What to Do If You Want to Retire in 5 Years

If you want to retire in five years, now is the time to get your financial plan firmly in place. Your next steps will depend on factors like your age, savings, expected retirement expenses and overall financial goals. Whether retirement is just around the corner or still several years away, reaching this milestone usually requires consistent saving and careful planning.

A financial advisor can help you plan for retirement, whether it’s years or decades down the road.

Preparing for Retirement in 5 Years

There are a few steps you should take if you want to retire in five years.

Decide When to Retire

The first step is deciding when you want to retire. This will determine how long your savings may need to last.

It will also help you determine whether you have enough savings to retire in the first place.

Calculate Your Life Expectancy

Estimating your life expectancy is a critical part of this process.

Depending on how long you’ll live, you could risk outliving your savings. You also don’t want to overestimate and then delay retirement unnecessarily or compromise your quality of life.

For instance, if you plan to retire at 70, your retirement plan should ideally cover at least 20 to 25 years of living expenses. However, retiring early, such as at 45 or 50, requires preparing for a much longer retirement horizon and building a significantly larger nest egg.

Review Your Savings

As retirement nears, reviewing and maximizing your savings becomes more important than ever.

The final years before leaving the workforce offer a critical window to boost your retirement accounts and strengthen your financial foundation.This is the time to prioritize increasing your contributions, especially by taking advantage of catch-up contributions if you’re eligible.

Even modest increases in your monthly savings can make a meaningful difference. For example, saving an extra $500 per month over the five years before retirement amounts to $30,000, not including any potential investment gains. This additional savings can serve as a valuable cushion for unexpected expenses and allow for greater flexibility during retirement.

Retiring in five years or less may require some serious saving and planning.

Open Retirement Accounts

One of the most effective ways to maximize savings in the years leading up to retirement is to take full advantage of retirement accounts, such as 401(k)s and IRAs.

401(k)s

401(k)s are employer-sponsored retirement plans that allow employees to invest a portion of their paycheck before taxes.¹ Many employers offer matching contributions, which can significantly boost your savings.

In 2026, the contribution limit for 401(k)s is $24,500.²

IRAs

Individual retirement accounts (IRAs) are personal savings plans that also offer advantages for tax planning.

There are two main types of IRAs: traditional and Roth.³

Traditional IRA. With a traditional IRA, contributions may be tax-deductible, and taxes are paid upon withdrawal in retirement.
Roth IRAs. Roth IRAs are funded with money that’s already been taxed. In return, you benefit from tax-free growth and tax-free qualified withdrawals in retirement.

In 2026, the IRA contribution limit is $7,500.

Maximize Your Contributions

You can maximize your retirement account contributions in a few steps.

Contribute enough to your 401(k) to take full advantage of any employer match.
Aim to max out your 401(k) contributions whenever possible.
If you have additional funds to save, consider opening and contributing to an IRA. This account may not be tax-deductible, but it will still offer tax-deferred growth.
Automate your contributions to ensure you’re consistently saving each month.
Increase your contributions each year, especially if you receive a raise or bonus.

Take Advantage of Catch-up Contributions

If you are at least 50 years old, you have an additional opportunity to boost retirement savings through catch-up contributions.⁴

The 2026 contribution limits differ between 401(k)s and IRAs.

The 401(k) catch-up contribution limit is $8,000, up from $7,500 in 2025.
The IRA catch-up limit is $1,100, up from $1,000 in 2025.

This means that if you’re 50 or older, you can contribute a total of $32,500 to your 401(k) and $8,600 to your IRA.

Since 2025, those between the ages of 60 and 63 can contribute even more to their 401(k)s, up to $11,250 in super catch-up contributions, bringing their total possible contribution to $35,750, if the plan allows.

Determine How Much Income You’ll Have

If retirement is just five years away, you should have a general sense of how much money you’ll have by then.

By combining your savings estimate with your expected Social Security benefit and other sources of retirement income, you can calculate how much total income you can expect on an annual basis when you stop working.

For a correct estimate, account for the various streams of income that you expect in retirement, such as these.

Social Security. Social Security benefits are a primary source of income for many retirees. Your benefits depend on your earnings history and the age at which you start claiming them. Delaying benefits until age 70 can result in higher monthly payments. Meanwhile, claiming as early as 62 can reduce your monthly payments over your lifetime by up to 30%. Our Social Security calculator can help you estimate your benefits.
Retirement account withdrawals. Withdrawals from 401(k)s, IRAs and other retirement accounts will likely constitute a significant portion of your retirement income. The 4% rule is a common and simple withdrawal strategy that suggests withdrawing 4% of your savings in your first year of retirement.⁵ You then adjust your withdrawals in subsequent years for inflation.
Pension payments. If you have a pension, it may provide a steady income stream during retirement. The amount, which is not always indexed for inflation, depends on your years of service and salary history.⁶
Annuity payments. Annuities can provide guaranteed income for life or a specified period, helping to ensure you don’t outlive your savings.
Rental income. If you own rental properties, the income generated can supplement your retirement funds.
Other savings. You can tap personal savings and other investments as necessary, providing flexibility in your retirement income plan.

