The final five years before you retire is when your financial journey transforms from a marathon into a quick sprint.
The average retirement age in America is 62, according to a survey by MassMutual (1), and if you’re in your late-50s or early-60s, your top priority should be bolstering your nest egg as much as possible.
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Fortunately, for many people this age is also when their earnings are at their peak, their children are leaving the nest and their mortgage is close to being paid off. Unfortunately, many older Americans are not fully prepared for retirement. One in five adults across the country over the age of 50 have no retirement savings at all, according to AARP (2), and the median savings for those in their 50s and 60s is $441,611 and $539,068, respectively, according to Empower (3).
If you’re in a similar situation, here are five steps you can take to rapidly thicken your safety net in the next five years.
1. Max out your tax-advantaged accounts
In recognition of how important the few years before retirement truly are, the Joe Biden administration implemented the Secure Act 2.0 (4). As a result, older workers across the country can super-charge their contributions to their 401(k) plans (5).
Those over the age of 50 can make catch-up contributions of $7,500 per year starting in 2025 and those between the ages of 60 and 63 can make “super catch-up” contributions of $11,250. For someone in this early-60s age range, the total contribution they can make this year is $34,750. And if they benefit from an employer 401(k) match, they could catch up to their retirement goals even faster.
Unfortunately, most older workers are not taking advantage of these generous catch up features. Only 16% of eligible employees made catch up contributions in 2024, according to Vanguard (5).
Don’t be one of the laggards. Leverage these special provisions in your 50s and 60s to make your retirement as comfortable as possible.
2. Create a robust retirement income plan
It’s easy to get so caught up thinking about the size of your nest egg that you forget to plan for withdrawals. Most people rely on a simple rule of thumb, such as the gold standard 4% rule, to plan their retirement.
But as you approach this new phase of life where you don’t have steady employment income, you really have to plan for how and when you withdraw money. For instance, delaying Social Security benefits could increase the monthly amount you receive. This could also give you enough time to sell some assets from your taxable brokerage accounts for tax gain harvesting (6) or to convert 401(k) funds into a Roth IRA for tax-free growth.
If you have other sources of retirement income, perhaps from rental property or traditional defined benefit pensions, you need to figure out the tax consequences of these streams.
Simply put, a balanced and well-crafted withdrawal strategy will minimize taxes and maximize your quality of life in retirement.
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3. Stress-test for market volatility
It’s likely that your retirement plan is based on simple assumptions about market returns and withdrawal rates. For instance, maybe your plan assumes the stock market will deliver a 7% annual return and your annual withdrawals will be 4%.
However, it’s important to note that these are long-term averages and you need to stress-test your portfolio for prolonged market downturns. If, for example, the stock market drops 10% in your first year of retirement and you withdraw 4%, at the end of the year you’re left with a portfolio that is 14% smaller. That can have a long-term impact on how much money you can withdraw during the rest of your retirement.
Stress testing your portfolio and creating a back-up budget or emergency fund can help you prepare for such market downturns and unexpected volatility.
4. Spread your assets in a tax-optimized way
Five years from retirement could be the ideal time to balance out your nest egg and spread it across multiple accounts. If you have too much accumulated in taxable brokerage accounts, perhaps you could consider contributing and maxing out your tax-deferred accounts for the next few years. If you have too much in a 401(k) plan, this could be the ideal time to consider Roth conversions.
Your late-50s and early-60s are also an ideal time to plan for required minimum distributions (RMDs) which generally kick in at 73.
5. Create a lifestyle plan
Don’t forget that all your financial plans ultimately hinge on your lifestyle. That means you need a lifestyle plan just as much as a withdrawal or tax plan. If you want to continue working side gigs or part-time, build that into your plan. If you want to spend more time traveling, don’t neglect that in your annual budget.
If you’re five years away from retirement, test the retirement lifestyle with a short break and see what you enjoy doing with your leisure time. This is the perfect opportunity to build a lifestyle plan for your golden years.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
MassMutual (1); AARP (2); Empower (3); Wikipedia (4); CNBC (5); Ameriprise Financial (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.