The Five-Year Countdown to Retirement: How to Navigate the Retirement Red Zone

Retirement isn’t a finish line; it’s a transition zone. The five years leading up to retirement are some of the most critical financial years of your life. Think of this period as the "retirement red zone." Decisions made during this window are often permanent, and mistakes can be costly. Here's how to make sure you enter retirement on solid ground.

The Five-Year Countdown to Retirement: How to Navigate the Retirement Red Zone

Retirement isn’t a finish line. It’s a transition zone. The five years leading up to retirement are some of the most critical financial years of your life. Think of this period as the "retirement red zone." Decisions made during this window are often permanent, and mistakes can be costly. Here's how to make sure you enter retirement on solid ground.

1. Get a Grip on the Moving Parts

As retirement nears, you'll face a flurry of decisions:

• When should you start taking Social Security?

• Should you tap your 401(k), IRA, or brokerage account first?

• Is now the time to downsize your home?

• Should you take your pension as a lump sum or as an annuity?

There are also age-based rules to consider. For example, if you leave your job in the year you turn 55 (or 50 for public safety workers), you can withdraw from your 401(k) without the usual 10% early withdrawal penalty—as long as the money stays in the employer’s plan. But if you roll those funds into an IRA, you lose that flexibility.

2. Run the Numbers: Project Your Income

This is no time for back-of-the-napkin math. Use retirement calculators or work with a professional to figure out:

• How much after-tax income you’ll actually have

• How long your money will last

• Where you can strategically pull funds to reduce taxes

Update your plan every year during the red zone. Life changes and so should your projections.

3. Stockpile Cash Reserves

A strong cash buffer can prevent you from having to sell investments in a downturn or panic if a pension check or Social Security payment is delayed. Think of it as your personal safety net, not your retirement income source. Use a savings or money market account—not your IRA.

4. Dial Down Investment Risk (But Don’t Pull the Plug Too Soon)

Some people go into retirement with 90% of their investments in stocks. If they’re lucky, they make it work. But if the market tanks the year they retire, they’re stuck.

A more disciplined approach starts a decade before retirement gradually shifting from stocks to more stable investments like bond or stable value funds, especially after good market years. This isn’t about avoiding risk; it’s about managing it intelligently.

5. Explore Your Lifestyle Options

Now is the time to picture your ideal retirement life:

• Moving to a low-tax state?

• Living abroad?

• Working part-time for enjoyment?

The more intentional you are, the smoother the transition.

6. Simplify Your Financial Life

If you’ve accumulated accounts from multiple employers, consolidating can save you headaches and money. One IRA instead of six means fewer fees, easier management, and simpler paperwork when you need to make changes or take withdrawals. Just make sure you're not giving up any special protections or access by consolidating too early.

Final Thoughts

The last five years before retirement are no time to “set it and forget it.” This is a time to be proactive, disciplined, and strategic. Nail the transition, and you’ll set yourself up for decades of financial peace. Slip up, and the recovery window gets awfully short. Start your countdown with clarity, not chaos.

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The information provided herein is intended solely for general informational purposes and should not be interpreted as personalized investment advice or an individualized recommendation. Investment strategies discussed may not be appropriate for every investor. Each individual should carefully evaluate any strategy in light of their unique financial situation before making investment decisions.

All opinions expressed are subject to change without notice in reaction to shifting market conditions. While data presented may come from third-party sources believed to be reliable, Mietzner Wealth Management cannot guarantee its accuracy, completeness, or reliability.

Any examples provided are purely illustrative and do not represent expected outcomes or guaranteed results.

This content is general in nature and is not intended to provide specific legal, tax, or investment advice. Tax regulations may change, potentially with retroactive effect. For advice tailored to your individual circumstances, consult with qualified professionals such as a CPA, financial planner, or investment advisor before acting on any of the information provided.

Please consult your tax advisor to determine an effective tax strategy based on your personal tax situation.

All investments involve risk, including the potential loss of principal.

May 21, 2025