The Investing Rule That Matters Most Once You're Within Five Years of Retirement

If you didn't start investing as early as you hoped, the five years before retirement are not the time to coast. This window can be one of the most powerful — and risky — for your portfolio, where even the smallest decisions can shape how much income you'll have once paychecks stop.

That's why maximizing your retirement contributions becomes the most important strategy. Here are several ways to make it happen..

Increase your retirement account contributions to the maximum

For 2026, the IRS raised the annual 401(k) contribution limit to $24,500, up from $23,500 in 2025, while the IRA limit increased to $7,500 from $7,000. If you're within five years of retirement, this is the number one rule to follow. Contributing the maximum can meaningfully boost your nest egg during a period when your income may be at its peak.

Higher contributions also reduce your taxable income if you're using a traditional 401(k) or IRA. That tax break can free up additional cash to save, invest, or pay down high-interest debt.

Take advantage of catch-up contributions over age 50

Workers aged 50 and older can contribute even more. In v, the 401(k) catch-up contribution limit increased to $8,000, up from $7,500 in 2025. The IRA catch-up amount also rises to $1,100 in 2026, up from $1,000 in 2025.

These additional dollars allow you to accelerate savings at a time when retirement is close enough to feel real, but still far enough away for contributions to meaningfully compound before you call it quits at work.

Use enhanced catch-up contributions if you're ages 60 to 63

SECURE 2.0 introduced an even higher catch-up limit for those ages 60, 61, 62, and 63. In 2026, eligible workers in that age band can contribute up to $11,250 in catch-up contributions to a 401(k), instead of the standard $8,000.

This creates a rare opportunity to dramatically increase tax-advantaged savings in a short period. If you're in this age group and still earning a high income, failing to use this provision could potentially mean leaving many thousands of dollars in tax-deferred growth on the table.

Make a last-minute IRA contribution for the prior tax year (if eligible)

You typically have until the federal tax filing deadline to make IRA account contributions for the previous tax year. That means if you did not max out your 2025 IRA limit, you may still have time to contribute extra funds before filing your tax return by April 15, 2026.

This retroactive funding option gives you flexibility if year-end expenses prevented you from fully contributing. For someone nearing retirement, even one extra year of tax-advantaged growth can make a measurable difference.

Why maximizing contributions matters so much now

The final working years often represent your highest earning period, which means you may have the greatest capacity to save. Contributions made now benefit from tax advantages, potential employer matching, and compound growth — even if the time horizon is shorter than it once was.

Increasing contributions can also strengthen your future required minimum distribution (RMD) calculations and give you more flexibility in managing taxable income later. In short, this stage is about locking in financial resilience before your income shifts from earned wages to portfolio withdrawals.

Bottom line

When retirement is five years away, the rules change. You move from aggressive accumulation to strategic optimization — maximizing contribution limits, taking advantage of catch-up contributions, and dialing back unnecessary risk.

Even modest increases in savings during your final working years may translate into many thousands of dollars in additional retirement income. The question is whether you're using every available lever to grow your wealth before the paychecks stop.

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