If you’re five years out from retirement, you’re entering what might be the most consequential stretch of your working life. The nest egg is largely built, the mortgage is probably manageable, and the finish line is close enough to see. What you do in these final working years is often what determines whether retirement feels secure or anxious when it arrives.

It’s one of the most common conversations I have with clients, and the way I think about it comes down to three main levers: tax, debt, and the way your super is invested.

Why these five years matter more than most

By your late fifties or early sixties, two things are usually true. Your super balance is at or near its peak, which means a small shift in investment strategy makes a bigger dollar difference than it did ten years ago. And your earning capacity is still intact, which means you have options — on tax, on contributions, on debt — that you won’t have once you stop working.

The decisions you make now compound in both directions. A missed contribution cap or an overly aggressive portfolio heading into a market downturn is harder to recover from when you only have a handful of working years left. The flip side is that the right moves in this window can meaningfully improve the income you’ll draw for the rest of your life.

1. Make the final working years as tax-efficient as possible

While you’re still earning, you have access to tax strategies that disappear the moment you retire. The most useful of these for most people is making extra concessional (before-tax) contributions to super.

These contributions are taxed at a flat 15% going into super, rather than at your marginal rate. For anyone paying tax at 30% or higher, that’s a meaningful difference, and it has the added benefit of growing the balance you’ll draw on later. Salary sacrifice is the most common way to do it; personal deductible contributions are another option, depending on how you’re paid.

How much headroom you have in a given year depends on your concessional contribution cap and whether you have any carry-forward amounts available from previous years. For some people, there’s a quiet opportunity to make a much larger catch-up contribution than they’d realised they could.

Non-concessional (after-tax) contributions are also worth looking at, particularly if you’re receiving an inheritance, downsizing proceeds, or a redundancy payout in the lead-up to retirement.

2. Get the debt down before you stop earning

Any debt still running when you retire has to be paid from your retirement income. That’s a very different arithmetic to paying it from a wage, because every repayment reduces what’s available for lifestyle, and because the strategies for repaying debt from super withdrawals are more constrained.

Accelerating repayment in the final working years is one of the cleaner levers you have. It doesn’t need to be dramatic — redirecting a bonus, a tax refund or a modest extra fortnightly amount can make a material difference over four or five years. For most people the goal is a mortgage that’s either gone, or small enough to clear from an initial drawdown, by the time they stop working.

There’s a related decision to make about whether extra cash should go onto the mortgage or into super. The right answer varies with your income, your mortgage rate, and your contribution cap — this is one of those situations where modelling the options side by side is more useful than relying on a rule of thumb.

3. Take some risk off the super portfolio

By the time retirement is on the horizon, most pre-retirees have built a substantial balance in super. The challenge is that the strategy that got you there — a long time horizon, growth-heavy exposure, riding out the ups and downs — is not quite the right strategy for the five years before you need to start drawing on it.

The specific risk we’re guarding against is called sequencing risk: a sharp market downturn in the first few years of retirement. If you’re forced to sell assets at depressed prices to fund your living expenses, those assets aren’t there to recover when markets eventually do. The permanent reduction in income this creates can be larger than most people expect.

Our response to it, as part of the CARE investment philosophy, is what we call the “four-year pause button” — holding roughly four years of expected income in defensive, stable assets by the time retirement begins. That buffer means a bad market year doesn’t force sales from the growth side of the portfolio, and lets you wait out volatility rather than crystallising losses.

Building towards that mix is something that happens gradually in the lead-up to retirement rather than overnight. You don’t want to shift fully conservative too early (retirements can last 25 to 30 years and still need growth), but you also don’t want a 70% growth allocation on the day you stop earning. Working out the right glide path, and when to make each adjustment, is part of what the pre-retirement planning conversation is for.

