What to Do With Your Portfolio in the Final 5 Years Before Retirement

Five years from retirement is the critical window to rebalance your portfolio, boost savings, and lock in reliable income for a secure retirement.

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Being five years away from retirement can seem exciting. After years of hard work and saving, you’re looking forward to clocking out for the last time and opening the door to your Golden Years.

But without careful planning, that door can lead to a pitfall. However, there are some steps you can take now to make sure that doesn’t happen and you can live the retirement you’ve spent your life working hard for.

So let’s take a closer look.

Rework Your Asset Allocation

As you move closer to retirement, capital preservation and guaranteed income is key. So you may want to place less emphasis on generally riskier securities like growth stocks. Instead, you may want to shift a larger percentage of your asset allocation to fixed-income securities like high-yield bonds and Treasury securities like Treasury inflation-protected securities (TIPS).

You also could consider dividend stocks. Dividends are regular payments companies make out of their profits to shareholders. These typically are distributed quarterly or monthly. But you also can turn to dividend exchange-traded funds (ETFs). These are funds that may invest in hundreds of dividend-paying stocks handpicked by professionals. But don’t just chase the yield. Companies offering higher than usual yields may be distressed firms trying to attract shareholders. It’s important to make sure that these ETFs also seek out companies for other positive factors such as strong financials, consistent dividend distributions, and growth.

Furthermore, it’s important to always remain diversified. You may want to consider inflation-hedging securities like real estate investment trusts (REITs) and precious metals like gold. Many financial advisers recommend allocating 5–10 percent of your allocation to such alternative investments.

But at this point, you don’t want all your money in the markets. You may want to set aside three to five years of living expenses in cash, high-yield savings accounts, and certificates of deposit (CDs) in order to set up a hedge against market downturns.

Maximize Your Retirement Plans

If you can, you should aim to max out your retirement plan accounts each year.

Here’s how the rules break down for 2026: The 401(k) maximum contribution in 2026 is $24,500 for employee contributions and $72,000 for combined employee and employer contributions. With that said, you would want to contribute at least enough to get your employer contribution.

But if you’re five years from retirement, you’re probably 50 or older. People age 50 or older can make additional catch-up contributions of $8,000. And those between the ages of 60 and 63 may instead make “super” catch-up contributions of $11,250 if the plan allows.

And as for traditional and Roth IRAs, the 2026 maximum contribution is $7,500. Those aged 50 and older can make additional “catch-up” contributions of $1,100.

Consider Taking Out an Annuity

If done right, an annuity can provide you with a lifetime stream of guaranteed income, hedge against market volatility and inflation, and mitigate the risk that you’ll outlive your savings.

But there are many types of annuities out there. A fixed annuity is a common example.

Here’s how it works: A fixed annuity is basically an insurance contract that you may purchase with a lump sum, such as your retirement savings, or in a series of installment payments. The insurance company then guarantees your account will earn a certain fixed interest rate over a set period of time known as the accumulation phase.

Based on the characteristics of the annuity, you can begin getting payments at a certain time for a specified period or a lifetime. The amount of the payments would be calculated based on the money in the account and other factors. During the accumulation phase, the account grows tax-deferred until payments begin.

However, annuities can be extremely complex. So it’s best to seek the help of a qualified financial adviser and tax professional if you’re considering one.

Consider Delaying Social Security

Beyond your portfolio, Social Security would also be another source of income. You can begin collecting Social Security benefits at age 62 and retire. But if you can wait, it’ll pay off. In fact, your benefits can decrease by up to 30 percent if you begin collecting at age 62. But you’ll get larger checks at your full retirement age. The full retirement age is 66 for people born between 1943 and 1954. Then, it gradually increases to 67 for those born in 1960 or after. However, you’ll get your maximum Social Security benefits if you wait until age 70.

The Bottom Line

Being five years away from retirement can be an exciting time. But in order to reach your destination, there are some important steps you should consider taking now. This includes readjusting your portfolio to meet your risk tolerance, maximizing your retirement accounts, and strategically collecting Social Security benefits. But with a little effort and know-how, you can achieve the retirement you deserve.

The Epoch Times copyright © 2026. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.