With roughly five years to go, the highest-value work is diversifying deliberately, unwinding concentrated company stock on a schedule, using the last high-contribution years fully, and building the tax plan that will govern the transition.
Five years out is the sweet spot. Far enough that decisions can be staged across multiple tax years, close enough that the numbers are real rather than hypothetical.
Here is what tends to matter most in that window.
Diversify with the withdrawal plan in view
Diversification at this stage is not just about spreading across asset classes. It is about matching assets to when you will need them — near-term spending in something stable, long-horizon money in something growth-oriented.
It is also about tax diversification. Having balances in taxable, tax-deferred, and Roth treatments is what gives you room to manage your bracket year by year once the paycheck stops. Households with everything in one bucket have far fewer moves available.
Company stock is usually the biggest single risk
For anyone who accumulated shares through grants or a purchase plan over a long tenure, the position is often much larger relative to net worth than they realize — and it correlates with the paycheck, the bonus, and sometimes the pension, so the household is exposed to one company in several directions at once.
The right response is a written, staged unwind rather than a single decision. Spreading sales across tax years manages the gain, and setting the rule in advance means you follow it whether the stock is up or down. Deciding case by case is how a plan turns into a series of postponements.
Tax-smart selling
Which lots you sell matters. Specific-lot identification, harvesting losses to offset gains, and paying attention to whether a gain is short- or long-term all change the after-tax result on the same trade.
Timing across years matters too. Realizing a large gain in a final high-earning year is materially different from realizing the same gain in the first year with no salary, and the gap between the two can be substantial.
Use the last high-contribution years
These are typically the largest deferrals of your career: full 401(k) contributions, catch-up contributions once eligible, HSA contributions if you are on a qualifying plan, and — where the plan supports it — after-tax contributions with in-plan conversion.
Keep the emergency reserve intact through all of it. Retiring with everything invested and nothing liquid is how a household ends up selling assets at a bad moment in month three.
Build the tax plan now, not later
Map the years between your last paycheck and the start of Social Security and required distributions. Those are usually your lowest-bracket years and the natural window for Roth conversions.
If retiring before 65, that same window governs your marketplace health insurance cost, because premium credits are driven by realized income. The conversion plan and the insurance plan have to be built together — optimizing either one alone will produce the wrong answer.
The single largest mistake in this window is treating these as separate tasks handled by separate people. The stock decision is a tax decision, the tax decision is an insurance decision, and all of them are the retirement income decision. Five years is enough time to sequence them properly.