The twelve months before you stop working are when the hard-to-reverse decisions get made, so a checklist of what to do one year before retirement should focus on exactly those: healthcare enrollment, Social Security timing, final retirement contributions, pension elections, debt, estate documents, and where you’ll live. Decisions in this window can shift your retirement income by tens of thousands of dollars a year, and most can’t be undone once you’ve signed the paperwork.
Work the list in roughly the order below. Spending comes first because every other number depends on it.
Nail Down a Realistic Spending and Withdrawal Plan
Track what you actually spend now, not what you think you spend. Six months of detailed expense tracking gives you a reliable baseline. Commuting, work clothing, and lunches out shrink after you stop working, but hobbies, travel, and home utilities usually rise to meet them. The net change is smaller than most people expect.
Once you have a spending number, test it against your savings. A common starting point is the 4% rule: withdraw 4% of your portfolio in year one and adjust for inflation each year after. On a $1,000,000 portfolio, that’s roughly $40,000 in year one. The rule was designed to give a portfolio a high probability of lasting 30 years. It is a starting point, not a guarantee, and your actual rate should account for your health, your other income, and whether you’re retiring at 55 or 70.
Withdrawals from traditional 401(k) and IRA accounts count as ordinary income, so a $40,000 gross withdrawal is not $40,000 of spendable cash. Federal income tax rates for 2026 start at 10% and climb to 37%, though most retirees land somewhere between the 10% and 24% brackets depending on total income.1Internal Revenue Service. Federal Income Tax Rates and Brackets Run the tax math now, while a paycheck still backs you up.
Factor In Required Minimum Distributions
If you’re near 73, required minimum distributions change the plan. Under current law, you must begin RMDs from traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer retirement plans in the year you turn 73. That age rises to 75 starting in 2033. The penalty for missing an RMD is a 25% excise tax on the amount you should have withdrawn, dropping to 10% if corrected within two years.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Your first RMD is due by April 1 of the year after you turn 73, but waiting until April means two RMDs in the same calendar year, which can push you into a higher bracket. Plan the first one into the year you turn 73 unless the math clearly favors delay.
Make Your Last Round of Contributions Count
Your final working year is your last shot at employer-plan contributions, and the 2026 limits are higher than many workers realize. The standard 401(k) limit is $24,500. At 50 or older, you can add an $8,000 catch-up, for $32,500 total. A SECURE 2.0 provision gives workers aged 60 through 63 a larger catch-up of $11,250 instead of $8,000, bringing the ceiling to $35,750.3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
The 2026 IRA limit is $7,500, plus a $1,100 catch-up at 50 or older.3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 If you have a high-deductible health plan with an HSA, the 2026 HSA limit is $4,400 for self-only coverage and $8,750 for family coverage, with an extra $1,000 at 55 or older.4Internal Revenue Service. Expanded Availability of Health Savings Accounts Under the OBBBA HSA funds carry over indefinitely and come out tax-free for medical expenses at any age, which makes the HSA one of the most tax-efficient accounts to bring into retirement.
Consider a Roth Conversion Before You Leave
If your final working year puts you in a lower bracket than you expect in retirement, or if you want to shrink future RMDs, converting part of a traditional IRA or 401(k) to a Roth is worth modeling. You owe income tax on the conversion in the year it happens, but the Roth then grows tax-free, qualified withdrawals are tax-free, and the original owner never faces RMDs. A year of lead time lets you size the conversion to stay in a bracket you can live with. One caution covered under Medicare below: a large conversion can trigger income-related Medicare surcharges two years later.
Lock In Healthcare Coverage
Healthcare derails more retirement plans than any other expense, and the enrollment deadlines are unforgiving. What you do depends on whether you’ll be 65 when you retire.
