Financial Planning in the Five Years Before Retirement in Ontario

The five years before retirement are unlike any other period in your financial life. You're close enough to see the finish line — but still far enough that the decisions you make now will define what retirement actually looks like. This is the window where financial planning matters most, and where the mistakes are hardest to recover from.

If you're in your late 50s or early 60s and retirement is on the horizon, this article outlines the key areas a financial planner will help you work through in the critical pre-retirement years.

Why the Pre-Retirement Window Is So Important

The five years before retirement are consequential for several reasons. Your income is likely at or near its peak — which means your savings contributions are more powerful than they've ever been. Your time horizon is short enough that major financial errors don't have decades to recover. And the decisions you're about to make — when to retire, when to take CPP, how to structure income — are largely irreversible.

This is not the time for a set-it-and-forget-it approach. It's the time to be deliberate, analytical, and proactive.

Area 1: Building Your Retirement Income Projection

The foundational work of pre-retirement planning is building a complete projection of what retirement income looks like for you — month by month, source by source.

This includes:

• CPP — When will you elect to take it? Starting at 60 means a permanent reduction; waiting until 70 means enhanced payments. Your financial planner models both scenarios against your expected expenses and health situation.
• OAS — Available at 65 (or deferred to 70 for an increase). Understanding the clawback thresholds and how OAS interacts with your other income is part of the tax optimization work.
• Pension income — If you have an employer pension, now is the time to understand all its terms: the payout structure, survivor benefit options, early retirement reduction factors, and inflation indexing (if any).
• Personal savings — Your RRSP becomes a RRIF by 71 and generates mandatory minimum withdrawals. Starting a drawdown strategy before that deadline — potentially converting some RRSP to RRIF earlier — can smooth your tax picture significantly.

Area 2: Tax Planning and Income Sequencing

Taxes in retirement are a planning problem, not a fixed cost. How you sequence withdrawals from different account types — RRSP/RRIF, TFSA, non-registered accounts, pension — determines how much tax you pay and, by extension, how long your money lasts.

Common tax planning opportunities in the pre-retirement window:

RRSP meltdown strategy — If you'll have significant mandatory RRIF income at 71 that pushes you into a higher bracket, drawing down your RRSP earlier (in lower-income years) can reduce lifetime tax.

TFSA maximization — Any remaining TFSA contribution room should typically be filled before retiring, since TFSA withdrawals are tax-free and don't affect OAS clawback thresholds or income-tested benefits.

Pension income splitting — Once you're receiving eligible pension income, you may be able to split up to 50% with a spouse, reducing household tax significantly.

Area 3: Insurance and Protection Review

Many people arrive at pre-retirement with insurance coverage that made sense 20 years ago but doesn't reflect their current situation. Before you retire:

Review life insurance needs — Once your mortgage is paid and children are independent, your life insurance needs may be lower. Or you may have estate planning goals that require permanent coverage. A pre-retirement review clarifies what you actually need.

Assess disability coverage — Disability insurance typically expires at 65 since it replaces earned income. If you're planning to work until 65, make sure your coverage extends that long. If you stop working early, it becomes irrelevant — but the transition should be planned, not accidental.

Consider long-term care or critical illness — These products become more relevant (and more expensive) as you approach retirement. Addressing them while still insurable can be an important part of pre-retirement planning.

Area 4: Debt Elimination

Entering retirement with debt — particularly a mortgage or high-interest debt — constrains your financial flexibility significantly. The pre-retirement years are the time to eliminate debt aggressively, even if it means slowing down registered savings contributions temporarily.

Your financial planner can help you model the trade-off: contributing to RRSP versus paying down the mortgage, based on your tax rate, your interest rate, and your retirement timeline.

Area 5: Estate Plan Review

Your estate plan — will, powers of attorney, beneficiary designations — should be reviewed before retirement. This is often the last time you'll have earned income and the clarity that comes with it. Make sure your estate reflects your current wishes, your beneficiaries are up to date, and your executor is still the right choice.

Work With Marc Pineault in the Pre-Retirement Window

If retirement is five years out or less and you haven't done a comprehensive financial review, now is the time. Marc Pineault works with Ontario residents navigating this critical transition and helps them arrive at retirement with a plan they understand and trust.

Reach out at calmmoney.ca/contact to start the conversation.

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This article is for educational purposes only and does not constitute personalized financial advice. Please consult a qualified financial planner before making any financial decisions.