Are You Planning to Retire in 5 Years?

Oct 23, 2023 1 min read

After a lifetime of hard work and diligent saving, the finish line is in sight and it’s time to start planning for the last five years of your career — and beyond. The prospect of retiring can be both exciting and nerve-wracking, but the right preparation can help ensure a smooth and seamless transition when the time comes.

What to Do 5 Years Before Retirement

Make a Health Insurance Plan

Health insurance is likely the biggest "new" expense you'll face once you're retired. If you'll be 65 or older when you hang it up, you’ll qualify for Medicare Part A for free, but there are typically premiums for other parts of the program and any supplemental coverage you may choose to buy. For people under 65, you’ll need to look into other options, such as staying on your employer’s health plan or purchasing coverage through your state's health care marketplace. This is also a good time to consider additional insurance needs, like long-term care coverage. Approximately 70% of Americans who turn 65 will need long-term care, but by age 65 it may be too late to be approved for long-term care insurance.

Pay Down Debt

Eliminating debt before retirement gives you greater flexibility to alter your retirement budget if needed rather than having a significant portion of your income allotted to debt payments. Focus on eliminating consumption-based debt, like credit cards, auto loans and payday. These debts typically come with high interest rates that can significantly impact your finances.

Update Your Estimated Income and Budget

You’ve likely already thought through how much money you’ll need to retire comfortably, but it’s good practice to review and update your expected monthly retirement income and expenses as the date draws nearer. Start with your employer-sponsored 401(k) or 401(b) retirement account and then consider any IRAs and any other retirement investments you may own. You may also have rental property income or continued income from a part-time job. Try to determine how much income each can provide monthly and use that as the foundation for your monthly budget.  

Consider Your Investment Strategy

As you approach the five-years-out mark, it might be time to transfer some of your retirement savings out of the stock market and into lower-risk investment products. Think about the three bucket approach – a bucket for liquid assets you’ll need to regularly draw on, a bucket for converted or easily convertible assets to refill your first bucket and a bucket for long-term investments that you won’t need to touch for awhile. It's important to think through where your  money is before you need to spend it so that you have control over how much you convert and when. 

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A financial advisor can help you complete these last critical steps before retirement. Connect with a Farm Bureau financial advisor to protect your future

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