If You’re Turning 65
Medicare eligibility begins at 65. Your Initial Enrollment Period is a seven-month window: the three months before your birthday month, your birthday month, and the three months after.5Medicare. When Does Medicare Coverage Start Missing it has permanent consequences. The Part B late enrollment penalty adds 10% to your monthly premium for every full 12-month period you could have signed up but didn’t, and it stays on your premium for life.6Medicare. Avoid Late Enrollment Penalties
The standard Part B premium for 2026 is $202.90 per month. Higher earners pay more through Income-Related Monthly Adjustment Amount surcharges, which begin at $109,000 for single filers and $218,000 for joint filers, based on modified adjusted gross income from two years earlier. At the top tier ($500,000 single or $750,000 joint), the total monthly Part B premium reaches $689.90.7Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles This is where a final-year Roth conversion can backfire: the converted amount counts as income and can push you into IRMAA two years out.
Part A covers hospital stays, Part B covers outpatient and physician services, and Part D covers prescription drugs.8Medicare. Parts of Medicare You’ll also choose between Original Medicare with a separate Medigap supplement or a Medicare Advantage plan. The right choice depends on your doctors, your medications, and how much you travel; start comparing plans a few months before your enrollment window opens.
If You’re Retiring Before 65
Retiring before Medicare means bridging the gap. COBRA lets you stay on your employer’s plan for up to 18 months after leaving, but you pay both the employee and employer portions plus a 2% administrative fee.9DOL.gov (Employee Benefits Security Administration). FAQs on COBRA Continuation Health Coverage for Workers If you were paying $300 a month while employed and the employer was covering $1,200, your COBRA bill is roughly $1,530. The Health Insurance Marketplace is the other main option, and losing employer coverage qualifies you for a special enrollment period. For many early retirees a subsidized Marketplace plan costs less than COBRA, so compare both.
Retiring before 65 with prior employer coverage also gives you a Medicare Special Enrollment Period of eight months after that coverage ends, so you won’t face a Part B late enrollment penalty when you do turn 65.
Decide When to Claim Social Security
The gap between your smallest and largest possible Social Security benefit can run 76% or more, and the claiming decision is effectively irreversible. For anyone born in 1960 or later, full retirement age is 67.10Social Security Administration. Benefits Planner: Retirement – Born in 1960 or Later Claiming at 62, the earliest possible age, permanently reduces your benefit by as much as 30%.11Social Security Online. Early or Late Retirement? When To Start Receiving Retirement Benefits Delaying past full retirement age increases your benefit by 8% per year up to age 70.12Social Security Administration. Delayed Retirement Credits No credit accrues after 70, so waiting beyond that gains nothing.
A spousal benefit can be as much as 50% of the higher earner’s primary insurance amount, though claiming before full retirement age reduces that to as little as 32.5%.13Social Security Online. Benefits for Spouses If you’re divorced and the marriage lasted at least 10 years, you may be eligible to claim on your ex-spouse’s record without affecting their benefit.14Social Security Administration. Can Someone Get Social Security Benefits on Their Former Spouse’s Record?
During this final year, log into your my Social Security account and check every year of recorded earnings. Errors reduce your benefit permanently, and correcting them requires old W-2s or tax returns. Fix anything wrong now, not after you file.
File for Your Pension and Choose the Payout
If you have a defined-benefit pension, request a formal benefit estimate from HR and ask for the Summary Plan Description, which lays out your vesting status, payout formulas, and distribution options.15Internal Revenue Service. 401(k) Resource Guide – Plan Participants – Summary Plan Description Pay particular attention to the choice between a single-life annuity, which pays more each month but stops at your death, and a joint-and-survivor annuity, which pays less but continues for your spouse. The monthly difference typically runs 10% to 20%, and the election is permanent. Pull together birth certificates, marriage licenses, and military discharge papers now so filing doesn’t stall.
Clear Debt and Build a Cash Cushion
Every dollar of required debt service is a dollar your portfolio has to produce on top of living expenses. Credit cards, personal loans, and car payments should be priority targets in your final working year.
The mortgage question is less clear. A rate below 4% locked in during the low-rate years usually favors keeping the loan and investing the difference. A rate of 6% or higher argues the other way, both for the arithmetic and for the lower fixed cost in retirement. Some retirees simply sleep better without a mortgage, which has real value when markets drop 20% and no paycheck is coming in.