Project Your Expenses

Retiring in as little as five years will require a firm understanding of your expected spending in your golden years.

This number will vary based on where you live, your desired lifestyle and your pre-retirement spending levels. For example, some experts recommend replacing between 70% and 90% of your pre-retirement income to maintain your current standard of living.⁷

Housing, utilities, groceries and leisure activities will make up a significant portion of your budget. However, retirees may also face increased healthcare costs, as they are more likely to experience health issues and require medical care. It’s important to carefully consider how your spending habits may shift in retirement and plan accordingly to ensure you have sufficient funds to cover your needs.

The healthcare consideration is especially important for people who retire before Medicare eligibility at age 65. For example, retiring at age 50 means you’ll have to secure private health insurance for 15 years or pay out of pocket. Either way, you must factor these costs into your spending plan.

Don’t forget to prepare for inflation, either. It can undercut your purchasing power and reduce the value of your fixed income over time. One way to do this is to diversify your income sources with investments that can outpace inflation. These can include equities, inflation-adjusted annuities and real estate.

Our retirement calculator can give you an idea of whether or not you’re on track.

Retirement Planning in Action

To illustrate the importance and process of creating a retirement plan, consider a 60-year-old man who plans to retire at age 66 in five years.

The Social Security Administration’s life expectancy calculator indicates that a 60-year-old man, on average, can expect to live to age 83.⁸ However, this individual rounds up and assumes a life expectancy of 85.

Retirement Budget Example

Income Sources After Tax	Estimated Expenses
Social Security: $2,500 per month ($30,000 annually) starting at 65.	Housing and utilities: $24,000
401(k) withdrawals: $1,500 per month ($18,000 annually) based on his savings	Groceries and dining: $15,000
Pension payments: $1,000 per month ($12,000 annually)	Health insurance and medical costs: $15,000
Rental income: $1,200 per month ($14,400 annually) from a rental property	Travel and leisure: $10,000
	Miscellaneous: $6,000
Total Annual Income: $74,400	Total Annual Expenses: $70,000

With an annual income of $74,400 and estimated expenses of $70,000, he would have a surplus of $4,400 each year. This provides a small cushion for unexpected costs or additional savings growth.

Stress-Testing Your Plan Against Market and Health Shocks

This example provides a comfortable surplus of $4,400 per year, but this figure assumes everything goes according to plan. Testing the budget against a few realistic disruptions shows how much cushion actually exists.

The example budget relies on $18,000 in annual 401(k) withdrawals using a 4% withdrawal rate. This implies a 401(k) balance of roughly $450,000. A 25% market drop in the year leading up to retirement, or shortly after, would reduce the same 4% withdrawal to around $13,500. This creates a $4,500 shortfall that would erase the entire annual surplus on its own.

This is the sequence of returns risk retirement planners often emphasize.⁹ A downturn in the first few years of retirement can do more lasting damage than the same downturn occurring later. This is because withdrawals during a depressed market lock in losses that are harder to recover from.

Healthcare costs carry similar risk. The example budgets $15,000 annually for health insurance and medical costs, but that figure assumes routine care. A single unexpected event, such as a hospitalization or a new chronic condition requiring ongoing treatment, can easily add $10,000 to $20,000 in a single year. The risk is sharper for someone retiring at 60 because they still have five years before Medicare eligibility.

A market downturn that reduces withdrawal income in the same year as an unplanned medical expense would push the example budget into a deficit rather than a surplus. A single point-in-time projection does not capture that possibility.

Consider building a cash reserve equal to one or two years of essential expenses, keeping it separate from invested retirement accounts. This gives you room to reduce withdrawals during a downturn rather than sell depressed assets to cover a shortfall.

Bottom Line

A woman who approaching retirement looks over her finances.

Retiring in five years may be an achievable goal with careful planning and disciplined saving. By understanding your life expectancy, maximizing savings, estimating income, projecting expenses and creating a detailed plan, you can work toward a financially secure and fulfilling retirement.

Retirement Planning Tips

Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Required minimum distributions (RMDs) play an important role in a lot of people’s plans for retirement. These mandatory withdrawals from pre-tax retirement accounts start at age 73 (or 75 for people who turn 74 after 2032), and failing to take them can result in penalties. SmartAsset’s RMD calculator can help you estimate how much your first RMD will be and when you’ll need to take it.