Retirement Countdown: How to Invest Smartly in Your Final 3 Years of Work

Retirement isn't just a milestone—it's a life-altering transition. You've worked for decades, and now the reality is setting in: Will you have enough money to maintain your lifestyle? What if inflation, healthcare costs, or a market downturn derail your plans? The fear of running out of money is real, and the time to act is now.

The final three years before retirement are critical. Every investment move you make now will determine your financial security for the next 20, 30, or even 40 years.

Without a solid plan, you could find yourself cutting expenses, delaying retirement, or worse—running out of savings when you need them most. But the good news? You still have time to adjust, protect your assets, and secure the comfortable future you deserve.

Are you prepared for rising long-term care costs (which are not paid for by traditional health insurance or Medicare), inflation, and market volatility?

• What Is Long-Term Care?

Here's what you need to do to safeguard your savings and maximize your income as you approach retirement.

The Retirement Landscape: Planning Now is Critical

Retirement today is different from past generations. People like you are living longer, long-term care costs are soaring, and some are working well into their golden years.

To make informed investment decisions, you should understand key retirement statistics that are shaping the retirement landscape today.

• More Americans Are Retiring Later: Nearly 19% of Americans aged 65+ are still working, a number that has doubled over the past four decades.
• Most Americans Aren't Financially Ready: The median retirement savings for those aged 55-64 is just $89,300—far from enough to fund a 20- to 30-year retirement.
• Inflation Erodes Purchasing Power: ​As of February 2025, the annual inflation rate in the United States was 2.8%, a decrease from 3.0% in January 2025. Inflation is still high and could be a concern.
• Healthcare Costs Are Skyrocketing: A retired couple in 2024 will need an estimated $315,000 to cover healthcare expenses alone (dental, prescription drugs, eyecare, etc.), not counting long-term care costs.
• Long-Term Care Costs Are Skyrocketing: A retired couple may need over $500,000 to cover the cost of long-term care. Someone with dementia could need years of care approaching millions of dollars in costs.

What does this mean for you? If you're three years away from retirement, you must take action now to protect your wealth and ensure a sustainable income.

Three Years Out: How to Adjust Your Investment Strategy

The final years before retirement are critical. Your priorities should shift from aggressive growth to a balanced strategy that ensures stability, income, and protection against risk.

1. Rebalance Your Portfolio for Stability

Gone are the days of taking high risks for high rewards. A diversified portfolio protects your assets while still allowing for growth.

• Traditional Strategy (60/40 Split): 60% bonds, 40% stocks. A solid mix but may not keep pace with inflation.
• Modern Approach (50/30/20 Split):

• 50% Stocks – Invest in blue-chip, dividend-paying stocks (e.g., Johnson & Johnson, Procter & Gamble).

• 30% Bonds – U.S. Treasury, municipal, or corporate bonds offer lower-risk, stable income.

• 20% Cash & Cash Equivalents – High-yield savings accounts, CDs, and money market funds provide liquidity.

Best Investment Vehicles

A quick survey of several financial advisors made several recommendations. Always check with your financial advisor on which ones make sense for you.

• Dividend-paying stocks: Blue-chip companies like Johnson & Johnson (JNJ) and Procter & Gamble (PG) provide steady dividend income.
• Bond funds: Investing in U.S. Treasury bonds, municipal bonds, or corporate bonds can offer consistent income.
• Real Estate Investment Trusts (REITs): These provide exposure to real estate markets without direct ownership burdens.
• High-yield savings accounts and money market funds: These ensure liquidity while earning interest.
• Avoiding Overexposure to Market Volatility: Reducing investment in speculative assets (e.g., crypto, high-growth tech stocks) and rebalancing your portfolio annually helps mitigate risks as you near retirement.

When you are approaching retirement, you can reduce risks by diversifying investments while maintaining steady growth and income streams.

What to Avoid: Cryptocurrencies, speculative stocks, and over-concentration in one sector.

2. Maximize Your Social Security Benefits

When and how you claim Social Security can significantly impact your income.

