What Should You Do 5 Years Before Retirement?

What to Do 5 Years Before Retirement to Secure Your Finances?

Know the key financial actions to take 5 years before retirement, covering debt, investments, income planning, healthcare costs, and tax efficiency.

Written by : Knowledge Centre Team

2025-10-10

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8 minutes read

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Retirement feels like a far-off stage, a destination you have years and years to reach when you are in your twenties, thirties, or forties. However, as they say, time flies. Within the bat of an eye, you fast-forward to your late fifties or early sixties, and retirement planning becomes a pressing topic of contemplation seemingly overnight.

It is during the ultimate five years before retirement that panic may begin to kick in if you haven’t been prepared. The most critical and urgent questions regarding financial planning will start propping up at this point:

  • How much will be my monthly pension after 60?
  • Do I have enough to have a lifetime income after I retire?
  • Can I continue my insurance to look after medical emergencies?

Needless to say, the last five years of your retirement is a crucial phase and the best chance to pay off debt, accrue substantial wealth and devise long-term strategies for a safe and secure post-retirement life. However, irrespective of your current stage of financial situation, there is always room for improvement.

Here is a list of the top five things that you should do five years before your retirement:

1. Revisit your Retirement Savings

About five years before retirement is an ideal time to gauge your savings and portfolio and decide what your budget will be after retirement. Thus, you must devise a retirement budget that estimates how much you will need each month:

  • You can begin by recording your monthly income and expenditures
  • Then, record the expected monthly retirement income from sources such as a pension, investments, social security, and other retirement funds

If the consequent result is close to your current pay, then viola, you will not have to make much amends to your post-retirement lifestyle, and there is also no need for significant overnight financial changes.

On the other hand, if your post-retirement budget comes out to be relatively low as per your current take-home pay:

  • You can change your current lifestyle to spend less in retirement
  • Start saving more in your retirement funds and replenish them as much as possible within these five years

Must Read - How to Withdraw Pension?

2. Switch to Safer Investments

When you were 30 or 40 years old, taking on investment risk was a feasible enough risk as the timeline for using that money was many years away. However, things change five years before you retire.

With a couple more years left before you say goodbye to your work life, your investment risk should change to focus less on growth and more on preservation.

Different Types of Investment Options in India

Having a retirement corpus in the later years of your retired life will be more important than having a huge pension in the beginning. It is noteworthy to mention that you should plan to move at least 80 per cent of your investments to safe instruments, such as debt funds, pension plans, etc., by the time you reach 60 years.

Must Read - Defined Benefit Pension Plan

3. Ensure a Healthcare Fund

Healthcare is one of the most significant expenses a retired person can incur. Thus, meticulous planning five years before retirement goes a long way. If you retire at or after the age of Medicare eligibility, that is, 65 years, you will have a lot of money on health insurance costs:

However, it is essential to be aware of everything Medicare does not cover. In addition, it is also essential to plan for any unprecedented health crisis or long-term illness you may face post-retirement.

Thus, securing the following in the five years before you retire is optimal:

  • Invest in senior citizen Mediclaim insurance before 65
  • Have critical illness insurance with your pension plan or separately
  • Keep a separate pool of funds for medical emergencies

 

4. Find Ways to Minimise Regular Expenses

The chances are that your post-retirement income will not be equal to your current take-home pay. Thus, for a more secure, stable, and peaceful retirement life, you must take preventive steps and venture out on a journey to minimise expenses five years before you retire.

A great way to start is by trying to live on your expected retirement budget so that you can get the hang of how your post-retirement financial situation will be. In addition, if you feel that the budget is too restrictive, you still have the option to postpone retirement by a few more years and save money.

Try to do one or more of the following to minimise your cost of retired life:

  • Move to a lower-tier city
  • Maintain good health and a healthy weight
  • Budget your gifts and lifestyle spends

On the contrary, what you should avoid:

  • Make hasty decisions
  • Withdraw funds rampantly from your retirement accounts
  • Leaving your long-term work in an instant, only to realise that your retirement budget is too limited for your liking

 

5. Ensure Repayment of Loans Before Retirement

Being debt-free is a freedom you must taste in your retirement life. An optimal retirement approach five years before its onset is to repay all the loans and debts. You will have a more balanced budget and a more fulfilling life on a limited monthly income.

You can take small steps, such as:

  • Making additional mortgage payments to pay off your home loan before or shortly after retirement
  • Ensure that you have a reliable vehicle at your disposal and that all of its costs are cleared
  • In case you and your family have two vehicles, then examine your retirement needs, and see if one vehicle will suffice to reduce vehicle payments

A liability-free retirement means peace of mind and stability.

Life after sixty is what you decide to make of it. A retirement life with luxuries, international vacations, etc., could seem too far-fetched of a dream for the unprepared. However, a little planning goes a long way in making your dreams come true.

Thus, timely preparation is what makes all the difference. Moreover, the last five years before retirement comprises the golden years to solidify your retirement preparations. Use term and health insurance, plus medical corpus to have a financially stable life after 60.

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Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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