By Ken Petrashek,CFP®, EverPar Advisors
I start almost every discovery meeting with pre-retirees the same way. I ask them: what does retirement mean to you?
The question catches people off guard sometimes. They’re expecting to talk about numbers and accounts and investment returns. But I’ve learned over the years that the most important question isn’t “how much do you have saved?”
The most important question is “what are you actually retiring to?”
Here’s what I typically see. Someone comes in and they’ve done everything right. They’ve saved consistently. They’ve built up $800,000, or $1.2 million, or whatever their number is. They’ve read the articles that say they need $1.5 million to retire comfortably. And they’re anxious.
The textbook definition of retirement is that you quit working at your company and you live off your pension or 401(k) or some combination of the two. But that’s not how most people think about it anymore.
Most people in their 50s and early 60s don’t want to fully retire. They want to downshift. They want to change gears. They’ve been doing the same thing for most of their career, and they’ve saved some money, and now they’re asking: when can I shift?
That’s a fundamentally different question than “when can I stop working entirely?”
I have clients who retire from their corporate job but keep consulting. I have clients who leave full-time work but pick up adjunct teaching, or serve on boards, or start something completely new. I have clients who do truly retire in the traditional sense.
The point is, you need to define what retirement actually looks like for you before you can plan for it.
And that definition changes everything about how we approach the numbers.
What the research shows
The anxiety around retirement timing is real, and it’s pervasive.
According to the Employee Benefit Research Institute, 70% of workers with more than $500,000 in retirement savings still express significant anxiety about retirement timing.* Even people who have saved substantial amounts feel uncertain.
*Source: Employee Benefit Research Institute, Retirement Confidence Survey
Northwestern Mutual found that Americans believe they need $1.26 million to retire comfortably.** That number has fluctuated over the years, but the larger point is this: people are fixated on hitting a specific savings target, and they’re stressed about whether they’ll get there.
**Source: Northwestern Mutual, Planning & Progress Study 2025
J.P. Morgan research shows that 6 in 10 retirees experience spending fluctuations of 20% or more during their first three years of retirement. Half of retirees between ages 75 and 80 continue to experience year-to-year spending volatility.***
***Source: J.P. Morgan Asset Management, Guide to Retirement
This data tells us something important. Having a number in your account doesn’t mean you’re ready to retire. Knowing your “number” and psychological readiness are two different things.
And your spending in retirement is going to change in ways you probably haven’t fully anticipated.
So if you’re five years out, here’s what we need to work through.
1. Clarify what retirement actually looks like
I talked about this at the start, but it’s worth drilling down on because everything else flows from this.
Will you actually retire, or are you downshifting?
Are you planning to stop earning income entirely? Or are you thinking about moving to part-time work, consulting, or something less demanding?
There’s no right answer here. But the answer changes your income planning, your Social Security strategy, and your withdrawal approach.
If you’re going to keep earning $40,000 or $50,000 a year doing consulting work or part-time teaching, that’s $40,000 or $50,000 you don’t need to withdraw from your portfolio. That changes the math significantly.
A lot of the people I work with, especially those in their 50s, realize they don’t actually want to stop working. They just want to stop doing what they’ve been doing. That’s a critical distinction.
Housing: staying or moving?
Are you staying in your current home? Downsizing? Moving to a different state?
If you’re considering a move, you need to understand the cost-of-living comparison. Some people assume they’ll save money by moving somewhere cheaper, but they don’t always factor in things like higher property taxes, healthcare costs, or the reality that they end up traveling back to see family more often than they planned.
And if you’re thinking about downsizing, when does that happen? Is it something you do right as you retire, or is it a few years down the road?
These lifestyle questions can have financial consequences.
How will you fill your time?
This one is harder for people to think about, but it matters.
If your identity and your sense of purpose have been wrapped up in your work for the last 30 years, what replaces that when you retire?
I’m not a therapist, so I’m not going to tell you how to solve this. But I will tell you that the clients I work with who have the smoothest transitions are the ones who’ve thought this through. They have hobbies. They volunteer, and they have projects. They know what they’re going to do with their time.
The ones who struggle are the ones who retire because they think they should, or because they hit some magic age, but they haven’t really figured out what they’re retiring to.
Have you gone through comprehensive financial planning?
If you haven’t worked with a CFP® professional to build out a real plan, now is the time.
That plan should show you how all the pieces fit together. Your investments, your Social Security strategy, your tax situation, your estate documents, your insurance needs. How does it all work?
