How to Plan for Retirement as It Approaches: A Year-by-Year Countdown
By Kevin Sercia, Senior Wealth Advisor, Lighthouse Private Wealth
Most people picture retirement planning as one big decision, made sometime in the year or two before they actually stop working. Pick a date, run a few numbers, hope it holds.
That’s rarely how it actually works. By the time retirement is twelve months away, the decisions that matter most should already be settled. Real planning happens in stages, years apart, and each stage asks a different question. Answer them out of order, and the final year turns into a scramble.
Picture a countdown: a sequence of checkpoints, each with its own job. Here’s what belongs in each one.
What Should You Do When Retirement Is 10 Years Away?
Ten years out, nobody expects a finished plan. This is the checkpoint where the big picture gets built, and it’s the one most often skipped because retirement still feels far away.
Start by estimating what retirement will actually cost, based on the life you plan to live. A rule of thumb borrowed from a magazine can be a rough starting point, but your real number depends on where you’ll live, what you’ll do with your time, and what your household actually spends today.
This is also the year to check whether your investment mix still matches your actual time horizon, rather than assuming it should already look more conservative simply because retirement is now in view. The more common mistake runs the other way: households often scale back risk earlier than their timeline calls for, when ten years out may still support something closer to the growth-oriented allocation they had in their 30s, depending on the rest of the plan. The real de-risking usually belongs closer to the finish line, not this far from it.
This is early enough, too, for an honest conversation about long-term care. It’s an uncomfortable topic, so it tends to get put off until the options have narrowed.
Workplace benefits deserve a second look at this stage as well. If you’re 50 or older, catch-up contribution limits let you put meaningfully more into a 401(k) or IRA each year, and an HSA, if you have access to one, is worth maximizing now for the medical expenses retirement almost always brings. Small adjustments made a decade early compound into a very different outcome than the same adjustments made at year five.
Ten years out, the real work is making sure the plan can survive being wrong about the number.
What Should You Do When Retirement Is 5 Years Away?
This is where a retirement date starts turning into an actual retirement plan, and where the decisions get specific.
This is also the window to look seriously at 401(k) and old employer-plan decisions before you’re forced into them on your last day of work. Rolling money over, consolidating accounts, or leaving them in place can all be reasonable choices when there’s five years of runway to think them through carefully.
Tax bracket planning belongs here too. Between now and the year Required Minimum Distributions begin, there’s often a window where Roth conversions make more sense than they will later. That window closes gradually, year by year, as your income and the tax rules around it shift.
This is also a natural point to raise your savings rate if you can. For a lot of households, five years out is when the biggest recurring expenses — a mortgage nearing payoff, kids finishing school — start easing at the same time retirement is coming into view. Redirect even a portion of that newly freed-up cash flow into savings before it quietly absorbs into everyday spending, and it can meaningfully shift what the final number looks like.
The five-year mark is when a retirement date turns into a retirement plan.
What Should You Do When Retirement Is 2 Years Away?
Two years out, the focus shifts toward how your assets will actually pay you, month to month. This is the income architecture checkpoint.
Start by mapping your guaranteed income — Social Security, any pension — against what your portfolio will need to generate on top of it. That gap is the number that actually matters most, far more than any total account balance on its own.
Social Security claiming deserves real analysis here. The right age depends on health, family longevity, whether there’s a spouse’s benefit involved, and what other income you have to bridge the years before claiming. Run the actual scenarios for your specific household — a general rule of thumb glosses over what’s actually at stake.
If retirement comes before 65, health insurance is the other piece that has to be solved concretely: COBRA, a marketplace plan, or employer retiree coverage. This is one gap that can’t be left to sort itself out later.
Two years out is also the right time to stress-test the plan you’ve built. Ask what the first few years of retirement would look like if the market dropped 20% right after you stopped working. An honest answer of “we’d have to cut spending significantly” is valuable information to have while there’s still time to adjust course. If you’re married or partnered, both retirement timelines deserve to be mapped together at this stage, since claiming Social Security and income decisions play out differently for a household than for one person alone.
What Should You Do in the Final Year Before Retirement?
The last twelve months belong to sequencing and paperwork, assuming the earlier checkpoints were handled. Skip ahead to this stage without that groundwork, and it’s easy to see why the final year feels so stressful.
Build a cash reserve covering one to two years of essential expenses. This is the single best defense against sequence-of-returns risk: the danger of having to sell investments at a loss in the first years of retirement simply because a market downturn happened to land at the wrong time.
