Retiring in the next 5 years? Avoid these financial mistakes

Almost ready to retire? A few simple concepts can help keep the bottom from falling out of a secure retirement. (Illustration: Rob Dobi)
Almost ready to retire? A few simple concepts can help keep the bottom from falling out of a secure retirement. (Illustration: Rob Dobi)


The last few years before retirement can make or break what comes next.

It’s so close that you can almost feel it: retirement. You just need about five more years and you are there. So, here’s some advice: Don’t blow it. Financial mistakes in the few years before retirement can quickly—and permanently—derail your plans.

With that in mind, here are six common mistakes to avoid:

1. Failing to maximize retirement contributions

During their peak earnings years, people should try to maximize the employee contribution, including the catch-up contribution available to people age 50 and above, says Julie Back, senior vice president and financial adviser in the Seattle office of New York-based Wealthspire Advisors. For 2024, this allows them to contribute a total of $30,500. If you have been making automatic contributions from your paycheck, be sure you aren’t falling short of the limit, if you can afford to contribute the full amount, she says.

2. Not analyzing Social Security options

The earliest age anyone can take Social Security is age 62, but full retirement age could be anywhere from 65 to 67 depending on your birthday. However, waiting a few years to take benefits—until age 70—can often be financially prudent, Back says.

Back’s own mother began taking Social Security benefits at age 62—without first running it by her daughter—and permanently reduced her benefit. “She was one of those people who had it in her mind that she’d been paying in her whole life and she was just going to start taking it. It was a gut punch when she told me," Back says.

There can be instances where it makes sense for an individual to start collecting benefits sooner rather than later. But delaying benefits can be especially important because people are living longer. Clients don’t think they are going to live into their late 90s, but they could, so it is important to plan for that, Back says. Delaying Social Security “may allow you to have more resources down the road to cover long-term care or other needs that might come up, or lifestyle choices like travel," she says.

3. Taking on unnecessary debt

Financial advisers caution clients not to take on unnecessary debt or make overly large cash purchases as they are nearing retirement. Buying a home after retirement might not be a bad idea, depending on the circumstances. But raking up large credit-card debts or buying big-ticket items that depreciate quickly can do a number on your finances.

Beware also of taking on debt that’s unsustainable such as a huge house with a large mortgage whose payments require the salary you are accustomed to. “That will torpedo your retirement faster than anything," says Jamie Cox, managing partner at Harris Financial Group in Richmond, Va.

4. Investing like you’re still 25

People nearing retirement sometimes forget they don’t have as much time to make up for losing investment bets. Cox recalls an investor nearing retirement who bought several rental properties shortly before the 2008 housing crash. After the market crashed, he couldn’t rent the properties or sell them without taking a loss and he didn’t have the cash to pay off the mortgages. He had to sell them off piecemeal over time and he and his wife had to keep working several years longer than they had planned.

Cox recommends people who are a few years from retirement avoid risky investments and instead bolster their portfolio with dividend-paying stocks and bonds. “You want to invest your money in what you’re going to live on to support your income," he says.

Back advises clients nearing retirement to start building up their cash reserves using tax refunds, gifts, bonuses and other extra income. She recommends retirees keep two years of cash on hand to cover nondiscretionary expenses and protect their portfolio in the event of a market downturn. This way you don’t have to sell from the portfolio to cover your expenses, she says.

5. Overspending on children

Not overindulging your children becomes more important the closer you get to retirement, says Robert Strauss, estate-planning attorney with Weinstock Manion in Los Angeles. While the desire to be generous with one’s children is “obvious and clear," the impact on a retiree’s finances can be detrimental, he says.

Strauss has a client who has spent so much on one of his adult children that he has to work longer as a result. “He’s using his salary to support himself and one of his kids. If he didn’t have to support them, he could have retired already," Strauss says.

6. Neglecting to plan for your desired retirement lifestyle

Many people say they want to travel or garden or spend time with their children and grandchildren during retirement, but they don’t map out a solid plan for how much these activities are likely to cost. This could mean that once they retire, they won’t have saved enough to do what they want, or they might be unnecessarily cautious about spending money, preventing them from enjoying themselves, says Marianne Caswell, president of Park Avenue Securities in New York.

Caswell has relatives who saved for retirement for many years but were hesitant to use their savings for activities such as small trips, eating out with friends and other social outlets. She recommends that clients make a tentative spending plan a few years before they retire so they have “financial confidence" to do the things they want.

Cheryl Winokur Munk is a writer in West Orange, N.J. She can be reached at

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