The decade leading up to retirement could be the 10 years that make or break your strategy and determine the fate of your life savings. The first half of the decade is your last, best chance to build a financial snowball that grows as it rolls. The second half is the time to make crucial strategy and lifestyle adjustments to protect what you’ve built and position yourself for success.
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GOBankingRates spoke with experts who outlined what to do — and what not to do — in the crucial decade leading up to retirement.
There Will Be Time for Risk Aversion Soon — Keep Your Money in Play at First
Conventional wisdom says to reduce portfolio risk and limit asset exposure in the runup to retirement — but not necessarily in the early runup.
“Ironically, one of the biggest mistakes people make approaching and during retirement is becoming overly risk averse,” said Robert R. Johnson, Ph.D., CFA, CAIA, professor of finance at the Heider College of Business, Creighton University.
If you’re 10 years out from retirement and you trade equities for a safer bet like bonds, you could miss out on a decade of gains — and remember, the rule of 72 shows that historically, the stock market has doubled every seven years.
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Concentrate on Contributions and Use Your Age to Your Advantage
Soon, you’ll have to move much of your nest egg out of harm’s way by shifting to more defensive investments, so in the first five years, stuff as much money as you can into tax-friendly accounts while they’re still chasing higher returns — and remember that you can save more now than in previous years.
“If you’re 50 or older, the IRS allows you to contribute more to your retirement accounts, such as 401(k) [plans] and IRAs,” said Melissa Murphy Pavone, CFP, CDFA, founder of Mindful Financial Partners.
The IRS has held the catch-up contribution limit for 401(k) plans, 403(b) plans, 457 plans and Thrift Savings Plans at $7,500 for 2025, the same as in 2024, and also held the current $1,000 catch-up contribution limit for IRAs.
Tread Lightly in the ‘Retirement Red Zone’ 5 Years Out
Savers shouldn’t convert higher-risk investments to safer bets too early, but they shouldn’t risk waiting too long, either. The sweet spot might be in the middle of the final decade.
“When a person is within a few years of retirement, say five years, they should begin to reduce their risk exposure in retirement accounts,” said Johnson, who is also the co-author of “The Tools and Techniques Of Investment Planning, Strategic Value Investing and Investment Banking for Dummies.”
“A large downturn in the equity markets immediately preceding retirement can have devastating effects on an individual’s standard of living in retirement,” he explained. “Take, for example, someone who retired at the end of 2008. If they were invested in the S&P 500, they would have seen their assets fall by 37% in one year.”
Johnson used an NFL analogy in nicknaming those final five years “the retirement red zone.”
“Just as a football team can’t afford to turn the ball over and fail to score points when inside the opponent’s 20-yard line, the retirement investor can’t afford a big downturn in the retirement red zone,” he said. “This is what is referred to as ‘sequence of returns risk.’ A bad sequence of returns immediately preceding retirement can be devastating.”
Don’t Let an Expensive Emergency Foil Your Progress
If you’ve always maintained an FDIC-insured emergency fund that’s separate from your retirement savings, consider padding it as the finish line approaches. If you’ve somehow gotten by without one for all these years, now is the time to stop rolling those dice.
“A well-stocked emergency fund — typically six to 12 months of expenses — becomes even more critical as you approach retirement,” said Pavone. “This ensures you won’t have to tap into your retirement savings prematurely.”
You’ve Gotten Used to Your Lifestyle — Stay Used to It
Many people earn more than they’ve ever earned before in the decade before retirement — but it doesn’t mean anything if they blow it to live larger than they’ve ever lived before.
“The last 10 years of one’s career tend to be the highest-earning years, yet many people are unable to improve their financial condition,” said Johnson. “A common mistake people make is letting their spending increase commensurate with their new salary.”
He described the destructive yet all-too-common behavior known as lifestyle creep or lifestyle inflation.
“For instance, people move into a more expensive home or buy a more expensive car … to reward themselves for receiving the raise. What happens is they are unable to improve their financial condition because they spend everything they make,” he said. “One way to prevent lifestyle creep is to simply act as if you didn’t receive a raise, effectively investing the raise. This shouldn’t be a major burden, as one had gotten used to living on one’s previous salary.”
Do What the Richest, Savviest Investors Do: Get Help
It’s possible that you don’t require or can’t afford the services of a family office, but that doesn’t mean you shouldn’t follow the lead of the wealthy elite by viewing professional financial services as a dividend-paying investment.
“A fee-only financial planner is a good start,” said Chad Gammon, CFP, owner of Custom Fit Financial. “A credential to look for is a CFP professional. They can help create a retirement plan, as well as assist in tax planning, estate planning and insurance reviews.”
Gammon suggested enlisting the service of a dedicated tax professional, as well.
“This could be a CPA or enrolled agent (EA),” he said. “They can help with your tax preparation and planning alongside your financial planner. Other professionals to consider would be an estate planning attorney and an insurance specialist.”
Don’t Count on Social Security — or the Option To Continue Working
Social Security was never designed to provide the sole source of retirement income — and the program’s future is precarious heading toward the 2030s.
“I believe there is a misconception among many Americans that Social Security will provide for their retirement,” said Johnson. “They are in denial about … the standard of living that relying on Social Security will provide them.”
Another false sense of security comes from the assumption that people can just keep working past retirement age if they don’t save enough during their careers. However, many find that they don’t have that choice.
“One of the more interesting findings of a recent Gallup poll is that people plan to retire at age 66 and are actually forced to retire early at age 62 due to a plethora of reasons, primarily health considerations — their own and those of their loved ones,” said Johnson. “The option to continue working may not be there.”
In short, you have 10 years left — use them wisely.
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This article originally appeared on GOBankingRates.com: Retirement Guide: 10 Years Left Until Your Career Exit? 6 Ways To Prepare
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