Your five-year retirement runway: what to organise now

Five years from retirement feels close enough to get excited and far enough away to make meaningful changes. It is also the point when vague plans need numbers. You may know that you want to travel, spend more time with family or leave full-time work, but you still need to decide how much that life costs and where the income will come from.

A retirement runway brings those decisions into sequence. It helps you avoid cramming every contribution, investment change and debt repayment into the final months of work. The following framework is not a rigid countdown. Use it to identify the decisions that need time, the choices that can wait and the conversations you should start now.

Five years out: describe an ordinary retired year

Start with life rather than a target balance. Picture a normal week in retirement. Where will you live? How often will you travel? Will you help family, volunteer, care for someone or continue paid work? Include the quiet costs, such as replacing a car, maintaining the home, health care, hobbies and gifts. Retirement spending rarely follows one flat line.

Build an annual budget using current spending as evidence, then adjust for costs that will stop, start or change. Separate essential spending from flexible choices. Add larger one-off amounts for the first decade and a reserve for surprises. A rule of thumb can provide a comparison, but your own pattern matters more. Two households with the same super balance can need very different incomes.

Four to five years out: map every income source

List super balances, investment income, cash, rental property, business interests, defined benefit pensions and any expected Age Pension entitlement. Include both partners and note when each source becomes available. Super access age and Age Pension age are not the same. You may need to fund a gap between finishing work and receiving government support.

Run projections under more than one return and inflation assumption. Include fees, tax and planned withdrawals. A straight-line average return can hide sequencing risk, which is the danger that poor returns early in retirement combine with withdrawals and permanently reduce the balance. Test what happens if markets fall near your retirement date. The answer may shape your cash reserve, asset mix or willingness to work a little longer.

Four years out: review debt and housing

Decide what role the home plays. You may plan to stay, renovate, relocate, downsize or eventually use a home equity option. Each path affects cash flow, lifestyle, transaction costs and Age Pension assessment. Do not rely on a future sale without discussing where you would move and what the replacement home might cost.

Review the mortgage and other debts. Entering retirement debt free can reduce required income, but using all available cash or super to clear a loan can leave too little liquidity. Compare interest savings, investment consequences, tax and access to emergency money. If you plan to refinance, lenders may assess an application differently once employment income stops, so investigate options before leaving work.

Three years out: align investment risk with withdrawals

Retirement does not turn a long-term investor into a short-term investor overnight. Some money may fund next year's living costs while another portion may remain invested for twenty years or more. Separate these time frames. Cash and defensive assets can support near-term payments, while growth assets can help the portfolio keep pace with inflation over a long retirement.

Review super investment options and assets held outside super as one household portfolio. Look for concentration, hidden overlap and fees. Decide how many years of planned withdrawals you want in defensive assets and how you will refill that pool. Avoid a sudden move to cash simply because retirement is approaching. That may reduce volatility, but it can also lock in losses and weaken long-term growth.

Two to three years out: use contribution opportunities carefully

Check employer contributions, salary sacrifice, personal deductible contributions and any unused concessional cap amounts. Review after-tax contributions, spouse strategies and potential downsizer eligibility if a home sale forms part of the plan. Contribution limits and balance thresholds apply, so confirm current rules and your records.

A final working year with a bonus, leave payout or business income can create both opportunity and complexity. Plan before the payment occurs. Keep enough accessible cash for tax and the period before retirement income begins. Super contributions can improve tax efficiency, but they should not force you to borrow for ordinary expenses or cancel a near-term goal.

Two years out: design the retirement pay packet

Choose how money will reach your everyday account. An account-based pension can provide flexible payments from super, subject to minimum withdrawal rules. An annuity or other lifetime income product can add certainty. Cash, investments, work income and the Age Pension may complete the picture. Many people use a combination rather than one source.

Set the payment frequency and decide how you will handle irregular costs. A monthly pension can feel like a salary, while a separate annual travel or home-maintenance account can protect the day-to-day budget. Understand tax, fees, investment options, death benefit settings and what happens if one partner dies. Test the income against the budget before your final pay cheque.

One year out: rehearse the plan

Live on the proposed retirement budget for several months while still earning. Direct the difference to savings or debt. This rehearsal reveals whether the plan overlooks subscriptions, family support, health costs or the simple pleasure of a weekly lunch out. It also helps you learn which spending feels essential and which feels flexible.

Build the cash reserve, complete planned home repairs and confirm major purchases. Check leave balances, employment benefits and the exact timing of the last salary and super payment. Gather identity documents and create access to myGov, fund portals and bank accounts. Make sure both partners know where records sit and how household bills work.

Before the final day: cover the human details

Retirement changes more than income. Work often provides structure, purpose, friendship and a sense of progress. Talk honestly about how each partner imagines the week. One person may want travel while the other wants routine. Trial reduced hours, longer leave or a transition to retirement arrangement if it fits your circumstances.

Update your will, enduring powers of attorney and super death benefit nominations with qualified legal help. Review insurance because needs can change when work and debt end, but do not cancel cover before understanding replacement options and health risks. Record the first review date, ideally within the first year. Retirement is a new phase of the plan, not the moment planning stops.

Give the first year some breathing room

Avoid filling every week or committing all spare capital before retirement begins. Keep room to learn what the new rhythm actually costs and which activities bring satisfaction. Schedule a six-month conversation about spending, income and daily life. Small early adjustments can protect both the relationship and the long-term plan without making retirement feel like a permanent budgeting exercise.

Key takeaway

Keep the decision connected to your life.

The most useful retirement target is not just a super balance. It is a clear picture of spending, income, housing, debt, risk and daily life. Start early enough to test the plan, use contribution opportunities thoughtfully and give both the money and the human transition room to settle.

Official sources

Rules, rates and thresholds can change. Check the linked government guidance for current information before acting.