The Five Years Before Retirement: What Should You Be Doing?

Knoxville Financial Q&A Episode 17 | The Five Years Before Retirement: What Should You Be Doing?

November 2, 2026

Calculators

Retirement is about more than reaching a certain age or saving a specific amount of money. The decisions you make during the final five years of your career can have a lasting impact on your financial future.

In this episode of the Knoxville Financial Q&A Show, Paul Ragone and Brian Duncan of Integrity Wealth Services discuss six important areas to consider as retirement approaches. From reviewing your investment allocation and developing a retirement income strategy to evaluating debt, healthcare expenses, and potential financial risks, they explore practical steps you can take while you're still earning a paycheck.

They also discuss something that often gets overlooked: the emotional transition into retirement. After decades of working, what will your daily life look like, and how will you find purpose and fulfillment?

Whether you're five years away from retirement or getting even closer, this conversation offers valuable insights to help you prepare for both the financial and personal changes ahead.

Episode Chapters:

00:00 Introduction: Five Years Before Retirement
00:55 Reviewing Your Investment Allocation
04:33 Developing Your Retirement Income Strategy
06:44 Evaluating Debt and Major Expenses
11:27 Healthcare and Medicare Considerations
12:42 Stress-Testing Your Retirement Plan
15:47 Preparing Emotionally for Retirement
19:29 Final Thoughts

Transcript

So, we recently got a question from a couple that we met with potential new clients. they're five years away from retirement and they were wondering what they should be doing. So, we thought it would make u a good topic for a video.

Opening

Transitioning from accumulating wealth to using it or about to use it is pretty important. And I would also say we say all this and we start all this assuming the average retirement age which falls I think right around 65. So we're going to talk about this period leading up to 65 the 5 years before that. So 60 to 65. I think we can go a little bit beyond that or we can massage that a little bit but that's probably the majority of people that are going to have this conversation. I mean decisions made during those five years can have long-term consequences for sure.

All right.

All right. So, we broke it down into a couple steps to dissect.

1. Review Your Investment Allocations

first one being review your investment allocations.

Yeah. I mean, well, I think one of the things that we've noticed surprisingly actually is that if you have the Roth 401(k) option, take advantage of it, especially in those five years. we've we've had a lot of people come in here that didn't really understand that they should be contributing to that. As something as simple as the Roth contribution, it also becomes more crucially important because you have during those periods of times both catch-up contributions and what they call super catch-up contributions. So, the catch-up contributions actually apply, you know, all the way at beginning at 50 years old, but we're talking about the five years. So, beginning at age 60, covering you to 63, you have something called super catch-up contributions. And what that allows is basically a total contributory amount in your 401(k). Now, granted, this would be if somebody takes advantage of the Roth 401(k), but that's 34,750 bucks that they can contribute into a Roth potentially between the ages of 60 and 63. And then at 64 and 65, the final two, it would drop down to 31,000. and those obviously are subject to change, but that's currently what they are. And if you have a Roth 401(k) or part of your 401(k) is in Roth, you eventually can roll that into a Roth IRA. And there's no required minimum distributions on that or taxes on the growth. So take advantage of that if that's available in your 401(k) plan.

Yeah. And

I think something else to talk about too when you're, you know, looking at your investment allocation, we're using investment allocation to talk about both your contribution balance and making sure that your aggressive or moderate or low risk is also adjusted accordingly. as part of that conversation. any anybody after 59 and a half has the ability to do in-service distributions and move up to their entire balance out of their 401(k) and potentially get it into something that could be more fitting of your risk tolerance. And I think that's also something that matters too is you know this five-year window beforehand this goes to impact all those little steps can add up to significant things.

Yeah. And guess what? Most people are invested in age-based funds. And so we've we've discussed this before. I won't I won't get into it but that might not be the right thing for you to be in five four three two one years into before you retire. So, what Brian just said could be really important if you move your money out and have it managed correctly instead of just going into an age-based fund.

