6 money moves experts say you should make 5 years before you retire

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• The years immediately leading up to your retirement are crucial — mistakes in this period could be costly.
• Once you know how much you spend before retirement, do a trial run of living off your anticipated income.
• Make sure your estate plan is up to date with your needs in retirement.

Transitioning to retirement can be exciting and scary. You're preparing to say goodbye to the career you've spent decades building, but you're also about to have time for other activities you enjoy, whether it's travel, lounging on the beach with a book, or spending time with friends and family.

While it's important to consider the mental and emotional aspects of that shift, there are also financial steps to take. When you're five years before or after, you're in what financial planning experts call the "red zone" — a period when your savings and investing decisions can significantly impact your financial stability for the rest of your life.

"Retirement planning necessitates a long-term perspective," says Ashley Folkes, vice president and wealth manager at financial planning firm Farther. "Addressing anxieties related to healthcare costs, inflation, and unexpected expenses through thorough planning is essential."

Here are six moves financial planners say to make when you're five years out from retirement.

1. Figure out what you spend

One of the first steps to transitioning to retirement is to determine how much you're currently spending so you can figure out how much money you'll need once you don't have a steady paycheck.

Don't go through the headache of creating an itemized budget, says Evan Beach, president and wealth advisor at Exit 59 Advisory. Instead, he recommends simply looking at two years of debits from your bank account and dividing by 24.

"This should capture those one-off items, but more importantly, gives you the information necessary to see if you're on track," Beach adds.

2. Do a trial run with your projected budget

A strategic way to address the concern of outliving your savings or becoming a financial burden on your family is to simulate retirement living by adhering to a projected budget, Folkes says.

"This trial run reveals potential discrepancies between planned and actual expenses, prompting necessary adjustments," he adds. If past financial constraints, such as paying a child's college tuition, have limited your savings, it's good to know that before you retire, and can still implement savings catch-up methods.

3. Maximize your savings

In fact, it may be a good idea to save aggressively during this time, even if you're already on track. Your last five years are likely to be your highest earnings years, and you may also have lower family expenses if you have children who have moved out of the house.

"High income and comparatively low expenses is the perfect recipe for those looking to supercharge their savings," says Jessica McNamee, founder and wealth management advisor at Sirius Wealth Strategies. "In the last five years of work, people should try to maximize their retirement plan contributions."

But don't get discouraged if that is not possible. McNamee says if clients can't contribute the maximum amount allowed by the IRS, she encourages them to contribute what they can: "Something is better than nothing."

You also want to make sure you have enough cash reserves. Consider how much of your expenses will be covered by guaranteed income, such as Social Security or a pension, as well as withdrawals from your retirement accounts, to determine what amount of cash you should have handy. (While you're at it, review your Social Security earnings records to make sure they're accurate.)

4. Review your investment portfolio

While you should be reviewing your asset allocation — how your investment portfolio is divided between assets such as stocks and bonds — regularly, it's essential to do a check-in when you're approaching retirement.

"Being too risky just before and just after retirement can have huge consequences to you for literally the rest of your life," says Monica Dwyer, senior vice president and wealth advisor at Harvest Financial Advisors. "Huge losses during the five years prior and a few years after your retirement can alter your trajectory, so be aware of those risks and adjust accordingly."

A portfolio's asset allocation will be different for each investor: Someone who is less tolerant to risk and doesn't have a lot of cash saved up should take a different approach from someone who is risk intolerant but has wiggle room in the budget, or someone who can still invest aggressively amid market ups and downs. It may be worth finding a financial advisor who can help you make appropriate adjustments.

This is also a good time to make sure your portfolio is tax diversified — as in, your money is (ideally) split between accounts with pre-tax, after-tax, and tax-free treatments.

"It gives you more options," Dwyer says.

5. Take care of any needed home repairs

It may seem easier to wait until you have more time in retirement to take care of home repairs, but Beach recommends trying to get them done now.

"On the financial front, you typically have the most wiggle room between income and expenses between the time your kids leave the house and when you retire," Beach says. "This is the time to tackle those big-ticket items."

Doing so reduces the risk of having to take big withdrawals early in retirement when you don't know what the market will be doing, he adds.

6. Update your estate plan

If you haven't done so recently, now is the time to review and update your estate plan. Since you've likely been saving for decades at this point, you may be at or near your peak lifetime network, so it's critical to consider who will inherit your assets under what conditions. A trust, for example, can allow someone to control how, when, and why assets are disbursed to beneficiaries even after the grantor has died, McNamee explains.

She also says to consider your tax situation, and whether your money is subject to federal or state estate taxes now that your net worth has grown.

"Most people put estate plans in place when they have young children and not much in assets," she says. "When they are five years from retirement, they are probably in the opposite position, with adult children and significant assets. Their estate needs have dramatically changed, and their plan should be updated to reflect that."