Retiring in 5 Years? Here's a Preparing for Retirement Checklist

1. Do an Income Inventory

Review your retirement budget and projected income to assess whether you'll have enough cash in five years to cover your expenses. Be sure to adjust your budget if your retirement plans have changed in a way that will affect your income needs. For instance, maybe you've decided to move abroad, or you're contemplating a move to a continuing care retirement community.

If you're planning an early retirement, be sure to factor in the cost of being more active than the average retiree and spending more on traveling, engaging in hobbies, and enjoying entertainment. Remember to also budget enough money for health insurance if you'll be retiring before you're eligible for Medicare.

Look at the amount of retirement savings you've accumulated so far and make a rough estimate of how large of a nest egg you'll have come retirement day. Check the amount of Social Security income you'll be eligible to receive based on your retirement age and earning history, and add income from any other sources, such as a pension or savings and investments in other accounts.

2. Increase Your Savings

Ideally, your budget and income review will show that you're on track to meet your retirement savings goal. But if you're not, work to close the gap during this five-year window. To accelerate your savings, you might need to kick your spending down a few notches.

"Examine your lifestyle spending and [reduce it]," says Williamson. "Redirecting spending on leisure and sport memberships, vacations, dining out, and luxury car payments to savings will add up quickly. This takes discipline; some sacrifices as a pre-retiree can make these luxuries a reality in retirement."

3. Pay Down Debt

Your retirement income will go a lot further if you're not devoting large portions of it to paying off a large credit card bill or car loan. Five years away from retirement, your focus should be on paying down as much debt as you can.

"Having to make payments on luxury goods in retirement can consume too much of one's retirement income, leaving little money to enjoy the additional time retirement affords," Williamson says.

Exercising the discipline to eliminate your debt before you retire will free up more money for you to enjoy the retirement lifestyle you've planned.

4. Review Your Asset Allocation

Talk to a financial advisor about how well your current asset allocation aligns with your retirement outlook and your overall financial security.

"A well-positioned retiree with little to no debt, and cash savings to cover two to three years of basic expenses, should maintain allocations similar to those used in their earning and accumulating years," Williamson says. "Maintaining retirement fund growth to hedge against inflation and rising costs over what could be a 30 plus year time frame is important."

If you do think your portfolio needs tweaking, a financial advisor can help you figure out the best way to rebalance.

5. Get Used to Living on Less

Take the opportunity during these last years before retiring to ease into living on a reduced income. Use your updated retirement income projection as a benchmark.

If your financial plan shows what your income is likely to be in retirement, [use it to] act as if you're in retirement today and spend that amount to get a feel for how life will be and where adjustments to lifestyle spending might be necessary," Williamson says.

Those adjustments could include anything from a smaller wardrobe to a smaller home. You may be pleasantly surprised to discover that you don't even miss the things you let go of to make room for the retirement of your dreams.

Use this preparing for retirement checklist to make the most of the next five years and to get financially fit to live the retirement life you want.