Financial Advice 5 Years Before Retirement

Reviewed by Ed WilkinsonLast updated: March 4, 2026 11:54 am

an elderly women sitting in a park with a younger woman looking at a phone happily

Image credit: Pavel Danilyuk @Pexels

In this article:

Review Your Retirement Goals
Maximise Your Pension Contributions
Analyse Your Investment Strategy
Plan for Healthcare and Long-Term Care
Understand Your State Pension and Benefits
Eliminate Debt Before Retirement
Prepare for the Unexpected
A Financial Adviser Can Help

As you approach the five-year mark before retirement, it’s sensible to refine your plan so the move into later life is smooth and sustainable. This stage lays the groundwork for long-term financial security. The guidance below is educational in nature and can help you get retirement-ready.

Review Your Retirement Goals

Begin by reassessing your retirement goals. Consider whether your aspirations have changed and evaluate your current financial position to see if it aligns with them. Reflecting on your objectives now can help you make timely adjustments for a comfortable retirement.

Assess your expected retirement age: Decide whether you plan to retire around your State Pension age¹ or earlier/later. You can usually access defined contribution pensions from age 55 (rising to 57 on 6 April 2028), but taking money earlier can reduce your income later on.
Estimate retirement expenses: Calculate your expected monthly spending, allowing for inflation and potential healthcare or care costs. Rather than relying solely on generic rules of thumb, consider using the Pensions and Lifetime Savings Association’s Retirement Living Standards² as a benchmark for different lifestyles.
Review your living situation: Consider whether you will downsize, relocate, or aim to clear your mortgage before retirement. If you plan to move, factor in regional living costs and realistic sale/purchase prices, fees and taxes.

Additional Considerations for Retirement Planning

As you refine your retirement strategy, it’s worth integrating additional factors that could affect your financial security:

Review your investment portfolio: Check that your investments broadly match your risk tolerance and time frame. As you approach retirement, you may wish to reduce risk gradually to limit large swings in value.
Plan for inflation: The Bank of England³ targets 2% inflation, but the actual rate varies. Model different inflation scenarios to keep your plan realistic if prices rise faster than expected.
Consider your health and longevity: With people living longer on average, your savings may need to last for several decades. Build in a provision for health-related costs and a buffer for unforeseen expenses.

Taking these steps can help ensure that your retirement plan is robust and flexible enough to support you throughout your retirement years.

Maximise Your Pension Contributions

Increasing your pension contributions in the final few working years can significantly boost your retirement pot. You may be able to carry forward unused allowance from the previous three tax years if you meet the conditions. Be aware that the allowance can be reduced by the Tapered Annual Allowance⁴ for very high earners, and the Money Purchase Annual Allowance⁵ may apply if you have flexibly accessed defined contribution benefits.

Make use of pension tax relief at your marginal rate. Basic-rate relief is usually added at source; higher and additional-rate taxpayers may need to claim extra relief via Self Assessment. Scottish Income Tax rates and bands differ.
If applicable, maximise employer pension contributions to benefit from additional funding. Many employers offer matching schemes up to a percentage of salary.
Consider increasing contributions during peak earning years, within your allowances, to enhance tax relief and make the most of any employer matching.

Plan for Contributions Post-Career

You can receive tax relief on personal pension contributions up to age 75. After 75, you can still contribute, but tax relief is not available. Employer contributions are permitted at any age but count towards your Annual Allowance. If you have triggered the Money Purchase Annual Allowance, your tax-relieved defined contribution payments may be limited.

Consider Additional Savings Options

Beyond pensions, explore Individual Savings Accounts (ISAs) and other tax-efficient accounts. Since April 2024, you can subscribe to more than one ISA of the same type in a tax year, as long as you stay within the overall limit.

Look into different types of ISAs, such as Cash ISAs, Stocks and Shares ISAs, and Innovative Finance ISAs, each with different benefits and risks.
Consider a Lifetime ISA if you’re aged 18–39 (to open one). It can be used towards a first home or accessed from age 60 for retirement, with a government bonus.

Review Investment Strategies Regularly

As you approach retirement, review your investment strategies to ensure they align with your current risk tolerance and time horizon. Some investors blend growth assets (such as equities) with defensive assets (such as bonds or cash) to help balance long-term growth with capital preservation as retirement nears.

