The five years before retirement are unusual. You still have earned income, you still have time to adjust, and most of the choices in front of you are reversible. After you stop working, that changes: fewer levers, less time, and decisions that tend to lock in.
That makes it a useful window to take stock. Not to make dramatic moves, but to answer a handful of questions while the answers can still change.
Where will the income come from, and in what order?
Most people retire with money in several places at once: a workplace plan, an IRA, taxable savings, perhaps a pension. Those accounts are taxed differently, and the sequence you draw from them affects how much of each dollar you keep. Working that order out is one of the quiet places where financial planning and tax planning meet, and it is far easier to design while you are still earning.
What is the gap between what you spend now and what you expect to spend?
Very few households know this number precisely. Getting closer to it changes almost every other assumption: how long the savings need to last, how much flexibility the plan has, and how much risk it actually needs to take.
What happens to health coverage before Medicare?
What happens to health coverage between your last day of work and Medicare eligibility? This is the item most often missed, and it can be one of the larger line items in an early retirement year. The options look very different depending on how far ahead of the date you start looking.
How would the plan hold up if markets fell early?
A decline in the first years of retirement lands differently than the same decline later, because withdrawals lock in the loss. Knowing how much flexibility you have before that happens is worth more than predicting whether it will.
None of this requires a decision today. It requires knowing which decisions are coming, and roughly when, which is precisely the work of the five-year window.
This article is general in nature and is not investment, tax or legal advice. Raymond James does not provide tax or legal advice. Please discuss these matters with the appropriate professional.
