The “Gray Zone” Years: Retirement Planning 5-10 Years Before Full Retirement

Understanding the Gray Zone Years

You’ve spent decades saving, investing and building your retirement nest egg. Now you’re entering the gray zone, the critical five- to 10-year window before retirement when your financial decisions can have an outsized impact on the rest of your life.

As you look ahead to your next chapter, you may be wondering how to transition from earning a paycheck to generating sustainable retirement income. You might also be wondering when to claim Social Security, whether your retirement savings are enough, and how healthcare and long‑term care costs could affect your retirement lifestyle.

The gray zone years offer a significant opportunity to strengthen your retirement plan. You’re still far enough away from your target retirement age that changes can improve your outcome, but your timeline is shrinking, so it’s important to align your retirement strategy sooner rather than later.

If you need help defining your bigger financial picture and goals as you head toward retirement, Creative Planning’s overview of comprehensive financial planning can be a useful starting point.

Unique Risks of the Gray Zone

Several types of risk become magnified in the years leading up to retirement , especially as you transition from building retirement savings to relying on them for income.

Market and sequence-of-returns risk

• Market volatility – This is the risk that fluctuations in investment value could harm your retirement assets just before or just after you stop working. A significant downturn close to retirement can be harder to recover from, because you have fewer years of earnings and contributions ahead.

• Sequence-of-returns risk – This is the risk that a market drop early in retirement could permanently reduce your portfolio’s growth potential and the income it can support. Taking withdrawals while markets are down can lock in losses and shrink your retirement funds more quickly.

For more on how market swings interact with your long‑term plan, see Creative Planning’s perspective on staying invested through volatility.

Longevity, inflation and expense risk

• Longevity risk – You could live 25-30 years or more in retirement, which is great news — but it also means your retirement fund needs to last longer than you might expect. If your retirement expenses are higher than planned, or you retire earlier than expected, you may increase your risk of outliving your assets.
• Inflation risk – An unexpected rise in inflation can reduce your purchasing power and raise everyday expenses in retirement (especially those related to healthcare, housing and long‑term care).

• Unexpected expenses –Large one-time costs — such as home repairs, family support needs or major medical bills — can derail an otherwise solid retirement plan if you don’t have adequate reserves and flexibility built in.

Health and employment risk

• Healthcare emergencies – A healthcare emergency, including the need for long-term care, can quickly deplete retirement savings if you don’t have a plan for insurance coverage, out‑of‑pocket costs and caregiving.
• Job loss or early retirement –You may be forced into early retirement due to layoffs, health issues or family responsibilities, giving you fewer years to make retirement contributions and build your retirement nest egg.

A thoughtful retirement plan created during the gray zone years can help you manage these risks with a combination of investment strategy, insurance coverage, cash reserves and asset location plans. For an overview of how all these pieces fit together, see Creative Planning’s article on getting ready to retire.

Key Planning Moves 5-10 Years Before Retirement

Refine your retirement vision and target date

Start by clarifying when you’d like to retire, whether you see yourself fully retired or working part time, and what you want your lifestyle to look like. Your target retirement age and desired lifestyle will drive how much income you need, how aggressively you should save during these years and how you structure your investment portfolio.​

It can help to put rough numbers around your goals, such as typical monthly spending, travel plans, charitable giving and any support for children or aging parents. The clearer your vision, the easier it is to test whether your retirement savings and income sources are on track.

Stress-test your retirement plan

The gray zone is an ideal time to stress‑test your retirement plan against different scenarios, such as:​

• Retiring earlier or later than planned
• Experiencing a major market downturn just before or after retirement
• Facing higher‑than‑expected inflation or healthcare expenses
• Needing to provide financial support for family members

A financial advisor can model how your retirement plan performs under these scenarios so that you can see where adjustments might be needed (e.g., increasing your savings, modifying your retirement date, adjusting your investment mix or changing your withdrawal strategy).​

Maximize retirement savings and catch-up contributions

If you’re in your 50s or early 60s, you may be eligible to make catch‑up contributions to workplace retirement plans and IRAs, allowing you to contribute more than standard limits allow. These additional contributions can meaningfully boost your retirement assets during your final working years, especially if you’re behind on savings or plan to retire early.​

You may also want to increase automatic contributions from each paycheck, redirect bonuses or windfalls into retirement accounts, and ensure you’re capturing any employer match in your workplace plan.

It’s important to consider your tax rate during your working years compared to the tax rate you may have during retirement. Income from pensions, Social Security, IRA distributions and portfolio income should be managed within the Gray Zone.

Coordinate your Social Security strategy

Social Security claiming decisions can have a lasting impact on your retirement income, especially for married couples and high earners. Claiming benefits early can provide income sooner but permanently reduces your monthly benefit, while delaying benefits can increase your monthly income and offer stronger protection against longevity risk.​

During the gray zone years, work with an advisor to evaluate:​

• Whether to claim early, at full retirement age or later
• How your Social Security benefits interact with spousal benefits and survivorship planning
• How Social Security fits alongside pensions, annuities and withdrawals from retirement accounts

Investment Strategy and Portfolio Alignment

Reallocate your portfolio and review asset allocation

As you approach retirement, your investment portfolio may need to shift from a purely growth‑oriented allocation to one that balances growth with capital preservation and income generation. That doesn’t mean eliminating growth assets, but it may mean reducing concentration risk and overall volatility.​

During the gray zone, consider:​

• Reassessing your risk profile in light of your retirement timeline, not just your age
• Ensuring your portfolio is diversified across asset classes, sectors and geographies
• Reducing oversized positions in a single stock or employer stock
• Increasing exposure to investments that can support income while still maintaining growth potential

A wealth manager can help by designing an asset allocation that aligns with your time horizon for different goals — for example, near‑term income needs versus long‑term legacy or charitable objectives.