Whatever you do with the mortgage, build a cash reserve of six to twelve months of expenses in a savings or money market account before you retire. The buffer keeps you from selling investments into a downturn to cover ordinary bills, and it covers the weeks between your last paycheck and the first Social Security or pension deposit.
Address Long-Term Care While You Still Can
Medicare does not cover custodial long-term care, the kind most people actually end up needing: help bathing, dressing, and managing daily activities. The median cost of assisted living runs roughly $5,000 to $6,000 per month nationally, and a private nursing home room costs significantly more.
If you’re going to buy long-term care insurance, the year before retirement is close to the last practical window. Premiums rise steeply with age, and health conditions that develop later can make you uninsurable. Underwriting at 64 is substantially easier than at 70. Traditional policies cover long-term care specifically but return nothing if you never need care. Hybrid policies combine life insurance with a long-term care rider, so you either use the care benefit or your heirs receive a death benefit; they cost more upfront but address the “pay premiums for decades with nothing to show” concern.
If insurance isn’t in the budget, earmark part of your portfolio for potential care needs and keep it in liquid, conservative investments. A plan beats discovering the gap after a health crisis.
Refresh Estate Documents and Beneficiaries
Wills and revocable living trusts should name executors and trustees who are still willing, capable, and reachable. A durable power of attorney authorizes someone to handle your finances if you can’t, and a healthcare proxy or advance directive does the same for medical decisions. Without these documents, your family has to petition a court for guardianship, which costs thousands of dollars and plays out in public hearings.
Check Every Beneficiary Designation
This is where estate plans fail most often. Beneficiary designations on 401(k) accounts, IRAs, and life insurance policies override your will. If your ex-spouse is still listed as beneficiary on a retirement account, the ex-spouse gets the money regardless of what the will says.16Internal Revenue Service. Retirement Topics – Beneficiary Pull current beneficiary statements from every account and verify them.
Inherited retirement account rules have also changed. Beneficiaries who are not the surviving spouse, a minor child, disabled, or within 10 years of the account owner’s age generally must empty an inherited IRA within 10 years of the owner’s death.16Internal Revenue Service. Retirement Topics – Beneficiary Surviving spouses have more flexible options, including rolling the account into their own IRA. The rules affect how your heirs are taxed and may influence whether you name individuals, trusts, or charities.
Handle Digital Assets
Nearly every state has adopted some version of the Revised Uniform Fiduciary Access to Digital Assets Act, which limits what an executor can access unless you explicitly grant permission. Include digital asset authority in your will or power of attorney, and keep a separate private document listing account names, passwords, and what you want done with each. Don’t put passwords in the will itself, because wills become public documents during probate. Store the password list with your other estate documents and tell your executor where to find it.
Decide Where You’ll Live
Where you live has an outsized effect on how long your money lasts. Moving to a lower-cost area can save thousands a year through property taxes, housing costs, or the absence of a state income tax. Some states also exempt Social Security benefits from taxation. If you’re considering a move, look at the full picture — property taxes, sales taxes, income taxes, and state treatment of retirement income — rather than any single factor. Roughly 17 states and the District of Columbia also impose their own estate or inheritance taxes, often with much lower exemption thresholds than the federal $15,000,000 individual exemption for 2026.17Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
If you’re staying put, evaluate the house with aging in mind. Stairs, narrow doorways, and bathtub-only bathrooms become barriers faster than most people expect. Accessibility modifications are cheaper to do now, while you’re still earning, than as emergency work later.
If You’re Selling
Federal tax law excludes up to $250,000 of capital gains from the sale of a primary residence for single filers and $500,000 for married couples filing jointly, provided you’ve owned and lived in the home for at least two of the five years before the sale.18Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence If you bought decades ago, that exclusion can be worth tens of thousands.
Budget for the cost of selling. Agent commissions average around 5% to 6% of the sale price, and closing costs typically add another 1% to 3%. On a $400,000 home, that’s roughly $24,000 to $36,000 off the top. Repairs, decluttering, and staging take longer than most sellers plan for, so start well before the target retirement date.