The final year before retirement is one of the most important financial planning windows of your life. For decades, you’ve focused on saving, investing, and building wealth. Now the focus shifts: how do you turn those assets into a steady, sustainable retirement income stream to achieve the retirement you have dreamt of?
Putting a finer point on a well-structured plan in the final months before retirement can give you clarity, reduce uncertainty, and help ensure a smooth transition into this next phase of life. Below is a practical checklist of financial moves to consider making in the year leading up to your retirement date.
- Know Your Numbers
As retirement nears, there is no better way to understand where you stand financially than putting pen to paper. Retirement will look different for everyone, but at its core, it comes down to cash flow: money in versus money out.
- Expenses: Build a detailed retirement budget. Factor in fixed costs (housing, utilities, insurance, healthcare premiums), as well as variable & lifestyle expenses (travel, dining, hobbies). Don’t forget to budget for inflation—costs will rise over the decades you spend in retirement.
- Income: Identify your income sources. These may include Social Security, pension benefits, annuities, withdrawals from retirement accounts, and potentially part-time earnings.
- Taxes: Remember that not all income is taxed equally. Withdrawals from traditional IRAs and 401(k)s are taxable, while Roth withdrawals are tax-free (if requirements are met). Social Security may also be taxable depending on your overall income. Understanding your tax exposure is key to avoiding unpleasant surprises.
This exercise helps answer the critical question: Will I have enough? If the numbers don’t line up, the final year before retirement is the time to adjust your plan—whether that means modifying spending expectations, delaying retirement slightly, or exploring part-time work options.
- Update Your Estate Plan
Your estate plan is about distributing assets efficiently after death as well as protecting yourself and your loved ones if you become incapacitated. Within the year before retirement, we recommend you review & update your estate planning documents.
- Will or trust: Make sure they reflect your current wishes and family circumstances.
- Powers of attorney: Ensure you have designated someone you trust to make financial decisions on your behalf if needed.
- Healthcare directives: Update advance directives or living wills so your medical preferences are clear.
- Beneficiary designations: Review retirement accounts, insurance policies, and other assets. These designations override your will, so they must be current.
Just as important: make sure your family knows where these documents are located and how to access them, and who the professionals are that helped you establish them, such as financial advisors & estate attorneys.
- Develop a Withdrawal Strategy
Accumulating savings is one challenge; spending it wisely is another. Without a withdrawal strategy, you risk depleting your assets too quickly—or paying more in taxes than necessary. Work with a financial & tax advisor to determine the best order to tap accounts. For example:
- Draw from taxable accounts first to allow retirement accounts to continue growing tax-deferred.
- Delay withdrawals from IRAs or 401(k)s if possible, until required minimum distributions (RMDs) begin at age 73.
- Strategically convert portions of traditional accounts to Roth accounts in low-tax years.
A structured withdrawal plan balances your income needs with long-term tax efficiency, while also managing investment risk.
- Plan for Social Security and Medicare
Deciding when to claim Social Security is one of the most impactful retirement choices you’ll make. Benefits can begin as early as age 62, but claiming early permanently reduces your monthly check. Waiting until full retirement age—or even up to age 70—significantly increases benefits.
Healthcare is another critical piece. If you’re 65 or older, you must enroll in Medicare Parts A and B to avoid penalties and coverage gaps (unless you’re covered by employer health insurance). Consider whether you also need supplemental coverage (Medigap) or a Medicare Advantage plan. Don’t overlook Part D prescription drug coverage.
Coordinating Social Security and Medicare with your broader retirement plan ensures you maximize benefits and minimize out-of-pocket surprises.
- Consider Post-Retirement Work
Retirement today doesn’t always mean a complete stop. Many people choose to continue working part-time, consult, or even start small businesses. Phased retirement is becoming more popular as clients prefer to taper slowly away from work. The benefits are twofold:
- Financial: Continued income can reduce the pressure on your savings and allow you to delay Social Security.
- Lifestyle: Work can provide purpose, structure, and social engagement.
If you plan to work, consider how earnings may affect your Social Security benefits (for those under full retirement age) and how additional income could impact your tax situation.
- Notify Your Employer
When your retirement date is firm, give your employer formal notice. Beyond professional courtesy, this also opens the door to important conversations about benefits.
- Retirement plan options: Review whether you must take distributions immediately, or if funds can remain in the employer plan.
- Health coverage: Some employers offer retiree healthcare benefits—understand your options before moving to Medicare or the individual market.
- Other perks: Vacation pay, stock options, pension decisions, and deferred compensation arrangements may need to be addressed.
Make sure you leave with a clear understanding of every benefit you’re entitled to.
Bringing It All Together
The final year before retirement is about preparation, coordination, and clarity. Focusing on the planning areas listed above can help you move into retirement with greater confidence. Retirement is not a finish line—it’s the start of a new chapter. Entering that chapter with a clear financial plan allows you to focus less on money and more on the life you’ve worked so hard to enjoy.