Sep 14, 2026
Common Mistakes to Avoid in the Five Years Before Retirement
The final five years before retirement can have a major impact on your financial future. Learn which common mistakes to avoid as you prepare for a more secure retirement. after decades of working, saving and planning, retirement can finally feel within reach. The five years leading up to retirement are often an exciting time, but they can also be financially sensitive. at this stage, there is usually less time to recover from major financial mistakes. Decisions about spending, debt, investments, healthcare and income can all influence how comfortable your retirement will be. saving as much as possible is important, but avoiding costly mistakes can be just as valuable. Here are some of the most common mistakes people make during the final years before retirement—and what you can do instead.
1. Underestimating your retirement expenses
One of the most common retirement planning mistakes is assuming that your expenses will automatically drop once you stop working. some work-related costs may disappear. You may spend less on commuting, work clothing or meals away from home. However, many other expenses can remain the same or even increase. housing costs, utilities, property maintenance, insurance premiums, travel, family support and healthcare can all continue throughout retirement. Inflation can also gradually increase the amount you need to maintain your lifestyle. rather than estimating your retirement budget based on assumptions, start with your actual spending today. review your bank statements, credit card bills and recurring expenses. Separate your spending into essential and discretionary categories, then consider how each category might change after retirement. a realistic retirement budget can help you identify potential shortfalls before they become a problem.
2. Taking on new debt shortly before retirement
Entering retirement with significant debt can put unnecessary pressure on your future income. some people take on new loans in the years before retirement to renovate their home, purchase a vehicle, help their children financially or cover other major expenses. While these decisions may make sense in certain circumstances, adding a large monthly payment close to retirement can reduce your financial flexibility. once employment income stops, managing loan payments can become more challenging. this doesn’t necessarily mean that every debt needs to be eliminated before retirement. Instead, look carefully at your overall debt situation, including interest rates, monthly payments and repayment timelines. prioritizing high-interest debt and avoiding unnecessary new liabilities can make it easier to manage your cash flow once you retire.
3. Waiting too long to plan for healthcare costs
Healthcare is an important part of retirement planning, yet it is often overlooked. retirement planning tends to focus on savings and investment income, while healthcare expenses may receive less attention. However, costs related to medications, dental care, vision care, mobility, home support and other services can become increasingly important as you get older. before retirement, review what healthcare coverage you may have after leaving your employer. If you currently rely on workplace benefits, find out which benefits will end when your employment ends and what alternatives may be available. you should also consider whether your retirement budget has enough room for unexpected healthcare-related expenses. planning for these costs in advance can help prevent you from having to withdraw large amounts from your retirement savings unexpectedly.
4. Making drastic investment changes
As retirement approaches, it is natural to become more concerned about protecting your savings. however, reacting to that concern by making dramatic investment changes can create its own problems. some people continue taking more investment risk than their retirement plans can comfortably tolerate. Others move almost all of their money into very conservative investments because they are afraid of market volatility. neither approach is necessarily appropriate for everyone.
Your investment strategy should reflect your retirement timeline, financial goals, expected income needs and ability to tolerate market fluctuations. Retirement doesn’t mean your investments have to stop growing—but it does mean you may need to think differently about risk. instead of making a sudden decision based on short-term market movements, review your overall portfolio and consider whether its level of risk still matches your retirement plan.
5. Saving without having an income strategy
Building a large retirement savings balance is only one part of preparing for retirement. you also need to think about how those savings will actually support your lifestyle once employment income stops. consider where your retirement income may come from. Depending on your circumstances, this could include government benefits, workplace pensions, personal retirement savings, investment income, rental income or other sources. then think about how and when you plan to use those resources. for example, will you need to withdraw money every month? Do you expect your expenses to change significantly throughout retirement? How will you handle unexpected expenses? creating an income strategy before retirement can help turn your savings into a practical plan for covering your day-to-day needs.
6. Ignoring the impact of inflation
A retirement plan that looks comfortable today may look very different several years from now. inflation gradually reduces purchasing power, meaning the same amount of money may buy fewer goods and services in the future. this is particularly important for people expecting a long retirement. Even relatively modest annual increases in living costs can have a significant cumulative effect over several decades. when estimating your future retirement income, don’t look only at today’s expenses. Consider how costs may change over time and whether your income sources and investment strategy can adapt.
7. Forgetting about insurance and financial protection
Retirement planning isn’t only about investments and savings. It is also about protecting the financial resources you have spent decades building. review your existing insurance coverage as retirement approaches. Your needs may change when you stop working, particularly if your current coverage is connected to your employer. depending on your circumstances, life insurance, health-related coverage, long-term care considerations and other forms of financial protection may deserve a place in your overall plan. for families, business owners and individuals with significant financial responsibilities, reviewing insurance needs before retirement can help identify potential gaps while there is still time to address them.
8. Focusing only on the financial side of retirement
Retirement is a financial transition, but it is also a lifestyle transition. for many people, work provides structure, social interaction, purpose and a predictable daily routine. Suddenly having significantly more free time can be an adjustment. think about what your days might look like after you stop working. Will you travel? Spend more time with family? Take up hobbies? Volunteer? Work part-time? Pursue a personal project? thinking about these questions before retirement can make the transition easier—and it can also improve your financial planning. for example, extensive travel during the first few years of retirement could require a very different budget than a quieter lifestyle focused on hobbies and staying close to home.
9. Assuming you have plenty of time to fix mistakes
Perhaps the biggest mistake during the final five years before retirement is assuming that there will always be another opportunity to make up for a financial shortfall. when you are 20 or 30 years away from retirement, you generally have more time to recover from market downturns, increase your savings or change your strategy. with only a few years remaining, the margin for error can be smaller. that’s why the final five years should be used to review your plan carefully—not to panic, but to identify potential problems while there is still time to make adjustments.
Turning the final five years into an opportunity
The years immediately before retirement don’t have to be a period of financial stress. They can be an opportunity to take a closer look at where you stand and make thoughtful decisions about the future. start by reviewing your expected expenses, debt, investments, insurance coverage and potential sources of retirement income. Consider how inflation and changing healthcare needs could affect your budget, and don’t forget to plan for the lifestyle you want—not just the financial requirements. most importantly, don’t wait until your last day of work to think about what comes next. a well-considered retirement plan can help you enter this next chapter with greater confidence and a clearer understanding of how your financial resources can support the life you want to live.
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