You've got a date circled. Maybe it's firm, maybe it's still a little fuzzy, but you're close enough to start feeling it. This is also exactly the window where people make expensive, avoidable mistakes. Not because they're careless, but because there's a lot happening at once and the decisions feel abstract until suddenly they aren't.
The year before you retire is the last real stretch you have to move levers. After you leave, some options close permanently. Others come with penalties that follow you for decades. Here's what actually needs your attention right now.
Run your Social Security numbers before you assume anything
Most people have a vague sense of when they plan to claim Social Security. Far fewer have actually looked at what each option pays. The gap matters. Claiming at 62 versus waiting until 70 can mean a difference of more than $2,200 per month for someone at the maximum benefit level. That's not a rounding error over a 20-year retirement.
For people born in 1960 or later, full retirement age is 67. Claiming at 62 locks in a permanent reduction of up to 30%. Waiting past 67 earns you an 8% annual increase for each year you delay, up to age 70. There's no additional bump after 70, so holding out past that serves no purpose.
Health, other income sources, and whether you're married all affect the right answer. A spouse who earns less often benefits from the higher-earning partner delaying, since survivor benefits are based on the claimed amount. Pull up your Social Security statement, compare the scenarios, and make a deliberate call. The default is rarely the best one.
Understand exactly what Medicare covers and when you need to sign up
Medicare doesn't start automatically. You have a seven-month window centered on your 65th birthday to enroll, starting three months before the month you turn 65. Miss it without qualifying coverage from an employer, and you face a 10% Part B premium penalty for every year you were eligible but didn't enroll. That penalty is permanent. Someone who delays two years without creditable coverage adds 20% to their Part B premium for life.
If you're still working at 65 and covered by an employer plan with at least 20 employees, you can generally delay Medicare without penalty. But once that employer coverage ends, you have an eight-month window to enroll in Part B. COBRA doesn't count as employer coverage for this purpose. Waiting until COBRA runs out to sign up is one of the most common and costly Medicare mistakes people make.
The standard Part B premium is $202.90 per month in 2026. That goes up with income, and it goes up further if you miss your enrollment window. Set a reminder three months before your 65th birthday and know which scenario applies to you.
Max out retirement contributions while you still have a paycheck
The last working years are typically the highest-earning ones, which also makes them the most useful for retirement contributions. If you're 50 or older, you can contribute up to $32,500 to a 401(k) in 2026, which includes a $8,000 catch-up on top of the $24,500 standard limit. Those between ages 60 and 63 can contribute even more, up to $35,750, under SECURE 2.0's enhanced catch-up provision.
IRA limits are more modest, but still worth using. You can put up to $8,600 into a traditional or Roth IRA in 2026 if you're 50 or older, combining the $7,500 base limit with a $1,100 catch-up. These are dollars going into tax-advantaged accounts that will compound for however many years you don't touch them.
If you've been contributing just enough to capture an employer match, this is the time to reassess. The last 12 months before leaving work may be the final chance to significantly increase what you're bringing into retirement.
Consider converting some traditional IRA money to a Roth
A Roth conversion means paying tax now on pre-tax retirement funds in exchange for tax-free growth and withdrawals later. The window just before retirement, when income may be lower than it was during peak earning years, can be a useful time to do this in measured amounts.
The strategy works by filling your current tax bracket without spilling into the next one. If you're a married couple expecting $150,000 in taxable income this year and you're in the 22% bracket, you can convert up to roughly $56,000 and stay in that bracket. Spreading conversions across several pre-retirement years reduces the overall tax hit and keeps individual years from triggering higher Medicare premiums.
Roth accounts have no required minimum distributions during the owner's lifetime, which matters for managing taxable income in later retirement. Converting now also reduces the size of future RMDs from traditional accounts, which can otherwise create a significant tax spike in your 70s. Pay the taxes from savings outside the IRA if at all possible. Using IRA funds to cover the tax bill on a conversion typically negates the benefit.
Figure out your healthcare coverage before your last day at work
If you retire before 65, you'll need to bridge the gap between your employer coverage and Medicare. That gap is not cheap. COBRA lets you continue your current plan for up to 18 months, but you pay the full premium your employer used to subsidize plus a 2% administrative fee. For single coverage, that typically runs several hundred dollars a month. Family coverage can easily exceed $2,100 per month.
ACA Marketplace plans are the other main option. Losing job-based coverage triggers a 60-day special enrollment period, and if your retirement income is modest enough, you may qualify for premium tax credits that substantially reduce the cost. Early retirees often find their income drops enough to unlock meaningful subsidies. Worth modeling before you assume COBRA is the only path.
Whatever you choose, do not assume this will resolve itself. People who retire in their early 60s often underestimate healthcare costs as a budget line. One uncovered gap or a missed enrollment window can result in expenses that far exceed what the gap insurance would have cost.
Know where your required minimum distributions will come from
Required minimum distributions from traditional IRAs and 401(k) accounts start at age 73. Missing an RMD triggers a 25% penalty on the amount not withdrawn, reduced to 10% if you correct it within two years. These are not small numbers on large balances.
More important than the penalty is understanding what your RMDs will actually be. A $1 million traditional IRA generates a first RMD of roughly $37,700 at age 73, all of it taxed as ordinary income. A $2 million IRA doubles that. If you also have Social Security income, the combined total can push a significant portion of your benefits into taxable territory and raise your Medicare premiums through the income-related adjustment known as IRMAA.
