Five Mistakes People Make 5 Years Before Retirement — And How to Avoid Them

Five Mistakes People Make 5 Years Before Retirement — And How to Avoid Them

The five-year run-up to retirement is one of the most important phases in your financial life. Decisions made during this period can have a lasting impact on your income, lifestyle, and peace of mind in later years. Yet many people approach this stage with gaps in planning or misplaced assumptions.

Here are five common mistakes we see—and how you can avoid them.

1. Not Having a Clear Retirement Income Plan

Many people focus on how much they’ve saved, rather than how that savings will translate into a sustainable income.

Without a clear plan, it’s easy to underestimate:

• How long your money needs to last
• The impact of inflation
• The level of income you’ll realistically need

What to do instead:
Start building a structured income strategy, that considers all sources: pensions, savings, and any other assets and how they will work together over time.  Make sure to align your existing arrangements into a coherent plan.

2. Ignoring Pension Opportunities

By the time you’re five years from retirement, it’s common to have multiple pension pots from different employers. Leaving these scattered can make it harder to manage risk, track performance, and plan withdrawals effectively.

What to do instead:
Review your existing pensions and understand what you have. In some cases, consolidating into a smaller number of arrangements can improve clarity and control but this should always be assessed carefully, particularly where guarantees or benefits may be lost.

3. Taking Too Much (or Too Little) Investment Risk

As retirement approaches, your attitude to risk becomes more critical. Some people remain overly exposed to market volatility, while others move too cautiously and risk eroding the long-term value of their savings.

What to do instead:
Strike a balance between protecting your savings and allowing for continued growth. Your investment approach should reflect:

• Your time horizon
• Your income needs
• Your tolerance for fluctuations

A structured review of your current investments can help ensure they remain aligned with your retirement goals.

4. Overlooking Tax Efficiency

The way you access your retirement savings can have significant tax implications. Without careful planning, you could pay more tax than necessary or trigger avoidable liabilities.

Common pitfalls include:

• Taking large lump sums in a single tax year
• Not making full use of available allowances
• Poor coordination between income sources

What to do instead:
Plan withdrawals strategically across tax years and income sources. Understanding how pension withdrawals, tax-free cash, and other income interact can make a meaningful difference to your net income.

5. Not Planning for Life Beyond the Numbers

Retirement isn’t just a financial event—it’s a lifestyle transition. Many people focus solely on finances and overlook practical and emotional considerations.

This can include:

• How you’ll spend your time
• Potential healthcare or care costs
• Supporting family members
• Adjusting to a different routine

What to do instead:
Take a broader view of retirement planning. Consider both expected and unexpected costs, and ensure your financial plan supports the lifestyle you want, not just the basics.

Final Thoughts

The final five years before retirement are not the time for guesswork or inertia. Small adjustments now can have a significant impact later.

If you’re unsure whether you’re on track, reviewing your position with your adviser can help bring clarity and confidence and help you organise, assess, and prepare for retirement.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

SJP APPROVED 08/05/2026