• Claiming at 62? You'll receive 30% less than if you wait until full retirement age (67).
• Delaying until 70? You'll get 8% more per year in delayed retirement credits.
• Married? Consider spousal benefits to optimize household income.

"Waiting until 70 to claim benefits gave me an extra $800 per month for life. That's a game-changer."

Action Step: Use the Social Security Administration's benefits calculator to determine the best strategy for you.

Protecting Your Retirement from Long-Term Care Costs

Medical expenses like dental, eye, prescription drugs, and long-term care are some of the biggest financial risks retirees face, and the need for extended care is the biggest involuntary risk you will face. Without proper planning, they can drain your savings.

1. Plan for Medicare & Out-of-Pocket Costs

• Medicare starts at 65, but it doesn't cover dental, vision, hearing, or long-term care.
• Add a Medigap or Medicare Advantage plan to fill coverage gaps. Consider dental and eye coverage as well.
• Use a Health Savings Account (HSA) if you're still working to save tax-free for future medical costs, including paying for Medicare Supplement and Long-Term Care Insurance premiums.

2. Long-Term Care Costs Are Rising—Be Prepared

• 56% of retirees will need some form of long-term care.
• The average cost of assisted living is $58,025 per year (not counting surcharges), and a private nursing home room costs over $125,000 annually, according to the LTC News Cost of Care Calculator.
• Long-Term Care Insurance Will Help: If you purchase a policy before you retire, premiums are lower, and you'll have coverage when you need it most. Most people purchase an LTC policy between ages 47 and 67.

"My mother's nursing home care wiped out her savings in three years," says James from Milwaukee, WI. "That's why I bought LTC Insurance. I don't want my kids to go through that."

Creating a Sustainable Withdrawal Plan

How you withdraw money from your accounts matters just as much as how you invest. Poor withdrawal strategies can lead to higher taxes and early depletion of your funds.

1. Follow the "Bucket Strategy"

• Short-Term (1-5 years) – Keep cash and bonds for immediate expenses.
• Mid-Term (5-10 years) – Dividend stocks and balanced funds for steady income.
• Long-Term (10+ years) – Growth investments (REITs, ETFs) to outpace inflation.

2. Smart Withdrawal Order to Minimize Taxes

Withdraw in this order to reduce taxes:

1. Taxable Accounts (Brokerage, Savings) – No tax penalties.
2. Tax-Deferred Accounts (401(k), IRA) – Required Minimum Distributions (RMDs) start at 73.
3. Tax-Free Accounts (Roth IRA) – Withdraw last to allow tax-free growth.

"By strategically withdrawing funds, I saved over $15,000 in taxes last year," says retiree Carol from Waterloo, Iowa.

The Bottom Line: Take Action Now

The final three years before retirement require careful financial planning. Here's what to do right now:

• Rebalance your portfolio – Shift to a mix of stocks, bonds, and cash for stability.
• Maximize Social Security – Delay benefits if possible for higher payouts.
• Plan for healthcare costs – Consider Medicare supplements when you are 65 and add Long-Term Care Insurance now unless you purchased it in your 40s or 50s.
• Develop a tax-smart withdrawal strategy – Follow the bucket method to preserve your savings.

Your retirement security depends on what you do today. The earlier you plan, the better positioned you'll be to enjoy the lifestyle you deserve.

Need help planning? Consult a certified financial planner to tailor a strategy to your needs. However, most financial advisors are not well-trained or prepared to find you Long-Term Care Insurance.

Be sure to seek a qualified LTC Insurance specialist to shop for the best coverage from all the top-rated insurance companies and make professional recommendations.

You can rely on LTC News Trusted LTC Insurance Specialists when you seek accurate quotes for Long-Term Care Insurance. Quotes From Trusted Long-Term Care Insurance Specialists.

These LTC News trusted partners are professionals who are screened by LTC News and hold the esteemed CLTC designation, are endorsed by the American Association for Long-Term Care Insurance (AALTCI), and come highly recommended as Ramsey Trusted Pros by financial expert Dave Ramsey's organization (Ramsey Solutions).

Don't let time get away from you; get prepared now.