Pre-retirement is the time to map this out and decide whether Roth conversions, early withdrawals, or other strategies make sense to reduce the eventual RMD burden. Delaying this conversation until 72 leaves almost no room to maneuver.
Settle the pension question if you have one
Fewer workers have pensions than a generation ago, but if you do, the choice between monthly payments and a lump sum is one of the most consequential financial decisions you'll make. It's also typically irreversible.
Monthly payments provide guaranteed lifetime income and, in some plans, survivor benefits for a spouse. A lump sum gives you control and flexibility, but you take on the investment risk and the responsibility of making it last. One rough benchmark: if your annual pension payout is 6% or more of the lump-sum offer, the monthly payment may be the better deal. Below that threshold, a well-invested lump sum has a realistic chance of generating more over time.
Interest rates matter here too. When rates rise, lump-sum values typically fall because future payments are discounted more steeply. The PBGC insures private pension benefits up to $7,431.82 per month for someone retiring at 65, so if your pension is well under that amount, the monthly payment carries meaningful backstop protection. Run both scenarios through a financial planner who can model them against your full income picture.
Project your actual monthly retirement budget
Most retirement planning focuses on accumulation: how much do you have? The year before you leave work is the time to shift to a spending lens. What will you actually spend each month, and where will each dollar come from?
Work through it line by line. Housing, healthcare, food, transportation, travel, gifts, hobbies, insurance. Then add the income sources: Social Security at whatever age you plan to claim, pension payments if applicable, investment withdrawals. The gap between projected spending and predictable income is what your portfolio has to cover. If that gap is larger than you expected, you have one year left where adjustments are still practical.
Healthcare is the budget line most people underestimate, particularly for the years before Medicare. It also tends to increase in your 70s and accelerate in your 80s. Building in a conservative buffer rather than planning for expenses to stay flat is the more defensible assumption.
Get a handle on your debt situation before you stop earning
Carrying significant debt into retirement on a fixed income is a different proposition than carrying the same debt while employed. Monthly obligations that felt manageable on a salary become bigger problems when your income drops and can't be replaced by working more.
A mortgage isn't necessarily a problem, especially at a low fixed rate with a payment that fits easily within projected income. High-interest debt is another matter. Credit card balances, personal loans, or variable-rate debt tied to rising rates are worth prioritizing in the final year of work, when you have the income to pay them down aggressively. Once you retire, the math on paying down debt versus keeping cash in reserve shifts considerably.
Car loans and payments often catch people off guard in retirement. If yours will run several more years and your vehicle is aging, replacing it before you leave work, while financing is easier to obtain and less expensive, may make more sense than dealing with it on a fixed income.
Review your investment allocation with retirement spending in mind
The portfolio that was appropriate while you were contributing and had 20 more years of runway is not automatically the right portfolio for someone drawing income in 12 months. Sequence of returns risk is most damaging in the years immediately around retirement. A sharp downturn in the first two or three years of withdrawals can permanently impair a portfolio in ways that the same downturn a decade later would not.
This doesn't mean abandoning growth entirely. Retirees who shift completely to conservative investments often run out of money just as slowly as those who stay too aggressive, just in a different direction. The goal is a mix that can sustain withdrawals through a downturn without forcing you to sell depleted assets. Keeping one to two years of expenses in cash or short-term bonds gives a portfolio time to recover without forcing withdrawals at the worst moment.
Review your asset allocation with an eye toward what you'll actually be pulling from, and when. It's a different question than you've been answering for most of your working life.
Update your beneficiary designations and estate documents
Beneficiary designations on retirement accounts, life insurance policies, and annuities override a will. Whoever is listed receives the asset regardless of what any other document says. If your IRA still names an ex-spouse, a deceased parent, or no one at all, that needs to be corrected before anything else.
The same applies to durable power of attorney, healthcare proxy, and any trust documents. These are not things to update once and file away permanently. Life changes, and documents that made sense a decade ago may no longer reflect your actual wishes or family situation. The year before retirement, when you're organizing finances anyway, is a reasonable time to review them with an estate planning attorney.
Retirement account assets can also be one of the more tax-efficient things to leave to heirs if structured correctly. Understanding the options, including naming trusts as beneficiaries, spousal rollovers, and the ten-year distribution rule for non-spouse beneficiaries, is worth working through with an attorney now rather than leaving it for your family to untangle later.
Build a relationship with a fee-only financial planner
The decisions concentrated in the year before retirement, Social Security timing, Medicare enrollment, Roth conversions, pension elections, portfolio allocation, are interconnected in ways that make it hard to optimize them one at a time. A mistake on one often creates a problem on another.
A fee-only fiduciary planner charges you directly rather than earning commissions on what you buy, which aligns their interests more cleanly with yours. They can model multiple scenarios, flag interactions you might not have considered, and help you sequence decisions correctly. This is a different relationship than a broker or an insurance agent, and it's worth the distinction.
You don't need to hand over your portfolio. Many people hire a planner for a one-time retirement readiness review, get a written plan, and act on it themselves. The value isn't ongoing management. It's having someone systematically review your situation and identify what you might have missed.
Retirement is the one financial transition you don't get to practice first. Doing the work now is what makes it go smoothly.
Learn how to stretch your retirement savings and maximize your Social Security benefits for a comfortable retirement:
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15 clever strategies to maximize your Social Security benefits: Use the facts in this post to make choices that raise your monthly check for years.
