A Year Before Retirement: 7 Financial Moves to Make
The year before retirement is not the time to wait for your last paycheck. It’s the time to look closely at the decisions that could shape your financial life after work. One thing that’s easy to overlook: the years around retirement can create a tax window that may not be available later. And that’s the kind of detail that can be easy to miss when you’re focused on simply getting to retirement.
A year sounds like plenty of time. It isn’t if the important decisions are left until the last few months.
This is the time to run the numbers, compare your options, and make decisions while you’re still earning a paycheck. That can mean looking at your tax situation before your income changes, deciding what to do with your 401(k), running different Social Security scenarios, checking how Medicare could fit into the picture, and figuring out exactly where your retirement paycheck will come from.
Here are seven financial moves worth making while you still have time to adjust the plan.
1. Calculate Your Tax Window
Retirement can create something that doesn’t exist during your highest-earning years: a period when your taxable income may drop significantly.
That makes the year before retirement a good time to look ahead—not just at this year’s tax bill, but at what the next few years could look like.
Start by estimating your income for the year you retire and the year after. What happens when the salary disappears? When will Social Security begin? When will required minimum distributions eventually enter the picture?
That gap can matter.
For someone with a large traditional IRA or 401(k), a lower-income year may create an opportunity for a Roth conversion. Money is moved from a traditional retirement account to a Roth IRA, with the converted amount generally included in taxable income.
The mistake is waiting until after retirement and then realizing there was a window that could have been used more strategically.
But there is another piece to consider: how much to convert.
A larger conversion could push income into a higher tax bracket and potentially affect future Medicare premiums through IRMAA. A smaller conversion—or spreading conversions across multiple years—may produce a different result.
The goal isn’t to convert as much as possible.
The goal is to know what your tax window looks like before it closes.
2. Decide What Happens to Your 401(k) Before You Leave the Job
A retirement date often triggers an automatic thought:
“I’ll just roll my 401(k) into an IRA.”
That may be appropriate. It may not.
A year before retirement, find out exactly what happens to your workplace plan if you leave. Look at the investment choices, fees, withdrawal options, and any features that could matter after employment ends.
Then compare that with an IRA.
There may also be a reason to keep some money in the employer plan depending on the circumstances. The point is not that one choice is always better.
The point is to make the decision before the retirement date forces the issue.
A year before leaving work, ask:
- What will happen to the account when employment ends?
- What will the fees and investment options look like?
- How easily can money be withdrawn?
- Will the account be part of the retirement-income strategy?
- Are there employer-plan rules worth considering before moving the money?
Don’t let a rollover become an administrative decision when it should be a financial one.
3. Stress-Test Your Social Security Timing
Most people treat the Social Security decision as a single lever: claim early, claim on time, or wait.
It works better as a stress test on the whole plan.
A year before retirement, run the numbers under each scenario—62, full retirement age, and later. If married, model the household strategy together rather than treating each spouse’s decision as its own separate choice.
Then look at what happens to the portfolio while waiting.
Suppose delaying Social Security means the investment account needs to provide more income for several years. That has a cost. But delaying may also provide a larger guaranteed monthly benefit later.
Which tradeoff makes sense depends on the household.
Health, longevity, other income, savings, taxes, and the need for income all matter.
Don’t make the Social Security decision in isolation. Run it against the retirement plan.
4. Check Your Medicare Exposure Before Making Big Financial Moves
Medicare planning doesn’t start when the Medicare card arrives.
It starts earlier—especially if retirement is close and income is about to change.
One detail that catches people off guard is IRMAA, the income-related adjustment that can increase Medicare Part B and Part D premiums for higher-income beneficiaries.
Medicare generally looks at income from two years earlier when determining whether IRMAA applies.
That means a financial decision made today can affect Medicare costs later.
A large Roth conversion, for example, can increase taxable income in the year of the conversion. That doesn’t automatically make the conversion a bad idea. It simply means the Medicare consequences should be part of the calculation.
This is where retirement planning gets interconnected.
A tax decision isn’t always just a tax decision.
Before making a large financial move in the final working years, look beyond the current tax return and consider what it could mean for Medicare premiums down the road.
5. Build Your First Retirement Paycheck Before Your Last Work Paycheck
For decades, the paycheck arrives without much thought.
Then retirement begins. The paycheck stops.
