We all know we should start thinking hard about retirement at some point.  But when?

Emily Guy Birken, author of The 5 Years Before You Retire, believes that your last 60 months at work is the best and most realistic time to polish off your retirement plans. That’s because those last five years represent “the point at which it really hits home to most people that they’re actually going to retire in the foreseeable future.”

Things, she writes, have changed. Fifty years ago, she writes, “most workers took retirement at age 65, and life expectancy for men was a mere 66.6 years of age – meaning that most retirees only enjoyed just over a year and a half of leisure.” That shorter lifespan made generous pensions more affordable for employers, because “they didn’t expect to pay them for very long.”

Now, she writes, only about 22 per cent of American workers (the book is aimed at a U.S. audience) are “offered a traditional defined benefit pension,” meaning most have to save on their own via capital accumulation plans (here, this means defined contribution plans and RRSPs).  As well, they can expect to live much longer.

So if you are saving on your own, are there things you can do in the last five years of work that will help you? Birken suggests downsizing your home, paying off or reducing your mortgage, taking in roommates or boarders, moving somewhere that is cheaper, going down to one car and cutting back on restaurants and entertainment. Those steps can really help you free up money for retirement savings, she notes.

She writes that drawing down the savings is tricky. “Determining how much you can afford to withdraw each year is more complicated than simply dividing your nest egg by the number of years you hope to live,” Birken notes. A good rule of thumb, she writes, is the so-called “four per cent method,” where your goal is to withdraw up to four per cent of your savings while reinvesting the other 96 per cent.

Another good strategy is an annuity, idea for those “who struggle with money discipline.” An annuity will give you lifetime monthly income, but she says they are not all the same so you should explore all annuity options before choosing the one that is best for your situation.

Birken says that if you possibly can, pay off your mortgage before you retire, because it is “likely your largest monthly expense.” However, these days houses cost more so about 40 per cent of us do carry mortgages into retirement.

Any debt in retirement is a burden, she writes. Yet in the US and Canada, most retirees still have debt. If you have five years to go before you retire, she advises, “prioritize your payment strategy to destroy high-interest debt, such as credit cards and car loans, first.”

There are lots of great tips in here, and although much of the health insurance and government programs part is not relevant to Canadians, this book can give you some good ideas on how to maximize your last years of full-time earnings.

And remember – any money saved in the 60-month run-up to retirement can easily be added to your Saskatchewan Pension Plan account, and the plan does offer a variety of annuity options. Check out the options available.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22