Finalize your Social Security and any pension elections, and set up tax withholding on your new income sources so you’re not surprised the following April. This is also the year to actually update the paperwork most people let go stale for a decade: beneficiary designations, power of attorney, and your will.
If you’re approaching 65, Medicare enrollment timing matters here too. Missing the initial window can mean permanent penalties, so it belongs on the calendar well before your birthday arrives. It’s also worth having one explicit conversation, on paper if possible, about what the first ninety days of retirement actually look like day to day. Households often find retirement disorienting simply because nobody planned for how to spend the actual hours in the day.
What Happens After Retirement Begins?
The countdown continues after day one, just in a different shape. The first six to twelve months are a calibration period, and actual spending rarely matches the projection exactly. That’s a normal part of the adjustment.
The plan deserves a fresh look at least once a year from here forward, especially after any year with significant market movement. Retirement income planning works best as an ongoing habit, checked regularly against how things are actually unfolding.
One common instinct in that first year is to move everything to cash the moment the paycheck stops. It’s an understandable reaction — but a portfolio built to last twenty or thirty years still needs a meaningful growth component, and the cash reserve built in the final year before retirement exists specifically to take the pressure off that kind of decision.
Common Questions About Retirement Planning
How many years before retirement should I start planning? Meaningful adjustments — asset allocation, long-term care conversations — are easiest to make starting around ten years out. Concrete decisions like Social Security timing and income architecture typically belong in the five-year and two-year windows that follow.
Should I pay off my mortgage before I retire? It depends on your interest rate, your tax bracket, and your goals heading into retirement. It’s exactly the kind of comparison Kevin runs with clients, using your actual numbers rather than a generic rule of thumb.
When should I claim Social Security? The right age varies by health, family longevity, marital status, and other available income. Very few households land on the same answer.
How much cash should I have going into retirement? A common approach is one to two years of essential expenses held in cash or cash equivalents, specifically to avoid being forced to sell investments during a downturn in the early years of retirement. For those more comfortable carrying some debt, a securities-based line of credit can serve a similar purpose, reducing how much needs to sit in cash.
What is sequence-of-returns risk? It’s the risk that a market decline in the first few years of retirement does outsized damage, simply because withdrawals are being taken from a smaller account at the same time it’s trying to recover.
Is there a simple way to check if I’m actually on track? A short, structured self-assessment — covering timeline, income sources, and open questions — is a good starting point for spotting obvious gaps. It’s also usually the first thing worth walking through with an advisor, since the harder questions tend to surface once someone who does this daily starts asking them.
What’s the most common retirement planning mistake? Treating retirement as one single decision made at the finish line. In reality, it’s a series of smaller decisions spread across the ten years before it, and by the time the date arrives, most of the meaningful choices should already be settled.
Do I need a financial advisor to plan for retirement? Where an advisor tends to add the most value is exactly where this article spends the most time: the years where tax timing, Social Security, healthcare, and investment risk all start pulling in different directions at once, and the decisions stop being separate from each other.
The Bottom Line
Hitting a specific number was never really the goal. Knowing which decision belongs in which year is what keeps the final twelve months calm. The households who retire with the least stress are the ones who worked through these checkpoints in order, giving themselves enough time to adjust course along the way.
About Kevin Sercia
Kevin Sercia is a Senior Wealth Advisor at Lighthouse Private Wealth. His approach emphasizes disciplined portfolio construction, long-term planning, client education, and intentional investment decision-making. Kevin works with clients to help align their portfolios with their goals, risk tolerance, time horizon, and broader financial circumstances. Background positioning is consistent with Kevin’s Lighthouse Private Wealth framework, including his emphasis on customized planning, focused portfolio construction, thoughtful capital deployment, and investor education.
Disclosures
This material is for informational and educational purposes only and should not be construed as individualized investment, tax, or legal advice. Investment strategies discussed may not be suitable for all investors. All investing involves risk, including the possible loss of principal. No strategy can guarantee a profit or protect against loss. Past performance is not indicative of future results.
Diversification and asset allocation do not ensure a profit or protect against loss. Rebalancing and portfolio changes may involve transaction costs and tax consequences. Index-based investments seek to track a benchmark; it is not possible to invest directly in an index. Any tax-related discussion is general in nature and should not be relied upon as tax advice. Investors should consult qualified tax and legal professionals regarding their specific circumstances.
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
