Five years from retirement? That’s your golden window to make smart financial moves. Without a plan, you might end up working longer or adjusting your dream retirement. Just ask Jenny—at 60, she was set to retire at 65, but her numbers weren’t looking great. Her plan only gave her a 24% chance of making her money last. The good news? With five key steps (taken in the right order), she boosted her odds to 85%—without working longer or making drastic changes. Small moves, big impact. Here’s how.
Step 1: Dial in Your Expenses
One of the biggest mistakes people make is assuming their current expenses will stay the same in retirement. Jenny did the same thing—figuring she’d need $6,000 a month, just like her take-home pay. But a closer look told a different story:
- Mortgage Payoff – Jenny’s mortgage was scheduled to be paid off in four and a half years. That alone reduced her long-term expenses by $1,000 per month.
- Travel Spending – While Jenny planned to spend about $1,000 per month on travel, she realized that this expense wouldn’t last forever. She estimated that she would travel frequently for about 10 years, after which her travel budget would decrease.
By making these realistic adjustments, Jenny’s actual core retirement expenses dropped significantly after age 75, giving her a much clearer, stress-free financial picture.
Step 2: Optimize Your Social Security Strategy
Once retirement expenses are well-defined, the next step is to determine the most effective Social Security claiming strategy. Many people assume they should start collecting benefits as soon as they retire, but that isn’t always the best approach.
For Jenny, collecting Social Security at age 65 would provide $2,400 per month. However, delaying benefits until age 70 would increase her monthly payout significantly due to the delayed retirement credit, which increases benefits by about 8% per year. Given Jenny’s good health and family longevity, delaying Social Security was a smart choice, allowing her to:
- Receive a higher guaranteed income for life.
- Reduce reliance on her investment portfolio in later years.
- Strengthen her financial position in her 80s and beyond.
This one adjustment drastically improved her long-term retirement security without requiring any additional savings.
Step 3: Adjust Your Portfolio Allocation
Your investment strategy should align with your spending needs in retirement. Too often, retirees make the mistake of de-risking too early, which can limit long-term portfolio growth. Conversely, maintaining an overly aggressive portfolio can be dangerous if market downturns occur when large withdrawals are needed.
Jenny’s original portfolio was heavily weighted toward stocks, which posed a risk since she planned to withdraw significant amounts in the first few years of retirement. Instead, she made the following adjustments:
- Shifted a portion of her portfolio into conservative assets to cover five years of essential expenses.
- Kept long-term growth investments intact, knowing that withdrawals would decrease after Social Security kicked in at age 70.
By structuring her portfolio this way, she ensured financial stability early in retirement while allowing the remainder of her assets to grow over time.
Step 4: Implement Tax-Efficient Strategies
Minimizing taxes in retirement can significantly extend the longevity of your wealth. For Jenny, delaying Social Security created a valuable tax planning window from age 65 to 70, where her taxable income would be lower. During this time, she:
- Converted portions of her IRA into a Roth IRA, keeping withdrawals within the 12% tax bracket to minimize tax liabilities.
- Reduced her future required minimum distributions (RMDs), decreasing taxable income in her 70s and beyond.
The results of this strategy were substantial:
✅ $52,000 more in after-tax assets
✅ $44,000 less paid in taxes over retirement
✅ $74,000 less withdrawn from tax-deferred accounts
Strategically managing taxes allowed Jenny to keep more of her money and enhance her long-term financial security.
Step 5: Recalibrate and Optimize Your Plan
After completing these steps, Jenny’s probability of retirement success increased from 24% to 85%. She was now on track to preserve an additional $1.6 million in assets throughout her retirement. More importantly, this planning allowed her to:
- Retire on time at 65, instead of delaying until 70.
- Maintain her desired lifestyle without financial stress.
- Have the flexibility to increase travel spending or pursue additional life goals.
By regularly reassessing and adjusting her plan, Jenny positioned herself for a fulfilling, financially secure retirement.
Final Thoughts
A well-structured retirement plan is not just about numbers—it’s about freedom, security, and the ability to enjoy life without financial stress. By following the right steps at the right time, you can maximize your wealth and retire with confidence.
If you’re serious about preparing for retirement, consider working with a financial advisor or using retirement planning software to refine your strategy. The decisions you make today will shape the quality of your retirement for decades to come.
Are you on track for retirement? Now is the time to get started!