Whatever income plan exists at that point is the one you’re living on—there’s no more runway to adjust before the bills come due.
A year before retirement, build a simple first-year retirement-income estimate.
Start with the monthly amount needed to cover expenses. Then subtract the income that is expected to arrive regardless of market performance, such as Social Security or a pension.
What’s left is the amount the portfolio may need to provide.
For example:
Monthly retirement spending: $6,000 Social Security and pension: $3,500 Portfolio needs to provide: $2,500
Now the retirement plan becomes much easier to evaluate.
Is that withdrawal sustainable? Which account should provide it? How much should remain in cash? What happens if the market falls during the first year?
Those questions are much easier to address while there is still a paycheck coming in.
Don’t wait until the paycheck disappears to find out what replaces it.
6. Run the Numbers on Your Debt
Retirement changes the way debt feels.
A $1,500 monthly mortgage payment may be manageable while earning a salary. It can feel very different when the only income is coming from Social Security, a pension, and investment withdrawals.
But paying off every debt before retirement isn’t automatically the right answer either.
Before making a large payoff, look at the actual numbers. Say there’s $90,000 left on a mortgage at 4.5%, with 12 years remaining and a $900 monthly payment. Paying it off in full would draw down $90,000 from retirement savings in one move—money that would no longer be available for market growth, emergencies, or future long-term-care costs. But keeping the mortgage means committing $900 of every month’s retirement income to a fixed obligation for the next 12 years, regardless of what the market does.
For each major debt, consider:
- Remaining balance
- Interest rate
- Monthly payment
- Years remaining
- Available cash and retirement assets
- How paying it off would change monthly retirement expenses
Then compare the two scenarios side by side: what the monthly retirement budget looks like with the $900 payment still in it, and what it looks like with that $90,000 withdrawn instead and the payment gone.
What does retirement look like with the debt? What does it look like without it?
That answer is more useful than simply saying, “Retire debt-free.”
Paying off a mortgage could improve monthly cash flow. But if doing so drains a large portion of retirement savings, it could also leave less money available for emergencies and future expenses.
The goal is not to make the debt disappear at any cost.
The goal is to make sure the debt fits the retirement you can actually afford.
7. Choose Your Withdrawal Order Before You Need the Money
This is one of those decisions that can be easy to ignore when everything is still sitting in the accounts.
A year before retirement, put the account balances on the table:
- Taxable investments
- Traditional IRA
- 401(k)
- Roth IRA
- Cash reserves
- Other retirement-income sources
The account that provides the first dollar of retirement income won’t be the same for every household.
Taking everything from a traditional IRA could create more taxable income than expected. Using only taxable investments could have different consequences. Using Roth money early may preserve tax-free income for later.
A blended approach may make more sense.
There is also the longer-term issue.
Required minimum distributions will eventually become part of the picture for many retirees with traditional retirement accounts. A withdrawal strategy that works beautifully at age 62 may not be the best strategy at 73 or beyond.
That’s why the withdrawal plan shouldn’t stop at Year One.
Think about the first withdrawal—and the withdrawals that come after it.
Don’t Waste the Year Before Retirement
The final year of work can disappear quickly.
There are meetings to wrap up, benefits to review, vacation days to use, paperwork to complete, and a long list of personal things to take care of before leaving a career behind.
Financial planning can easily get pushed down that list.
It shouldn’t.
This is the period when there may still be time to change course.
A Roth conversion can be evaluated before income changes. A 401(k) can be reviewed before employment ends. Social Security can be compared under different claiming strategies. Medicare costs can be considered before making major tax moves. Debt can be tested against the future monthly cash flow. And the retirement portfolio can be turned into an actual income plan.
None of these decisions should be made simply because a checklist says so.
They should be evaluated based on the numbers, the timeline, and the retirement income the household actually needs.
A year before retirement, the goal isn’t to have every answer. It’s to make sure the important questions are being answered while there is still time to do something about them.
Ready to Take a Closer Look?
If retirement is about a year away, there’s still time to work through the decisions that matter most—before they’re made by default instead of on purpose. That includes sizing up your Roth conversion window before it closes, deciding what happens to your 401(k) before you walk out the door, and building the withdrawal order that will fund your first retirement paycheck.
A complimentary discovery call can help walk through those decisions together and check whether the current strategy is actually built around the income, taxes, and lifestyle you’re expecting in retirement.