Here at EverPar Advisors, we have a coordinated team of planners & investment specialists that can help you map it all out.
2. Understand your expenses
Most people have a reasonable sense of what they spend now. But retirement spending is different.
What will your debt service look like?
Are you going into retirement with a mortgage? Student loans? Car payments?
For a lot of people, the house is the biggest remaining debt. And the question is: does it make sense to pay that off before you retire, or do you carry it into retirement?
The answer has changed over the years. Five or seven years ago, when interest rates were 2.5%, I told people: don’t pay off your house. If you can afford the mortgage payment, keep it. It’s cheap money. You’ve got this big chunk of capital that you can save, invest, and live off instead of tying it up in home equity.
Today, if somebody financed a house in the last couple of years and they’re paying 6% or 7%, that’s expensive money. That changes the calculation.
There’s no universal rule. It depends on your interest rate, your cash flow needs, and your overall financial situation.
How will your spending change?
You’re going to have more time in retirement. What does that mean for your spending?
Maybe you’re planning to travel more. Maybe you’re picking up new hobbies. Maybe you’re helping your kids financially in ways you weren’t before.
On the flip side, maybe you’re spending less on commuting, work clothes, or going out to lunch every day.
The research shows that spending is volatile in the early years of retirement. Some people spend more than they expected. Some people spend less. It’s hard to predict.
But you should at least think through what your spending might look like. Don’t just assume it’ll be 80% of what you’re spending now. That rule of thumb doesn’t always hold.
Have you planned for healthcare costs?
This is where people consistently underestimate.
In 2026, Medicare Part B premiums are $202.90 per month. That’s up 11.6% from 2025. Medicare Part D has a $2,100 out-of-pocket maximum.*
*Source: Centers for Medicare & Medicaid Services
According to HealthView Services, the average 65-year-old couple will spend $955,411 on lifetime healthcare costs. That includes premiums, deductibles, copays, vision, hearing, and dental. First-year costs average $17,003 and rise to $55,513 by age 85.**
**Source: HealthView Services, 2025 Retirement Healthcare Costs Data Report
Healthcare inflation is running at about 5.8%, while Social Security’s cost-of-living adjustment for 2026 is 2.8%. Healthcare costs are rising faster than your Social Security benefits will keep pace with.
If you’re retiring before 65, you need a plan for health insurance. Are you buying coverage on the ACA marketplace? Do you have retiree coverage from your employer? Can you get on your spouse’s plan?
Silver-level ACA plans can run $800 to $1,200 per month, depending on where you live and your income level. That’s $10,000 to $15,000 a year just for health insurance before you retire on Medicare.
And if you need long-term care down the road, those costs are substantial. A private nursing home room averages $11,294 per month. Assisted living is $6,313 per month.***
***Source: Genworth Cost of Care Survey 2026
You don’t have to solve all of this right now. But you need to understand the scale of these costs and factor them into your planning.
3. Understand your income sources
When the paycheck stops, where does the money come from?
Your withdrawal strategy
If you have a combination of IRA money, Roth money, and taxable accounts, there’s a right way and a wrong way to withdraw.
It depends on what resources you have and what your goals are.
The SECURE Act changed a lot of this. There was a time earlier in my career when we were telling people: don’t withdraw from your IRA. Let that be the last bucket you tap. Take money from your taxable accounts first, avoid triggering taxes on the IRA for as long as you can.
Now, for people with heirs, that advice has flipped. If you’ve got non-qualified accounts that will get a step-up in basis when you die, it often makes more sense to spend down the IRA money during your lifetime. You pass the taxable accounts to your kids with the step-up, and they avoid the capital gains tax.
Beyond the account structure, there’s also the type of investments you own. Some investments pay interest and dividends. Some are focused on growth.
When you’re in the accumulation phase, you’re saving so you can live off it someday. When you’re in the distribution phase, you’re living off those savings. The investment strategy should change between those two phases.
In a perfect world, you want to generate enough interest and dividends from your portfolio that you never have to sell shares to produce income. If you can do that, you’re never going to run out of money, because you’re not even touching the principal.
That’s not always realistic. But the point is, we want to think about how your portfolio is structured to produce the income you need.
Social Security
Here’s my philosophy: if you can delay Social Security, delay it.
When you delay, you increase your monthly benefit. And when you increase your benefit, you decrease how much you need to withdraw from your portfolio.
That’s important for two reasons.
