Man looking at document concentrating confused

Image source: Getty Images

If you've been working for a couple of decades or more, then you're probably thinking about the day when you'll be able to clock out for the last time and start living life on your own terms. Retirement represents a huge change in your lifestyle and your financial situation, so if you want to enjoy it to the fullest, you'll need to do some serious planning and saving before you make the leap.

If you're near the finish line and thinking of retiring within the next five years, then first make sure you can answer "yes" to the three questions below.

1. Are your retirement savings on track?

If you have been saving diligently for many years and have reaped the growth of the stock market over that time, then you should have a sizable balance saved in your retirement accounts. If your savings are minimal or nonexistent, then you will probably need to continue working for more than five years -- and ramp up your retirement savings as well.

So how do you know when you have enough money saved up? Start by figuring out how much annual income you'll need in retirement (for most people, it's about 70% to 80% of their pre-retirement income). Then subtract the yearly income you expect to receive from Social Security (you can get an estimate by creating an account at SSA.gov), a pension, or any other income source besides your retirement savings. What remains is the amount of income your retirement savings will have to provide. If you have enough money saved up to provide that income for as long as you expect to live, then you're in pretty good shape. For context, if you plan to retire around age 65, many experts say your savings should be sufficient to provide at least 25 years' worth of income.

It is wise to enlist the help of a financial planner when estimating your future income needs, as planners can take all of your financial information and plug it into a sophisticated program that incorporates historical market returns and other factors such as your tax bracket, Social Security and pension benefits, investment objectives, risk tolerance, and time horizon.

2. Is your portfolio allocated correctly?

If you are nearing retirement and your portfolio is invested almost exclusively in stocks, then it's probably time to start moving some of that money into safer alternatives such as bonds or annuities. Stocks can provide a greater rate of growth over time, but they can also result in large losses when a bear market hits. And this is something that you can't afford if you plan to retire in five years, as it may take longer than that to recoup your losses (as many investors have discovered since the bear market in 2008). A good rule of thumb is to subtract your age from 110, turn the result into a percentage, and allocate at least that much of your portfolio to bonds and similarly safe investments. For example, if you're 65, then you should have at least 45% of your portfolio invested in safer investments.

That said, no matter your age, you'll want at least 25% of your portfolio in equities in order to maintain a hedge against inflation.

3. Are you prepared to pay for long-term care expenses?

Although this issue won't likely arise in the next five years, it is still something you need to prepare for before you retire. Long-term care expenses can devastate even the best-laid retirement plans if you lack insurance coverage or dedicated funds to pay for them. Although the cost of long-term care can vary considerably depending upon the level of care you need and where you live, it can easily cost $50,000 to $100,000 a year or more.And the average stay in a nursing home generally lasts about two-and-a-half years.

One of the latest innovations in the life insurance industry is the introduction of policies that have accelerated benefit riders allowing the policy holder to access some or all of the death benefit in order to pay for expenses related to disability or long-term care. This can be a more economical way to insure yourself against the high cost of this form of care.

These are just some of the questions you'll need to be able to answer if you would like to retire in the next five years. If you are unsure of whether you are prepared to retire in the next five years, find a financial advisor who can provide you with advice on when you can safely retire and what you need to do to prepare.

The Motley Fool has a disclosure policy.