The decade before retirement is one of the most critical — and most common — times to reassess your investment strategy. You’ve spent years building savings; now the goal shifts from growth to protection and income. Here’s how to think through the 10-year countdown.
Why the Last Decade Is Different
When retirement is 20 or 30 years away, a bad year in the market is a temporary setback — you have time to recover. When retirement is 5 years away, a severe market downturn can meaningfully reduce your lifetime income if your portfolio is still heavily weighted toward stocks.
This is called sequence of returns risk: the risk that poor returns in the years right before or after you retire can permanently damage your financial plan, even if the long-term average return looks fine. The order of returns matters — not just the average.
10 Years Out: Reassess and Reposition
At the 10-year mark, take stock of where you are:
- Run the numbers. How much have you saved? What do you expect from Social Security? Will you have a pension? What will your estimated expenses be in retirement?
- Check your asset allocation. Is it still appropriate for a 10-year timeline, or has it drifted too aggressive (or too conservative)?
- Maximize contributions. If you’re 50 or older, you’re eligible for catch-up contributions — $1,000 extra in IRAs, $7,500 extra in 401(k)s for 2026 (ages 60–63 can contribute $11,250 under SECURE 2.0). The last decade of work can dramatically increase your final balance.
5 Years Out: Shift Toward Stability
As retirement gets closer, gradually reduce your exposure to stocks. This doesn’t mean getting out of stocks entirely — you may have a 25–30 year retirement ahead of you and still need growth. But you don’t want your first few years of retirement income depending on what the market does next quarter.
A common approach: keep 2–3 years of living expenses in stable, lower-risk assets (bonds, money market, CDs) so you never have to sell stocks at a loss during a downturn. The rest stays invested for long-term growth.
Consider a Bucket Strategy
The bucket strategy is a useful framework for this transition. You divide your portfolio into buckets based on when you’ll need the money:
- Bucket 1 (0–2 years): Cash and equivalents — covers near-term expenses without touching investments
- Bucket 2 (2–10 years): Bonds and conservative assets — refills Bucket 1 over time
- Bucket 3 (10+ years): Stocks and growth assets — still working hard for your long-term needs
This approach separates your short-term income needs from your long-term growth investments, reducing the emotional pressure to sell during market dips.
Don’t Forget Taxes
The decade before retirement is often the best window for Roth conversions. If you retire before Social Security kicks in, you may have several years of lower income — a good time to convert traditional IRA or 401(k) funds to Roth at a lower tax rate. This reduces required minimum distributions later and creates tax-free income in retirement.
It’s also worth thinking about your Social Security claiming strategy. Waiting until 70 to claim maximizes your monthly benefit, but you need enough saved to bridge the gap. The decision of when to claim interacts directly with how much you need to draw from investments.
Stay Invested — Just More Carefully
One of the biggest mistakes people make in the years before retirement is moving entirely to cash or bonds out of fear. With retirements lasting 25–30 years, you still need your portfolio to grow. A portfolio that’s 100% bonds or cash will likely lose purchasing power to inflation.
Most advisors suggest a stock allocation of 40–60% even in retirement, with the balance in bonds and stable assets. The right number depends on your spending needs, other income sources, and risk tolerance.
Final Thought
The 10 years before retirement are the time to shift from pure growth mode to growth-plus-protection. Reassess your allocation, maximize contributions, plan for taxes, and think about how you’ll turn your savings into income. The decisions you make in this window have an outsized impact on the retirement you’ll actually live.