First, obviously, a higher Social Security check gives you more guaranteed income. That’s valuable.
Second, and this is something people don’t always think about: you can’t pass your Social Security benefits to your kids. But you can pass your investment accounts. So if you take Social Security earlier and live off that income, you’re preserving more of your portfolio for the next generation.
Now, that advice assumes you have heirs you want to leave money to. If you don’t have kids, or if you’re not concerned about leaving an inheritance, the calculation might be different. You might decide to take Social Security at 62 or 65 and start enjoying it.
There’s no one right answer. But you need to coordinate your Social Security claiming strategy with your overall tax plan and your withdrawal strategy.
Pensions
If you’re leaving a job with a pension, you need to understand your settlement options.
Do you take a lump sum or an annuity? If you take the annuity, what happens to your spouse when you die? Do you have survivor benefits?
There’s also the question of early withdrawal penalties. If you’re under 59½, you generally pay a 10% penalty on distributions from retirement accounts. But there are exceptions.
One exception that’s relevant for many of the public safety folks I work with through the Trade Priorities & Accountabilities Act of 2025: if you’re in law enforcement and you have a defined benefit pension with a DROP fund, you can avoid that penalty if you leave the money in the DROP account or in a qualified retirement account. If you roll it to an IRA, you lose that public safety status and you’re subject to the 10% penalty if you withdraw before 59½.
I’ve had to fix this for people who got bad advice from someone who didn’t understand the rules. They were told they could roll it to an IRA and still avoid the penalty. That’s not true.
So if you have a pension, especially if you’re in public safety, make sure you understand the rules.
Required Minimum Distributions (RMDs)
RMDs begin at age 73 under current law. That’s going to increase to age 75 in 2033.
If you don’t take your RMD, the penalty is 25% of the amount you should have withdrawn. That’s down from 50% before the SECURE 2.0 Act, but it’s still substantial.
The strategy here is to plan ahead. If you’re 67 or 68 and you’re not taking distributions yet, this is a great time to think about Roth conversions or other strategies to reduce the size of your IRA before RMDs kick in.
Health Savings Accounts (HSAs)
If you have an HSA, this is one of the best accounts you can own.
You get a tax deduction when you contribute. The money grows tax-deferred. And if you use it for qualified medical expenses, it comes out tax-free.
That’s a triple tax advantage. No other account offers that.
If you’re still working and you’re on a high-deductible health plan, maximize your HSA contributions. And if you can afford to pay your medical expenses out-of-pocket and let the HSA grow, even better. You’re building a tax-free pool of money for healthcare costs in retirement.
4. Optimize your investment strategy
As you get closer to retirement, your investment strategy should evolve.
What types of investments do you own?
Are your investments focused on growth, or are they producing income through interest and dividends?
When you’re 10 or 15 years from retirement, you can take more risk. You’ve got time to ride out market downturns. But when you’re three or five years out, you need to start thinking about stability.
The research shows that many people stay too aggressive as they approach retirement. Morningstar warns about this. U.S. stocks have returned about 15% annualized over the past decade, and that’s created some complacency. But sequence of returns risk is real. If the market drops 30% in the first two years of your retirement and you’re withdrawing money, that can permanently damage your portfolio’s ability to recover.
The recommendation from most advisors is to de-risk five to ten years of spending needs. That means you’ve got five to ten years’ worth of expenses in more stable investments, cash, bonds, income-producing assets, so you’re not forced to sell stocks at the worst possible time.
Will your risk tolerance change?
Your risk tolerance should change as you move from the accumulation phase to the distribution phase.
When you’re accumulating, you’re adding money to the portfolio. Market downturns are buying opportunities. You’re dollar-cost averaging into cheaper prices.
When you’re in the distribution phase, you’re taking money out. Market downturns hurt more, because you’re selling shares at depressed prices to fund your spending.
Your portfolio structure needs to reflect this fundamental shift.
Do you have concentrated stock positions?
If you have a large position in a single stock, maybe from company stock options or a stock that’s appreciated significantly, you need a plan to diversify.
We recently published a whole separate article on how to diversify out of concentrated stock positions, but the short version is: concentrated positions create unnecessary risk. And the longer you wait to address it, the harder it gets.
If you’re five years from retirement and you’ve got 40% or 50% of your net worth in a single stock, we need to start working on that now.
Would a Roth conversion strategy make sense?
Roth conversions can be powerful, but they’re not right for everyone.
