscape. A strong Medicare strategy helps protect your retirement income from rising medical expenses.
5. Balance Pre-Tax and Roth Accounts With Purpose
Many retirees approach retirement with most of their savings in pre-tax accounts, such as 401(k)s or traditional IRAs. While these accounts are powerful for tax-deferred growth, they also create future tax obligations—especially once Required Minimum Distributions (RMDs) begin.
In the five years before retirement, you have a valuable window to:
- Shift some savings into Roth accounts
- Evaluate whether Roth conversions make sense
- Plan withdrawals that minimize taxes later in life
- Balance future taxable and tax-free income streams
As an example, a Central Florida retiree with significant pre-tax savings may choose to convert smaller amounts each year between ages 60 and 65, staying within a preferred tax bracket. This can reduce future RMDs and create more flexibility in later years when planning distributions, healthcare spending, or legacy goals.
Proper tax planning during this five-year window can have a lifelong impact on how long your savings last.
6. Adjust Your Investment Strategy for Retirement Income
Investment strategies that worked during your growth years may not be ideal as you approach retirement. The closer you get to leaving work, the more focus shifts to:
- Reducing unnecessary risk
- Creating predictable income streams
- Protecting against market downturns early in retirement
- Building a “retirement paycheck” strategy
One of the most avoidable mistakes pre-retirees make is staying too aggressive—or making sudden, panicked changes when markets get volatile. A balanced, thoughtful transition plan helps you remain steady and confident through the retirement countdown.
7. Get Professional Guidance Sooner Rather Than Later
Most people don’t realize how many decisions converge in the final five years before retirement—tax planning, income planning, healthcare planning, Social Security timing, risk management, and estate considerations. It’s a lot to juggle alone.
That’s why this window is the most common time that Central Florida pre-retirees reach out to the Winter Haven office of Thomas Advisory Services. With 30+ years of experience, Allen Thomas helps clients make informed, coordinated decisions instead of piecemeal guesses.
FAQ
What’s the biggest mistake people make five years before retiring?
The most common mistake is failing to adjust investments from accumulation to income planning—leaving portfolios vulnerable to market downturns right before retirement.
When should I start Social Security planning?
Ideally, at least five years before retirement so you can coordinate timing with taxes, Medicare, and other income sources.
Do I really need to think about Medicare early?
Yes—mis-timing Medicare enrollment can lead to penalties or surprise gaps in coverage. Early planning prevents avoidable expenses.
Should I use Roth accounts in retirement?
For many retirees, yes. Roth accounts provide tax-free withdrawals and reduce future Required Minimum Distributions, improving long-term flexibility.
If you’re in your final five years before retirement, now is the perfect time to get ahead of these decisions. Thomas Advisory Services invites you to request a free copy of Wealth Beyond Work —a practical guide written to help you step into retirement with clarity and confidence.