The 5-year retirement readiness checklist.
Most of the consequential retirement decisions get made — or missed — in the five years before you stop working. A year-by-year list of what to put in motion, why each item matters, and what it costs to skip.
The five-year window before retirement is the most leveraged period in a household's financial life. Account balances are usually at their peak. Decisions you make in this window — Roth conversion runways, pension elections, insurance coverage, beneficiary alignment, Social Security claiming — set durable outcomes for thirty years. Decisions you defer past this window often can't be unwound at all.
What follows is the year-by-year sequence I work through with clients. The cadence assumes a roughly 60-month runway; if you have less than that, compress the sequence rather than skipping items.
Year 5 out — build the income map
Inventory every account, plan, and benefit. Traditional IRAs, Roth IRAs, 401(k)s from current and prior employers, taxable brokerage accounts, HSAs, deferred comp, pensions, employer stock plans, annuities, savings bonds, and any small accounts you've forgotten. Many households reach the 60-month mark with 8–12 separate accounts; consolidation usually happens in year 1 or year 0, but the inventory has to happen first.
Project Social Security under three claiming ages — 62, full retirement age, and 70 — using your actual earnings record from ssa.gov/myaccount. The default 'just take it at 62' decision costs many couples six figures in lifetime benefits.
Estimate retiree medical and Medicare costs. For pre-65 retirement, the COBRA or marketplace bridge is often the largest unfunded expense and a primary reason households delay retirement by 1–2 years. For 65+, run the Medicare Advantage vs. Medigap decision tree at least once.
Run a baseline retirement projection covering ages 60–95. Most people are shocked by how the numbers change between age 80 and age 95 — and how much that long-tail-risk shapes withdrawal-rate decisions early in retirement.
Year 4 out — stress-test the plan
Run sequence-of-returns scenarios against the income map. Two retirees with identical balances and identical average returns can have radically different outcomes depending on the order of those returns. The 2000–2002 retiree cohort and the 2008 retiree cohort taught us this is not a hypothetical risk.
Quantify how much of the household's income is guaranteed (Social Security, pension, immediate annuities) versus market-dependent (portfolio withdrawals). Many couples discover their 'essential' expenses are mostly market-dependent — which is the single largest preventable cause of forced lifestyle changes 10–15 years into retirement.
Test the plan against a worst-realistic first-year-of-retirement scenario: a 30% equity drawdown in year one combined with elevated inflation. If the plan still works under that stress test, it's robust. If it doesn't, the time to fix it is now, not when the drawdown happens.
Decide on the long-term-care approach. The three real options — traditional LTC insurance, hybrid life-with-LTC riders, or self-funding — each have a viable case. See the LTC article for the full comparison. Underwriting tightens dramatically after age 70; many policies become unavailable. Year 4 is roughly the latest practical decision window.
Year 3 out — tax-position the portfolio
Begin Roth conversions if the multi-year tax projection supports them. The gap years between retirement and the RMD start age (73 or 75 under SECURE Act 2.0) are the prime conversion window, but the math often works in the last 2–3 working years too — especially in a transition year where W-2 income is lower than peak.
Review tax-loss harvesting opportunities in taxable accounts. Selling positions with embedded losses in a high-bracket year can offset gains and ordinary income at the most favorable rates.
Understand the tax character of every dollar you'll spend. Three buckets — taxable (capital gains rates), tax-deferred (ordinary income), tax-free (Roth) — produce dramatically different lifetime tax bills depending on which you draw first. The sequencing question is not solved by rule of thumb.
For Houston-area households with employer stock in a 401(k), run the NUA election analysis well before any partial distribution. NUA is a one-shot, irreversible election; the analysis is technical; the savings can be six figures.
Year 2 out — insurance and estate cleanup
Beneficiary designations checked on every retirement account, IRA, life insurance policy, annuity, and HSA. Beneficiary forms override your will. This is the single highest-value 30 minutes in retirement planning — and the most commonly stale paperwork in any household.
Estate documents updated within the past 5–7 years: will, durable power of attorney, healthcare directive. For Texas residents with assets at or near the federal estate-exemption threshold or complex family situations, consider a living trust — see the Texas estate planning article for what's worth doing here.
Disability insurance status reviewed. Many advisors and clients ignore this in the pre-retirement window because it 'becomes unnecessary at retirement.' The two years before retirement — when you're still earning and still need the protection — are when disability claims often happen.
Life insurance right-sizing. Term policies that were essential during child-rearing years may no longer be needed; permanent policies with cash value may be worth keeping for liquidity or estate-tax-efficiency reasons. Don't drop coverage reflexively; the analysis is policy-by-policy.
Year 1 out — logistics and rehearsal
Final pension election analysis if a defined-benefit pension is in play. Single-life vs. joint-and-survivor decisions are irreversible the day you elect. The corporate pension article covers the seven questions that should be answered before the form is signed.
Rollover strategy locked in. Where the 401(k) goes — IRA, current plan, partial distributions — should be decided in writing before retirement day, not figured out reactively. Watch for the NUA election if applicable.
First-year cash plan in place. Most retirees need 12–18 months of expenses in cash or short-term bonds at retirement start to absorb a bad sequence year without selling equities at a loss.
Test-drive a retirement budget for 90 days. Track every dollar of spending — including the irregular expenses (property tax, home maintenance, healthcare deductibles) at their annualized monthly cost. Many households discover at this point that their projected spending was 15–25% lower than reality.
Year 0 — retirement day
The decisions made in the prior five years take care of most of this day. What remains is paperwork: file for Social Security (if claiming now), enroll in Medicare (within the 7-month initial enrollment window), execute the rollovers, sign the pension election, transition the health plan, update direct deposits.
Schedule the first six-month check-in now. Markets, spending patterns, and family circumstances all shift in early retirement; the first year is rarely the average year.