Address sequence‑of‑returns risk

To help manage sequence‑of‑returns risk, many pre‑retirees set aside a portion of their portfolio in more conservative or cash‑like investments that can cover several years of retirement expenses. Doing so can give you flexibility to avoid selling growth assets at depressed prices if markets decline early in retirement.​

Some people use a “bucket” strategy, with shorter‑term spending needs in lower‑volatility investments and longer‑term growth assets invested more aggressively. While no approach eliminates risk, this kind of structure can make it easier to navigate market cycles without panicking.

Tax Planning and Account Strategy in the Gray Zone

The gray zone can be an ideal time to reduce your tax exposure and improve your tax diversification across accounts heading into retirement. Work with your financial advisor to determine whether the following strategic tax-related strategies make sense for your situation.

For a broader overview of smart tax moves, see Creative Planning’s article on key tax planning strategies.

Build tax diversification across accounts

Having a mix of tax‑deferred, tax‑free and taxable accounts can provide more flexibility for managing taxes in retirement. For example:​

• Tax‑deferred accounts – Traditional 401(k)s and IRAs offer upfront tax deductions but will be taxed as ordinary income when you withdraw funds in retirement.
• Tax‑free accounts – Roth IRAs and Roth 401(k)s can provide tax‑free withdrawals if certain requirements are met, giving you a valuable lever for managing your tax bracket later.
• Taxable accounts – Brokerage accounts offer flexibility, potential capital gains tax treatment, and the ability to harvest gains or losses strategically.

By building tax diversification during the gray zone, you give yourself more options to draw income in a way that manages your overall tax liability each year. For more on using different account types, see Creative Planning’s overview of great tax‑advantaged accounts.​

Consider Roth conversions and withdrawal sequencing

Depending on your income level, projected future tax brackets and required minimum distributions (RMDs), it can sometimes be beneficial to convert a portion of traditional IRA or 401(k) balances to Roth accounts before retirement.​

Your advisor and tax professional can help you evaluate:​

• Whether partial Roth conversions in low‑income years make sense
• How conversions might interact with Medicare premiums and other tax thresholds
• A withdrawal order that coordinates taxable, tax‑deferred and tax‑free accounts to support your lifestyle and manage your tax bracket over time

Coordinating when you claim your Social Security benefit, how you draw from different retirement accounts and how you manage taxes can meaningfully impact how long your retirement savings may last. A financial advisor can help you design a retirement income plan that sequences your income sources in a tax‑efficient way and helps reduce the risk of outliving your assets.

Healthcare, Long-Term Care and Insurance Planning

Healthcare is one of the largest and most unpredictable retirement expenses, especially if you retire before you’re eligible for Medicare. In fact, according to Fidelity’s 2025 Retiree Healthcare Cost Estimate, a 65-year old who retired in 2025 can expect to pay an average of $172,500 for healthcare expenses in retirement. Without a plan in place, healthcare costs and long-term care needs can put significant pressure on your retirement budget.

During the gray zone years, it’s wise to:

• Estimate healthcare expenses before and after Medicare eligibility
• Understand your options for Medicare, Medigap and Medicare Advantage
• Evaluate whether long-term care insurance or hybrid policies fit your needs
• Contribute as much as possible to a health savings account (HSA), if available, to build a tax‑advantaged bucket for future medical expenses

Creative Planning’s article on planning for healthcare in retirement can help you think through these line items in more detail.​

Building healthcare and long‑term care assumptions into your retirement plan can help you avoid underestimating these costs and being forced to cut back on other goals later.

Estate Planning and Legacy Considerations

The gray zone is also a good time to align your retirement plan with your estate planning and wealth transfer goals. As you think about how your assets will support you during retirement, also consider how you want to provide for a surviving spouse, children, grandchildren or charitable causes. If you plan to move to a new state in retirement, it’s critical to ensure your documents comply with your new domicile.

Work with your wealth manager and estate planning attorney to determine whether you should create or update:

• A last will and testament
• Beneficiary designations on retirement accounts and insurance policies
• A financial power of attorney
• A healthcare power of attorney
• A revocable living trust
• Family governance documents (if transferring a family business to the next generation)
• A special needs trust (if applicable)
• An advance medical directive
• An irrevocable life insurance trust

If you need a primer on the building blocks of an estate plan, Creative Planning’s guide to getting started with estate planning is a helpful resource.

How a Financial Advisor Can Help in the Gray Zone

The final decade before retirement is complex, but you don’t have to navigate it alone. A financial advisor who specializes in retirement planning can help you:​

• Clarify your retirement goals and timeline
• Model different retirement scenarios and stress‑test your plan
• Design an investment strategy and asset allocation appropriate for your stage of life
• Coordinate Social Security, pension and retirement account withdrawal strategies
• Plan for taxes, healthcare, long‑term care and potential legacy goals

Ideally, you’ll work with a CERTIFIED FINANCIAL PLANNER® professional who takes a comprehensive approach to financial planning and collaborates with your tax and legal advisors. This integrated approach can help you feel more confident as you enter retirement and adjust your plan as life changes. If you’d like to explore how a tailored retirement plan could support your goals in the gray zone and beyond, consider connecting with a wealth manager who can review your full financial picture and help you build a road map for the years ahead. You can learn more about Creative Planning’s retirement planning services and request a consultation when you’re ready.