By carefully planning your pension contributions and using tax-efficient savings options, you can build a strong financial foundation for retirement. Consider seeking regulated financial advice to ensure your approach remains aligned with your goals and circumstances.

Analyse Your Investment Strategy

As retirement approaches, reassessing investment risk can help protect your finances from market volatility. A gradual shift towards a more resilient mix may mitigate large losses and stabilise your resources.

Review your current asset allocation and consider whether exposure to higher-risk holdings (for example, highly volatile shares or speculative assets) remains appropriate. Reducing concentration risk close to retirement can help limit downside.
Engage with a regulated financial adviser to develop an investment strategy tailored to your risk tolerance and retirement timeline. A personalised approach can help your portfolio support long-term financial security.

Key Considerations for a Conservative Investment Strategy

Implementing a more conservative strategy is about more than simply reducing risk. Aim for a balanced portfolio that seeks steady growth and/or income while preserving capital. Consider the following:

Diversification: Spread investments across asset classes (such as bonds, equities and property) and geographies to help reduce risk and smooth returns.
Income-generating investments: Consider assets that provide a relatively dependable income stream, such as dividend-paying shares or high-quality bonds, to supplement pension income.
Asset liquidity: Keep some liquid assets that can be accessed quickly to cover unexpected costs without selling longer-term investments at an inconvenient time.

Monitoring and Rebalancing Your Portfolio

Regularly review and, where appropriate, rebalance your portfolio so it continues to reflect your objectives and risk tolerance. As markets and your circumstances change, periodic adjustments can help keep you on track.

By managing your investments carefully and, where needed, consulting a regulated adviser, you can navigate retirement planning with greater confidence.

Plan for Healthcare and Long-Term Care

Healthcare and care-related costs can be high in retirement. While the NHS provides comprehensive medical care, adult social care is typically means-tested and not fully covered. Planning for these costs should be an integral part of your retirement strategy.

Investigate options such as private medical insurance or health cash plans, and for care fees, consider products like immediate needs annuities. Ask your local authority for a care needs assessment and financial assessment, and check whether you may qualify for NHS Continuing Healthcare in certain circumstances.
Consider setting aside additional savings specifically for medical or care emergencies. With the potential for unexpected needs, having a dedicated buffer can be crucial.
Use ISAs or earmarked cash savings to build flexibility for health-related costs. Note that the UK does not operate a Health Savings Account (HSA) system.

Understanding the Cost of Long-Term Care

As life expectancy increases, many people will require some form of long-term care. Costs vary widely by region and by level of need. As a broad guide:

Day care services in the community can often cost around £50–£100+ per day.
Full-time residential care frequently ranges from about £700 to £1,200+ per week, with nursing care typically higher.

Strategies for Managing Healthcare Expenses

To manage these potential costs, it is wise to:

Assess eligibility for benefits such as Attendance Allowance⁶ (if you are over State Pension⁷ age). If you are under State Pension age, Personal Independence Payment⁸ may apply. These can help with some care-related costs.
Consider care funding solutions such as immediate needs annuities. Comprehensive standalone long-term care insurance is limited in the UK market.
Consult a regulated financial adviser with later-life planning expertise and speak to your local authority about care needs and funding assessments. They can help integrate care planning into your broader financial strategy.

By addressing healthcare and care costs proactively, you can reduce the risk of financial strain and help protect your retirement income.

Understand Your State Pension and Benefits

It’s vital to understand what state benefits you may be entitled to and how they fit into your overall plan. Building an accurate picture can meaningfully influence your retirement decisions.

Check your State Pension forecast through the GOV.UK service. The full new State Pension rate changes each April; you typically need 35 qualifying National Insurance years for the full amount, and at least 10 years to receive anything. You may be able to increase your entitlement by paying voluntary National Insurance contributions. Contact the Future Pension Centre before paying.
Explore other support, such as the Winter Fuel Payment and Pension Credit. Eligibility rules and amounts change over time and can differ across the UK (for example, Scotland operates a Winter Heating Payment scheme).
Investigate eligibility for a free bus pass. In England, it is generally available from State Pension age, while Scotland, Wales and Northern Ireland have different rules and ages.

Additional State Benefits to Consider

While planning for retirement, consider other state support that might be available:

Pension Credit guarantees a minimum income for those on a low income and can unlock other help (for example, assistance with NHS costs, Housing Benefit or Council Tax Reduction, and in some cases a free TV licence at age 75).
If you provide regular care, you might be eligible for Carer’s Allowance, subject to meeting specific criteria. Check how it interacts with other benefits.