The benefit of a Roth conversion is that you pay taxes now at your current rate, and then the money grows tax-free. You don’t pay taxes on the growth, and you don’t pay taxes when you withdraw it in retirement.
The challenge is that conversions work best when you have time. The more years the money sits in the Roth, the more valuable the strategy becomes.
In retirement, there’s a window where Roth conversions can make sense. You’ve lost your earned income, so you’ve got a gap in your tax bracket. If you’re in your early 60s and you’re not taking Social Security yet, and your RMDs haven’t started, you might have a few years where your taxable income is relatively low. That’s a great time to do conversions.
But here’s the double-edged sword. Conversions usually work better the earlier you do them. But when you’re working, any conversion you do bumps you into a higher tax bracket because you’ve still got earned income.
I tell clients: we always want to have the conversation about Roth conversions. But I find myself recommending against it more often than I recommend for it.
The times when it makes sense are when you have a low-income year, a tax-loss harvesting opportunity, or a long time horizon.
If you do convert, you need to coordinate with your Medicare strategy, because conversions affect your income two years later, and that impacts your Medicare premiums (IRMAA thresholds).
Stock options and restricted stock units (RSUs)
If you’re an executive with stock options, RSUs, or other equity compensation, you need to understand your timelines.
The question I ask clients is: how much longer do you want to stay?
I’ve worked with a number of executives over the years. One of them comes to mind when writing this article. She’s a CFO and her company just kept dangling more stock options in front of her. They wanted her to stay 5-7 years longer than she was planning.
The problem is that the compensation is attractive. It’s the golden handcuffs. But it’s also stressful. Being a CFO of a public company is demanding. At some point, you have to decide whether the additional compensation is worth the additional years of stress.
If you’re five years out and your company is offering you another round of options that vest over the next five years, you need to decide if that aligns with your retirement timeline.
The risk is that you keep accepting the carrot on the stick, and you end up working longer than you actually want to.
So think through your timeline. If the options vest before your planned retirement date, great. If they don’t, be clear-eyed about whether you’re willing to delay retirement to capture that compensation.
Your five-year timeline
If you’re five years out from retirement, here’s a roadmap.
5 years out
This is when you do comprehensive financial planning. It’s time to move away from estimates & ideas and embrace a real, detailed plan.
You need a realistic assessment of your resources. You need to understand your retirement budget. And you need to evaluate major life decisions, like whether you’re moving, downsizing, or staying put.
This is also the time to review any concentrated stock positions and start thinking about diversification strategies.
3 to 4 years out
Review your Social Security strategy. When are you planning to claim? How does that coordinate with your spouse’s benefit?
Start making tax and portfolio adjustments. If Roth conversions make sense, this is when you begin. If you need to rebalance toward more conservative investments, start that process.
Finalize your Medicare strategy. Understand the enrollment windows. Understand IRMAA and how your income affects your premiums.
1 to 2 years out
Finalize your withdrawal strategy and income plan. Which accounts are you pulling from first? What’s the sequencing?
Complete your healthcare plan shopping. If you’re retiring before 65, where are you getting insurance? If you’re 65 or older, what Medicare plans are you choosing?
Review and update your estate plan. Make sure your beneficiaries are correct. Make sure your will and powers of attorney are up to date.
This is also when you coordinate your Social Security claiming with your overall tax strategy.
1 year out or retirement year
Maximize your final-year retirement contributions. If you’re still working, max out your 401(k), your IRA, your HSA.
Complete any consolidation or rollover planning. If you’ve got multiple old 401(k)s sitting around, get those consolidated.
Handle all your employer retirement paperwork. Pension elections, final benefits, all of that.
And plan for your insurance transitions. When does your group health insurance end? When does your individual coverage begin? Make sure there’s no gap.
Final thoughts & your next steps
Retirement planning is about getting to a certain dollar amount yes, but it’s also about understanding what retirement means to you.
It’s about understanding what retirement means to you. It’s about knowing your expenses and your income sources. It’s about making sure your investment strategy matches your stage of life.
And it’s about having a plan that accounts for all the variables, taxes, healthcare, Social Security, withdrawal sequencing, and coordinates them in a way that actually works.
If you’re five years out, you have time to get this right. But you need to start now.
Because the cost of not planning is almost always higher than the cost of planning.
Schedule a foundation session with EverPar advisors by clicking this link.
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For many individuals, delaying Social Security can increase lifetime benefits, particularly for those in good health with longevity expectations. However, the optimal strategy depends on individual circumstances.
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