Sequence-of-Returns Risk

So, while looking at all of your asset allocations, something to consider is sequence of returns risk. We've talked about this before. We don't want to get too far down the rabbit hole. The biggest thing is just if you're getting close to needing the money and you're going to start taking the money out if we have a market downturn, you're going to be withdrawing, you know, the value dip and removing its ability to return. And so having the right piles of money to pick from to help reduce the exposure there becomes very important there too.

It's funny because this is what video 17 or 18 or something like that. We've probably mentioned sequence of returns and at least five or six of them. All right,

2. Develop Your Retirement Income Strategy

number two on the list would be develop your retirement income strategy. Yeah, I think a lot of people think and spend time with planning to when they accumulate money and planning for investments and planning for all that. I think the weird transition comes from you go from being the money machine and what generates the income in your household to your money becoming the money machine and what generates the money in your household. And I think that, you know, that requires you to start coordinating social security, pensions, when you withdraw, you know, where you withdraw money from and when you withdraw money from. But having all of those sections put together and knowing, okay, I'm going to start taking my social security here. I'm going to start taking my, you know, pension here. I'm going to start taking my 401(k) money here. All of that has to be worked through. And I think that five year leading up to it, it needs to be figured out beforehand what you're going to do rather than waiting to, oh crap, now I have to.

Right? So the general rule of thumb when it comes to, you know, if you have money in different accounts in retirement, start with your start withdrawing from your taxable accounts first, then move or transition to your IRAs if you rolled over your 401(k). If you didn't, pull it from the 401(k). And then eventually when you deplete those resources, which hopefully you don't, and if you have a Roth, that's you want to save the Roth for last, I guess, is the point I'm trying to make.

Yeah. Because otherwise you end up in an RMD trap, which is, you know, you have this pile of money. If you withdrew from the Roth first and your other taxable accounts, individual accounts first, then you'd end up with this pile of money that you're forced to take and you may have to take a larger chunk than you were intentionally planning or initially planning. So yeah, I think you know, making sure you don't land yourself in an RMD trap matters. 90% of the time we see our clients are overloaded with tax deferred savings that they're going to have to pay taxes on during withdrawal. It's basically because of 401(k)s. and so if you plan ahead, you can, you know, plan for Roth conversions to at least mitigate or reduce taxable amounts as much as possible.

All right. The

3. Evaluate Debt and Major Expenses

third point here is just evaluate debt and major expenses. you know I feel like one of the things that I see a lot is actually ironically life insurance. You get people that have that were you know maybe sold some version of a whole life. but you know debts paid for. Hopefully the mortgage is paid for. Maybe not. We'll have that conversation. But, you know, I think sometimes the what they're paying for, I mean, if they're paying 2, 3, 4, 5, 600 bucks a month for an insurance policy, but, you know, maybe your kids are now independently wealthy, maybe they're doing their own thing, and you don't really have the need for this policy that you had. I think shedding some of those expenses that aren't necessarily giving you the resources that you want. you know, that's that's one of them. I think the other one was mortgages. You know, I've had a couple clients that had saved up PTO and or you know, vacation days where they were going to get a lump sum payout and they were like, "Okay, well, should I pay off my mortgage or should I not? If it hadn't been paid for and you're going to get a lump sum in retirement or very close to it, I could use this to pay off my mortgage." Yeah. Chances are though, if you're approaching 60 or five years away from retirement, if you still have a mortgage, it's probably not very high. Hopefully, you know, hopefully not, right? Unless you just moved or something and you didn't have a lot of equity in your old house, but you know, if your interest rate is 3%. In my opinion, I wouldn't rush to pay that off. That's that's a gift right now. This is that interest rate conversation that we had what couple episodes ago. You know, if you're if your return is more than you're than you're being charged, it's a net positive. that allows you also to keep the money instead of paying off the mortgage to keep it invested because you got a long runway ahead of you that money has to last for. we're not saying that the market's going to be positive every single year and make more than 3% but the odds are it's probably going to make more than 3%. In most years, they're in your favor. Yeah. Yeah. Planning for large expenses. The other things we see, you know, maybe you've ridden your car, your daily driver for the last 10, 15 years and it's on the tail end of its of its lifespan and you're getting ready to retire and you're like, "Man, I really don't want to drive my little my little beater in retirement." Things like that need to be planned for. You have a five-year runway while you're still earning income. You need to say, "Okay, well, you know, my little pickup truck or my little car that I've been using, I might need a new one." and so plan those. Plan those accordingly. maybe instead of paying off the mortgage with that PTO lump sum payout, you go buy a car with it. I think but all of those matter. You know, the other thing to think about if you didn't downsize or buy a new house in that time frame, if you've been living in your house for the last 20 years, maybe there's flooring andor, you know, finishes that could be changed. All of those should be planned and accounted for while you still have the income and or what you're going to do or take the money from if you do want to wait till you retire to do some of those things. Yeah, that's really important because even downsizing now is not going to save you money. No. In fact, it could cost you more, right?