How to Access Information on Your Benefits

To obtain accurate, personalised information about your State Pension and other entitlements:

Visit the official GOV.UK State Pension pages to check your forecast and use the calculator based on your National Insurance record.
Contact the Pension Service or the Future Pension Centre to discuss your record and options, including voluntary contributions.
Seek free, impartial guidance from Citizens Advice⁹.

Understanding and integrating these benefits into your financial plan can provide a stronger foundation for retirement. Review your entitlements regularly in case your circumstances or the rules change.

Eliminate Debt Before Retirement

Entering retirement without the burden of debt is usually beneficial. Prioritise repaying high-interest debts, notably credit card and personal loan balances. Reducing what you owe lowers interest costs over time and frees up more of your income for day-to-day spending and savings.

Strategies for Debt Elimination

To eliminate debt more effectively, consider the following strategies:

Assess and organise your debts: List each debt with its interest rate, balance and minimum payment. This clarity helps you prioritise which to tackle first.
Implement the avalanche method: Pay the minimum on all debts while directing any extra funds to the highest-interest balance. Once cleared, move to the next highest, and so on.
Consider debt consolidation: If you have multiple high-interest debts, consolidating into a single loan with a lower rate can reduce interest and simplify payments. Compare total costs carefully, including fees, and avoid unnecessarily extending the term.

Impact of Mortgage Repayment

For many, the mortgage is the largest debt carried into retirement. Managing this effectively can improve your cash flow:

Overpaying your mortgage: If allowed, overpayments reduce the principal faster and lower total interest. Check for early repayment charges and keep an adequate emergency fund.
Remortgaging: Reviewing your deal periodically may reduce monthly outgoings. Weigh any fees, the remaining term and overall cost, not just the rate.

Benefits of Being Debt-Free in Retirement

Eliminating debts before retiring can lead to meaningful financial and well-being benefits:

Increased disposable income: Without monthly debt payments, your income goes further, helping cover living costs and potential medical or care expenses.
Reduced financial stress: Lower debt can ease money worries, supporting a more relaxed and enjoyable lifestyle.

By applying these strategies, you can approach retirement with a stronger financial foundation and greater peace of mind.

Prepare for the Unexpected

Establishing an emergency fund helps avoid dipping into your retirement savings for unforeseen expenses. Aim to hold at least three to six months of essential spending in readily accessible cash, adjusting the amount to your circumstances and risk tolerance.

Calculating Your Emergency Fund

To determine the appropriate size of your emergency fund, calculate your monthly essential costs, housing, utilities, food, transport and regular medical expenses, then multiply by your chosen number of months. For example, if essential expenses are £2,000 per month, a six-month fund would be £12,000.

Factors to Consider

Unexpected healthcare costs: Even with NHS provision or insurance, sudden medical issues can lead to out-of-pocket expenses.
Home repairs: Major repairs, such as roof or plumbing issues, can be costly and unpredictable.
Car maintenance: Essential vehicle repairs should be factored into your emergency planning.

Benefits of Maintaining an Emergency Fund

An emergency fund reduces the likelihood of incurring new debt and helps preserve invested savings during market downturns.

Reduces financial stress: Knowing you have a buffer can significantly reduce anxiety about unexpected bills.
Protects retirement savings: A dedicated cash reserve makes you less likely to sell investments at a bad time or draw down pensions faster than planned.

Prioritising and maintaining an emergency fund is a proactive step towards a secure and resilient retirement. Review the fund size periodically as your circumstances change.

A Financial Adviser Can Help

Given the complexities involved in preparing for retirement, consulting a financial adviser can provide personalised, regulated guidance tailored to your circumstances. A financial adviser can help you:

Create a comprehensive retirement plan that includes income strategies, tax planning and risk management.
Adjust your plan as needed based on changes in your life or financial situation.
Make effective use of your final working years to strengthen your financial position for retirement.

Working with a professional can help you consider all aspects of your financial health and prepare for retirement with greater confidence.

At FinancialAdvisers.co.uk, we understand the value of expert guidance as you approach retirement. Our platform can connect you with an FCA-authorised and regulated financial adviser in your area who can discuss the topics covered here. This article is for information only and does not constitute personal advice. Tax and pension rules can change, and their effects depend on your individual circumstances.

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