The 5-Year, 5-Step Countdown to an Awesome Retirement

I turned 70 yesterday, and while I’m not necessarily ready to call it quits just yet, I’ve been getting my ducks in a row for years now. Here’s the simple step-by-step process I used: It will work for you as well.

5 years away: strengthen your base

The first priority is to build cash reserves.

Aim for at least one year of living expenses in liquid accounts so you won’t have to sell investments during market downturns. And be sure you’re earning as much as possible on those insured savings. For example, SoFi's checking + savings combo is currently paying 4.50%, with zero fees, zero minimums, and no catch. They even offer a bonus of up to $300 just to try it.

You’ll also want to maximize retirement-account contributions. Workers with 401(k) or 403(b) plans can funnel a substantial slice of income into tax-advantaged savings, and those 50 or older can add catch-up contributions on top of regular limits.

If your employer plan allows post-tax contributions, consider using them to boost Roth savings for future tax-free growth. Rules differ by plan, so review details and consult a professional before adding extra dollars.

3 years away: major moves and borrowing

Handle big-ticket items—cars, roofs, major repairs—while paychecks are still coming in. And if you want to borrow money, like for a mortgage, home equity line of credit or car loan, remember you’ll need to do it while you’ve got a healthy income coming in. Lenders care much more about what you make than what you have in the bank.

If you do decide to borrow, always carefully shop loans and rates. There are plenty of free comparison sites around, like like this one from Money.com.

Clear any loans from workplace retirement accounts. Unpaid balances become taxable—and possibly penalized—distributions if they’re not settled within 60 days of leaving your employer.

This is also a good time to think about what you’ll do after retirement. If you plan to work part-time or monetize a hobby in retirement, start certifications or training now to smooth that transition.

2 years away: secure the legal and financials

Update estate documents: wills, powers of attorney, healthcare proxies, and beneficiary designations. Don’t have any estate documents to update? Now’s the time to create them. Thanks to today’s online options, you can get a legal, personalized, customized will for as little as $150.

Re-evaluate mortgage and other debts. Some retirees prefer to be debt-free; others refinance to lower‐rate, longer-term loans to improve monthly cash flow.

If you have an issue with too much debt, now is the time to deal with it. Get some free advice and a debt-destruction plan from a reputable company like National Debt Relief.

If you’ve never had a financial planner, this is an ideal time to meet with one. They can help lower your tax burden, create a financial plan, maximize your Social Security, help with estate planning and simply make sure you’re on the right track. Finding a competent one has never been easier. For example, AdvisorMatch's free service takes 2 minutes and matches you with experienced professionals who will offer you a free preliminary meeting.

1 year away: test the lifestyle

Now it’s time to confirm every income source. Contact former employers to uncover forgotten pensions, profit-sharing, or 401(k) accounts. Use the Pension Benefit Guaranty Corporation’s unclaimed-pension database, the Labor Department’s abandoned-plan search, and state unclaimed-property sites.

If you can, live for a year on the income you expect in retirement and direct any surplus into liquid reserves. This trial run reveals whether your budget is realistic. If you discover that you’re not going to have enough, start exploring additional income sources. For example, a reverse mortgage allows you to convert your home equity into an income stream. You can get some free information here.

Now’s also the right time to begin formal exit discussions with human resources, so timelines, paperwork, and benefit rollovers stay on track.

3 months away: gather documents and tie up loose ends

Download all plan summaries—retirement, health-savings, and medical—while employer systems still allow easy access. Create digital versions so you’ll have a searchable copy handy.

Confirm final pay, unused leave payouts, and provide a forwarding address for W-2s and future correspondence.

If your plan holds employer stock, explore a net unrealized appreciation strategy to potentially shift future gains from ordinary income to capital-gains tax rates. A qualified advisor can help decide if NUA fits your situation.

The power of preparation

When you’ve got a major life shift ahead, it helps to start early and get organized. And if you’ve never turned to professionals for help with investing, paying off debt or setting up an estate plan, now’s the time to do it. Because expert guidance now could lead to a lot more money in retirement, and a lot less stress while you’re getting there.