The year before retirement is the most consequential financial year of your working life. Decisions made in these twelve months — about Social Security, Medicare, income sources, and account structure — have effects that compound for decades. Getting them right is worth serious attention. Getting them wrong is expensive and sometimes irreversible.
This isn't a comprehensive retirement planning guide. It's a focused checklist of the ten things that most commonly get handled too late or not at all in the final year before people leave the workforce.
You can claim Social Security as early as 62, but each year you delay (up to age 70) increases your benefit by roughly 6–8%. The break-even point — where delayed claiming pays off — is typically around age 78–80. If you're in good health and have other income sources, delaying often makes sense. If your health is uncertain or you need the income, claiming earlier may be correct. This decision deserves a dedicated conversation with a financial advisor, not a last-minute choice.
Medicare enrollment has a 7-month window — three months before your 65th birthday, the month of, and three months after. Missing this window without qualifying coverage (such as employer insurance) triggers permanent premium penalties. If you're retiring before 65, you'll need to bridge coverage — through COBRA, a spouse's plan, or the marketplace. Plan this carefully; the gap in health coverage is one of the most common early-retirement mistakes.
Once you reach RMD age (currently 73 under SECURE 2.0), the IRS requires annual withdrawals from traditional IRAs and 401(k)s. Failing to take the correct amount triggers a 25% penalty on the amount not withdrawn. Know your RMD schedule before you retire, understand how it will affect your taxable income, and plan accordingly.
Your last year of employment is your last chance to make pre-tax contributions. If you're 50 or older, catch-up contributions allow significantly higher limits. Max out your 401(k) and IRA contributions this year — contributions made now grow tax-deferred for potentially decades.
The order in which you draw from different accounts — taxable accounts, traditional IRAs, Roth IRAs — has significant tax implications. A common strategy is to draw from taxable accounts first, then traditional accounts, then Roth — but the optimal sequence depends on your specific tax situation. A fee-only financial planner can model this for you. It's worth the cost.
Retirement accounts, life insurance policies, and annuities pass directly to named beneficiaries — outside of your will. If your designations are outdated (an ex-spouse, a deceased parent), the money goes to the wrong person regardless of what your will says. Review every account and update as needed.
Most people underestimate healthcare costs and overestimate how much their spending will decrease. Build a realistic monthly budget based on your actual anticipated expenses — not a rough estimate. Include healthcare premiums, out-of-pocket medical costs, travel if that's part of your plan, and a realistic lifestyle line. Then compare it to your income sources. Any gap needs a plan.
When you leave your employer, you have four options for your 401(k): leave it where it is, roll it into your new employer's plan (if applicable), roll it into an IRA, or cash it out (almost always the wrong choice due to taxes and penalties). Most people roll to an IRA for flexibility and investment options. Don't leave this decision until after your last day — some plans have timing requirements.
Sequence of returns risk — the danger of a market downturn early in retirement — is one of the most significant threats to retirement security. Having 1–2 years of expenses in cash or short-term bonds means you don't have to sell investments at depressed prices to cover living costs during a downturn. Build this reserve before you retire, not after.
Will, power of attorney, healthcare directive, and trust documents (if applicable) should all be reviewed and updated. Life changes — marriages, divorces, deaths, new grandchildren — often make old documents obsolete. This is also the time to make sure someone you trust knows where everything is and how to access it.
This list is focused on finances because that's where the most consequential and time-sensitive decisions live. But the final year before retirement is also the right time to think about what you're retiring to — not just what you're retiring from. Purpose, structure, social connection, and identity all shift in retirement, sometimes in ways people don't anticipate. The financial foundation matters; so does having a sense of what a good day looks like when work is no longer the answer.
Count down to your retirement date at HowManyDaysUntil.io — and track how many days since you started planning. Both numbers matter.
The decisions made in this final year are among the most important you'll make. They deserve the time and attention you'd give anything else that will shape the next several decades of your life.