Questions worth asking yourself

• Am I using as much of my concessional cap each year as makes sense for my tax position?
• Do I have carry-forward cap space I didn’t realise I had?
• What would the mortgage look like at my planned retirement date if I kept paying at the current rate? If I accelerated it?
• How much of my super is currently in growth assets, and how would I feel if that balance dropped 20% in the year I retired?
• Have I thought about how my super will transition from accumulation to pension phase, and when?
• Do I know roughly what my retirement income will look like under my current plan?

Honest answers to those usually sharpen the picture quickly. Where it isn’t yet clear, this is the sort of thing we work through with clients in the Pre-Retiree stage — modelling different scenarios, factoring in your tax position and timeframe, and setting out the specific steps year by year.

A note on timing

Five years is a useful horizon because it gives you time to do all three of these things well. Four years can still work. Two years is harder, because you’ve lost the ability to accumulate meaningfully extra super inside the caps, and the window for accelerating debt repayment has narrowed.

If you’re reading this and you’re three years out and nothing on this list has been looked at, that’s a reason to start the conversation now rather than later — not a reason to decide it’s too late.

Book an initial chat with the Insight Wealth Planning team →

Frequently asked questions

Why do the five years before retirement matter so much?

This is usually when your super balance is at its peak, your earning capacity is still strong, and small decisions on tax, debt and investment risk have the biggest effect on the income you’ll draw in retirement. It’s also the point where mistakes are harder to recover from, because you’re running out of working years to make them back.

How can super contributions reduce my tax in the final years of work?

Concessional (before-tax) contributions, such as salary sacrifice, are taxed at a flat 15% going into super rather than at your marginal rate. For higher-income earners this can be a meaningful tax reduction while also boosting the balance you retire with. The right level depends on your contribution cap, your income, and your overall plan.

Should I aim to be debt-free before I retire?

Not necessarily, but most people find it simpler. Retiring with a mortgage still running means your retirement income has to cover both lifestyle and loan repayments. Accelerating debt reduction in the final working years, when income is strongest, is one of the more reliable ways to reduce stress on the retirement budget.

What is sequencing risk, and why does it matter near retirement?

Sequencing risk is the risk of a major market downturn in the early years of retirement. If you’re drawing income from investments that have just dropped sharply, you can permanently reduce the amount your portfolio generates over your lifetime. Taking some risk off the table in the lead-up to retirement is designed to protect against this.

How defensive should my investments be five years before I retire?

There isn’t a single right answer, but the direction tends to be the same: shifting some of the portfolio into more defensive, income-oriented assets without going fully conservative too early. The goal is to protect against a bad market year right at retirement, while still having enough growth exposure for a retirement that may last 25 to 30 years.

Video transcript

Tegan Del Moro on the five years before retirement (video, 1:37).

My name is Tegan Del Moro. I’m a financial planner here at Insight Wealth Planning. I’m also a shareholder in the business. I’ve been in the financial planning industry for about 10 years now.

Often I get asked by my pre-retiree clients, what are some strategies or things they should be considering in the five years in the lead up to their retirement?

The first of which I would like to generally consider is tax minimisation. In the final years that you’re still working, we may be able to use things like superannuation contributions to be able to reduce the amount of income tax that you’re paying in your final years of work.

We also like to look at any debt that may be still present. Are there any opportunities to accelerate that debt repayment in the lead up to your retirement?

And finally, we want to have a look at superannuation and the underlying investments. A lot of people, when they’re getting to that pre-retirement stage, they’ve built a very significant nest egg within superannuation, so we want to start thinking about some downside protection in those portfolios and taking some risk off the table, so that when retirement rolls around, we can be really confident in the investment strategy and know that we’ve got some defensive mechanisms in place to be able to support a regular income stream when you’re ready for retirement.

General advice warning: the information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Superannuation contribution caps, tax rates and investment strategies vary with your circumstances and may change over time. Please consider whether this information is appropriate for you before acting on it, and seek personal financial advice where required. Insight Wealth Planning Pty Ltd is a Corporate Authorised Representative of GPS Wealth Ltd, ABN 17 005 482 726, AFSL 254544.