Yeah. So, especially if you have to have a mortgage on it. Let's just say that your house is paid off and you know you sell it. You have all the equity. You're basically trading a bigger house. Maybe not bigger, but let's just say you want to move to like a onelevel floor plan. Or maybe you want that lakehouse. You want to be able to sit on your back porch and see the lake. Well, then you're going to be paying more. I can promise you that. But let's just say you did want to downsize because of, you know, you're getting older. You don't want to really have to deal with stairs or anything like that in the future. you know, you could be going from a decent sized house to a smaller house and still pay the same for it.

Yeah. So, you know, I'll circle back to the thing that I was talking about briefly where, you know, making sure you buy the car, making sure you the reason why that is so important. I feel like the last thing you want to do is if it's not planned for and it's not addressed, the last thing you want to do is get within your 30 days or six months of retiring and hit that, oh crap, I need to downsize or I need to you know, maybe my home's not accessible for if I age or you have this knee-jerk reaction that requires you to spend cash that you didn't plan on spending and it just throws a wrench in everything else. you know, I have those instances with clients where I'm doing damage control because the planning part didn't come into play. Yeah.

4. Understand Your Healthcare Options

our fourth bullet point, we're not going to spend a lot of time on it. It's just worth talking about. understanding your health care and health insurance in retirement or what it's going to be in retirement. It matters. every situation, the reason why we're not going to spend a lot of time on it is every situation is different. All the way down to your Medicare supplement, all the way down to Every part of that aspect is different for every single client that we meet with. Yeah, it's totally different. Just like Brian said, because if you wait till 65, you might not realize that your income from age 63 counts towards Medicare and the IRMAA penalty. so these are factors that need to be considered, you know, during that five-year period for sure. Also, Brian and I are fortunate, you know, living in Knoxville, Oak Ridge being close by, most of our clients come from the facilities out there and they have amazing benefits. TVA, we have Yeah, we have lots of good entities that we've talked about that have great benefits that make that transition even easier. A lot easier.

Yeah. So it doesn't really become a major planning issue for us unless you know you don't have those benefits like those guys do. So the

5. Stress-Test Your Retirement Plan

fifth point is stress test your retirement plan. Yeah. I think this is one of those you know instances that a lot of people break down on. I think a lot of people don't realize okay well what happens if the worst case scenario happens and I run out of money. Yeah. What is my lifestyle going to look like? Am I going to go from traveling all the time to not traveling all the time? They just have really no way of knowing exactly how their scenario could look and one of the many different paths they could take.

On our website, I'll put the link down below. We have a bunch of really good calculators. There's two that I really like. One of them is called How much do I need to retire? And the other one is my retirement savings. And so, like I said, I'll put the link down below and you guys can go on there and play around with it and see what the numbers look like. it's pretty impactful. It's a very simple calculator. This isn't like true financial planning, but it'll put you in the ballpark to see if you're going to be okay. It gives you an idea. Yeah.

