The Final Countdown: How to plan for retirement with five years to go

Retirement can feel very different when it is five years away rather than ten.

What once felt like a long-term ambition may now be becoming a real date in the diary – bringing excitement, questions and perhaps a few unknowns.

You may be picturing the lifestyle you want, wondering whether you have “enough”, or thinking more seriously about how and when to step away from work.

At this stage, retirement planning is less about starting from scratch and more about refining the details. It is the time to review what you have built, sense-check whether your plans are still on track and make sure your money is aligned with the life you want to live.

Below, we’ve shared some top tips on how to plan for retirement when you have five (or more) years to go.

1. Picture the retirement you want

Before focusing on the financial side of things, it is worth taking time to think about what retirement means to you.

For some people, retirement is a clean break from work. For others, it may be gradual – perhaps reducing hours, consulting, volunteering or taking on new projects. You may want to travel, spend more time with family, move home, take up new hobbies or simply enjoy having more freedom in your week.

The first few years of retirement are often more active for many, which can mean higher spending on travel, leisure, home improvements or family support. Later on, your priorities may change again, particularly if health, care needs or family circumstances evolve. Thinking about these stages now can help you build a plan that feels both exciting and achievable.

Ask yourself:

• What would I like my first year of retirement to look like?
• Will I stop work completely, or retire gradually?
• Are there any one-off costs I should plan for?
• How might my spending change over time?
• What will give me structure, purpose and enjoyment once work changes or stops?

A clear lifestyle vision can make the financial planning more meaningful, because it gives your money a purpose.

2. Review your pensions, savings and investments

The final five years before retirement are a good time to get a clear picture of everything you have.

Many people build up several pensions during their working lives, often with different providers, charges, investment approaches and retirement options. You may also have ISAs, savings, investment accounts, property or other assets that could play a role in funding your retirement.

This is the time to understand what you own, where it is held and how it could support your future income needs.

You may want to review:

• Workplace and personal pensions, including older schemes.
• Defined benefit pensions, if you have them.
• State Pension entitlement and when it may be payable.
• ISAs, savings and investment accounts.
• Cash reserves.
• Investment risk, charges and performance.
• Pension beneficiary nominations.
• Whether consolidating pensions could make your finances easier to manage.

It’s also worth checking whether your current investment strategy still suits your retirement timeline. Money you need in the next few years may need to be treated differently from money intended to support you later in retirement.

3. Understand how much income you may need

One of the biggest questions people often ask themselves before retirement is: “Will I have enough?”

The answer depends on your lifestyle, spending habits, income sources and how long your money may need to last. It is not always as simple as replacing your salary. Some costs may reduce when you stop working, while others may increase, particularly in the early years if you plan to travel, renovate your home or support family.

It’s often helpful to start by thinking about three types of spending:

• Essential spending – household bills, food, insurance, transport and regular commitments.
• Lifestyle spending – holidays, hobbies, memberships, meals out and family occasions.
• One-off or future spending – home improvements, new cars, helping children or grandchildren, care costs or moving home.

This can help you understand the level of income you may need, both at the start of retirement and later on.

A lifetime cashflow model can then help you see how your pensions, savings and investments might support that income over time. It can also test different scenarios, such as retiring earlier, spending more in the first few years or experiencing a period of lower investment returns.

4. Create a plan for drawing income

Saving for retirement and taking income in retirement are two very different things.

As you approach retirement, you will need to think about how to turn your pensions, savings and investments into a sustainable income. This may involve combining several sources, such as pension drawdown, defined benefit pensions, State Pension, ISAs, cash savings, investments or annuities.

The order in which you use these assets can make a difference. It may affect how long your money lasts, how much tax you pay and how much flexibility you keep for later life.

Questions to consider include:

• Which income sources will start first?
• When will my State Pension or any guaranteed pensions begin?
• How much should I keep in cash?
• Should I draw from pensions, ISAs or other investments first?
• How can I take income tax-efficiently?
• How much flexibility do I need if my plans change?

These decisions can be complex and, in some cases, difficult to reverse. Getting retirement planning advice before making major pension or investment decisions can help you avoid mistakes and make more informed choices.

5. Stress-test your plan

The final five years before retirement are an important time to check how resilient your plans are.

