I'm a Retirement Planner: 6 Expenses I'd Slash 5 Years Before Retirement
The final five years before retirement can be especially valuable for fine-tuning your finances and readying for retirement. Experts recommend taking a close look at spending that creates debt, locks you into recurring costs or doesn’t add enough value to justify carrying it into retirement.
There’s another reason to free up cash during these years: Workers age 50 and older can generally contribute up to $32,500 to a 401(k) in 2026, including the $8,000 catch-up contribution, while those ages 60 through 63 may qualify for an even higher $11,250 catch-up contribution.
1. New Car Loans and Other Long-Term Debt
Five years before retirement may not be the best time to take on a new monthly payment that could follow you well into your retirement years, according to Gregory DuPont, an attorney, certified financial planner (CFP) and founder of Advocate Wealth Solutions. This is especially important with expensive vehicles or other financed purchases.
“I wouldn't necessarily stop any particular category of spending, but I would stop taking on new recurring obligations," DuPont said. "I don't want that payment following me into a fixed-income retirement for the next decade.”
2. Major Lifestyle Upgrades You’d Have To Finance
A new car, major renovation or vacation property isn't automatically a bad purchase before retirement, but financing one could drain savings while adding ongoing expenses. Before spending, consider not just the purchase price but the collected costs that could push back your retirement.
“Does it fit within projected cash flow, affect the retirement date or create ongoing expenses such as taxes, maintenance and insurance?" said Christopher Stroup, CFP and owner of Silicon Beach Financial. "A major purchase isn’t automatically wrong, but it deserves more scrutiny.”
This doesn't mean putting off necessary home repairs. Big- ticket needs such as a roof or furnace while you still have employment income are a worthwhile spend, particularly if doing so could prevent an unwelcome expense after retirement.
3. Subscriptions and Memberships You Barely Use
Anything that comes out of your account automatically each month deserves scrutiny, Stroup said. Things like streaming subscriptions, apps, clubs, gym memberships and delivery services.
“Individually, these expenses may seem insignificant, but several hundred dollars a month becomes meaningful over five years,” he said.
4. Excessive Convenience Spending
Frequent takeout, meal delivery and other convenience services may be worth reconsidering if they've become habits rather than intentional purchases, according to Stroup. You don’t have to eliminate all dining out or other pleasures but, he said, “I’d want every dollar to have a purpose.”
If you plan to travel or engage in more entertainment or hobbies in retirement you’ll want to be intentional about these costs, as well, and deciding which still provide meaningful value.
5. High-Interest Credit Card Debt
The years immediately before retirement can be an important period for getting high-interest debt under control. This is an essential time to pay down high-interest debt, including credit cards, because those payments can consume future retirement cash flow.
Although, Michael Ryan, a financial educator, said that not all debt is bad. Low-rate debts can probably wait, since these are not likely to be racking up expensive interest.
6. Expenses You Don’t Want To Carry Into Retirement
Finally, look beyond individual purchases and consider the lifestyle you're building in retirement. Cutting a permanent expense can potentially have a double impact of freeing up cash to save during your remaining working years and lowering the amount you'll need to fund once retired, Stroup said.
He gave the example of someone who reduces discretionary spending by $500 per month for five years, and invests that money rather than spending it, producing $30,000 of additional contributions. At an average 6% annual return, compounded monthly, those contributions could grow to roughly $35,000 in the short window before retirement.
What You Shouldn’t Automatically Stop Spending On
Retirement preparation should focus on cutting the excess but not chipping away at things that will be essential to your health and wellbeing. Don’t heavily cut spending on things like preventive healthcare, adequate insurance, necessary home and vehicle maintenance and so on, per Stroup.
“Spend intentionally on things that support the life you want,” he said.
DuPont also cautioned against taking austerity too far.
“Keep the small pleasures," he said. "People who white-knuckle their way to retirement rarely give themselves permission to spend those hard-earned savings once they get there.”
In a nutshell, cheap isn't always financially smart, Ryan concluded.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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