Yeah. Because a lot of people this, you know, kind of what we're talking about that they don't really think about what their income coming in provides them. When every day becomes the weekend and everything changes and your entire situation changes, what do you want that to look like? I mean, that's so true because and we've probably said this in other videos and we just mentioned that we have a bunch of clients that work in Oak Ridge. A lot of those guys, I mean, they know to the second when they're going to retire and then they end up going back to work in a consulting capacity because they realize their whole purpose in life is to do what they were doing. Like that defines them. It's kind of weird and they get bored at home. Boredom. Yeah. Brian and I just met with someone a couple of weeks ago. He basically can't retire because he's so specialized in what the information that he knows. he's he's basically already admitted he's going back to work in some form or another because nobody can really h nobody really has the information or knowledge that he does. I think unfortunately that makes my generation look a little bit bad because that wisdom as it's called it doesn't seem to be passed generationally. I think we are in a in a age that, you know, we lean on technology too much and forget that there are people that have that knowledge and that you probably should learn it, make you a little bit more invaluable. But sidebar, that is a sidebar.

The cool thing about it though is he's like he started this on some crazy project many years ago and he basically wants to like see it through. He doesn't want to leave even though he could. He's got he's well off. I'm pretty sure I would do the same thing.

I don't know, man. I don't know. There's only, you know, you only got so many years in your life and, you know, the project will be finished one way or another, I would assume. But, I respect him for, you know, sticking with it and want wanting to see it finished. Yeah, for sure.

6. Prepare for the Emotional Transition

That ties perfectly into the last point that we have, which was just preparing for the emotional side of transitioning. I think this it's like I said, it's something we talked about. every day becomes the weekend. Are you emotionally ready for that? Is that something that you've thought about? Well, every day that I wake up, I no longer have the structure, the schedule, the boss, the everything. Now, what do I do? That's important because I think even thinking about myself, like if I retired 10 years from now, 5 years from now, whatever that might be, putting everything financial aside, let's just say I'm well off and that's not going to be an issue. like what is my purpose after that? You know, coming here and working with our clients and helping them, you know, we get to leave the office every day knowing that we've done something really good for our clients. And if I lose that, I would hate that, you know, like what is my purpose in life if I'm not helping people succeed in their retirement? Yeah, I think I think that's something it also depends on your situation. I'll use personal family like grandkids become their number one thing, you know, that they're like, man, all I want to do is and I've even seen it in some of my clients, they'll move across town to be closer to the grandkids. and I think I think that's usually what fills a lot of people. I think they make that transition and they're like, "Man, this is an easy transition to make. I don't have to clock in and have a boss and, you know, have that coworker that I despise and spill my coffee on the same speed bump going to work, you know, flying there because you're late, whatever the case may be. But, you know, I think a lot of that comes down to I have grandkids. I've got family I can help. I can and some of it's travel. Maybe it's somebody I just want to see the world. my own extended family is this week I think they left to go to Hawaii for their they've been to all 50 states now and he's been retired for a little while quite some time but you know that was the thing was I want to go to every single state and see it.

Yeah. I mean like what I said before about people going back to work is true. No doubt about it. They get we call it retirement. They do go back. But we do have a handful of clients that really take full advantage of retirement. And like Brian mentioned, travel. I mean, they've got it dialed in pretty much. And we like to see those kind of stories for sure. Those also make it a little bit easier to plan for, especially something that has like a monetary cost that you can kind of calculate. You know, when it's as abstract as I just want to spend time with the grandkids, you're like, "Okay, now what do are we going to Disney World every week? I mean, what are we doing here?

Yeah. So, the people that do take advantage of retirement, what we would consider the proper way, you know, they'll budget 20, 30 grand for vacations a year or something like that. you know, you can do a financial plan and include that in the numbers and make the numbers work or maybe they don't work, but in most cases they do work. But at least we know there's there's a number there, right? And if like Brian's saying, if it's just hanging around with the grandkids, you don't know if there's going to be an unexpected trip that you didn't plan for or private school or private school. Maybe you want to feel blessed enough to be like, hey, instead of paying for a vacation, we'll send our kids to private school or grandkids private school. But all of that comes down and that's why those five years matter a lot. A lot.

Closing Thoughts

So closing thoughts here. The final five years are an opportunity to make adjustment before retirement. Yeah, I think retirement readiness involves way more than reaching a particular like number. I think it's you know the goal should be to enter into retirement with a clear understanding of really what you want your life to look like. your money situation, make sure you maximize every avenue before that and then what you want to do immediately after that. I think those I think that's the trick. Yep, that's a good way to wrap it up. So, with that said, sign off. Signing off.