Unexpected events can have a bigger impact when there is less time to recover before you need to start drawing income. It doesn’t mean you need to plan for every possible scenario, but it does mean your retirement plan should have enough flexibility to adapt.

Consider how your plan would cope with:

• Market falls just before or after retirement.
• Inflation and rising living costs.
• Changes to tax or pension rules.
• Health issues or care needs.
• Supporting children, grandchildren or other family members.
• Divorce, bereavement or changes in household income.
• Living longer than expected.

There is also an emotional side to this. Some people worry about spending too much and running out of money. Others underspend because they are unsure what they can afford. A well-structured retirement plan can help you understand what is sustainable, so you can enjoy retirement with greater confidence.

6. Think about your cashflow ladder

A cashflow ladder is one way of matching your money to different time horizons.

In simple terms, it means thinking about which parts of your wealth are designed for now, next and later. Money needed in the short term may be held in cash or lower-risk assets, while money intended for later retirement may remain invested for longer-term growth potential.

This approach can help reduce the risk of being forced to sell long-term investments during a market downturn. It can also provide reassurance that near-term income needs are covered, while giving the rest of your portfolio time to work harder for the future.

For example, your plan might include:

• Cash for immediate income and short-term spending needs.
• Lower-risk assets for income needed in the next few years.
• Balanced investments for medium-term needs.
• Longer-term investments for later retirement and inflation protection.

The right structure will depend on your circumstances, attitude to risk and retirement goals.

7. Review your estate planning

Knowing how to plan for retirement is as much about what happens to your money in the future as it is about how you use your money now.

The final years before retirement can therefore be a sensible time to review your estate planning and make sure your wishes are up to date. This is particularly important if your family circumstances have changed, your wealth has grown or you want to support loved ones during your lifetime.

You may want to review:

• Your Will.
• Lasting Powers of Attorney.
• Pension beneficiary nominations.
• Life policies and trusts.
• Inheritance Tax exposure.
• Whether lifetime gifting may be appropriate.
• How and when you would like wealth to pass to family.

Estate planning is not only about tax efficiency. It is also about making sure your wealth reaches the right people, at the right time, in a way that reflects your values and wishes.

Tax treatment depends on individual circumstances and may change in the future. Tax planning and estate planning are not regulated by the Financial Conduct Authority.

8. Plan for health, home and wellbeing

A fulfilling retirement is about more than money.

In the final five years before retirement, it is worth thinking about the practical and emotional side of the transition. Your health, relationships, home, social life and sense of purpose can all shape the retirement you experience.

You may want to ask yourself:

• Do I want to stay where I am, downsize, or move elsewhere?
• Will my home still suit my needs in later life?
• How will I stay active and connected?
• What routines will replace work?
• Are there hobbies, skills or interests I want to develop?
• How can I protect my physical and mental wellbeing?

These questions can be just as important as the financial ones. After all, the aim is not simply to afford retirement – it is to enjoy it.

9. Speak to a financial planner before making big decisions

The closer you get to retirement, the more important the decisions can feel.

A Lifestyle Financial Planner can help you think about how to plan for retirement, bringing together your pensions, investments, savings, tax position, estate planning and lifestyle goals into one joined-up plan. They can also use cashflow modelling to test different retirement scenarios and help you understand what may be possible  (though it’s important to remember that cash flow modelling also has its limitations*).

This can be especially helpful if you are unsure when to retire, how much you can spend, whether to consolidate pensions, how to draw income or how to protect your family’s future.

Retirement is not a single decision. It is a transition – and your plan should be flexible enough to evolve with you.

Five years to go? Now is the time to refine your plan

The final five years before retirement can be exciting, but they can also bring important decisions.

By reviewing your pensions, savings, investments, income needs, lifestyle goals and estate plans now, you can move towards retirement with greater clarity and confidence.

You do not need to have every answer immediately. But you do need a plan that helps you understand where you are, where you want to be and what steps may help you get there.

If you are thinking about retiring in the next five years, speaking to an Attivo Lifestyle Financial Planner could help you sense-check your plans and explore what may be possible.

If this is something you’d be interested in, we’d be delighted to meet with you in a free, no-obligation consultation, where we’ll explore your situation and see if we’re the right fit to support you.