5 Financial Moves to Make the Year Before You Retire

Retirement is one of the biggest transitions in your life. Even if you’ve planned for decades, the final year before it begins is a critical window to make sure everything’s aligned for your exit from the workforce. Tasks like reviewing your portfolio or planning for adequate healthcare can make for a softer landing while shifting into your golden years.

In this article, we’ll outline five important financial moves you should make in the 12 months leading up to retirement. This includes ensuring your investments are on track and that your income sources will be able to fund your lifestyle. It also involves being equipped for the emotional aspects of retirement, which can be overlooked.

1. Take Inventory of Your Income Sources and Assets

Before you retire, it’s essential to have a clear understanding of your financial landscape. Having a full inventory of your assets, liabilities, and expected income sources helps you visualize what they’ll realistically look like when your career ends. While it may seem basic, this step lays the foundation for every other retirement decision.

“First and foremost, take an inventory of where you stand financially. Figure out where all of your retirement assets are located,” says Chuck Czajka, Certified Social Security Claiming Strategist (CSSCS) and founder of Macro Money Concepts. As Czajka notes, it’s important to keep track of all your accounts and assets, including your:

• 401(k).
• IRA (traditional or Roth).
• Pension from employer.
• Real estate.
• Alternative assets (private equity, cryptocurrency, collectibles, etc.).

By having a complete picture of the above, you’ll be able to grasp what makes up your wealth and how it forms your retirement income. It may also provide you an opportunity to, where possible, consolidate accounts. For instance, it may make sense to roll your 401(k) into a Roth IRA, depending on your preferences.

2. Evaluate Your Investment Allocation

Similarly, it’s also vital to re-assess your investment portfolio in the year before retiring. If you’ve been planning carefully, you shouldn’t need to make any dramatic shifts. However, it’s worth evaluating your asset allocation and ensuring you’re appropriately hedging against risks, like market volatility, sequence-of-returns, and inflation.

Jake Falcon, CRPC^®, founder and CEO at Falcon Wealth Advisors, notes that the year leading up to retirement is a prime time to “reassess your portfolio, but not necessarily overhaul it.” When people near retirement, it’s common for them to “go too conservative quickly,” says Falcon. However, he explains that it’s also important to “have growth to outpace inflation and support a retirement that could last 30+ years.”

A common approach as you near retirement is the bucket strategy, where your portfolio splits into short-term (1–3 years), intermediate-term (3–10 years), and long-term (10+ years) allocations. This method helps you blend growth potential with stability and prevents you from having to sell growth-oriented assets in a downturn. Keep in mind, however, that how you allocate assets will be unique to you and your goals.

3. Plan for Healthcare

Healthcare is a crucial yet overlooked expense when you retire. Once you’re no longer working, covering medical costs will fall entirely on you, whether through insurance or out-of-pocket payments. Without a solid plan in place, healthcare costs can erode your savings and potentially shorten your retirement timeline.

“If you’re retiring before Medicare eligibility, healthcare planning is critical,” Falcon emphasizes. He recommends looking into insurance options like “COBRA, ACA marketplace plans, or a spouse’s coverage” to fill any gaps. Getting a policy is crucial because an unexpected health expense could cost several thousands, depending on the severity.

In the year before retirement, it’s wise to begin weighing your options. Then, once you leave your job, you won’t need to worry about any unnecessary risks that a coverage gap presents.

Czajka also encourages planning for long-term care needs, which many retirees overlook. “I find that many people do not plan for assisted living or long-term care,” he says. “Not having a plan for that makes no sense.” According to Genworth, the median monthly cost of long-term care can reach $5,350 without insurance.

4. Make Smart Tax Moves

The year before retirement is a smart time to take a closer look at your taxes. The decisions you make now can have a lasting impact on how much of your retirement income you keep. This includes evaluating your account structure and creating a tax-efficient withdrawal strategy.

“The year before retirement is a golden window for tax planning,” says Falcon. It’s a final chance to make advantageous tax decisions, which can reduce what you owe when you begin taking distributions.

One strategy to consider is a Roth conversion, which involves moving funds from a traditional IRA or 401(k) into a Roth IRA. While this creates a tax bill in the short term, it may help you avoid a higher burden later. This is especially true if you’re currently in a lower tax bracket or want to minimize the impact of required minimum distributions (RMDs) down the line.

It’s also worth working with your financial advisor to structure your withdrawal plan from taxable accounts like 401(k)s and IRAs. A thoughtful distribution strategy can help you minimize taxes in the early years of retirement and better manage your overall income.

5. Address the Emotional and Legacy Side of Retirement

Retiring is just as much an emotional shift as it is a financial one. Finding daily purpose and coping with the lack of a consistent paycheck will fall on your shoulders. The year before is a key time to mentally prepare yourself for what’s to come.

“Many people underestimate the emotional side of retirement. We talk a lot about ‘trading time’—what will you do with your days once work is no longer the default?” says Falcon. “Whether it’s volunteering, consulting, or pursuing a passion project, having a purpose can be just as important as having a paycheck.”

You can begin by thinking about how you want to spend your time after you retire: Will you volunteer? Travel? Start a part-time business? Having a sense of purpose or structure, as Falcon explains, can help the transition be smoother.

It’s also important to grapple with the legacy you want to leave behind. As you retire, estate planning becomes a crucial issue to tackle. This includes drafting key documents and making arrangements, like:

• A will
• Setting up trust(s)
• Establishing power of attorney (POA)
• Beneficiary designations on retirement accounts

Bottom Line

The final year before retirement is a crucial time to make lasting financial decisions and be sure you’re set up for success. There’s a lot to account for, however. Reviewing accounts, adjusting your asset allocation, and minimizing taxes are all tasks that require a high level of expertise for ideal outcomes.

The support of a financial advisor, therefore, can be highly valuable as you jump to retirement. “A qualified financial advisor can make all the difference in the world,” says Czajka. “I recommend you work with one that is all about safety first, otherwise known as principal protection,” he says.

The right financial advisor can leverage their experience and expertise to tailor a retirement plan that works for you. This includes helping you:

• Minimize taxes.
• Plan for healthcare expenses.
• Optimize your retirement income.
• Assess and adjust your portfolio before retirement.

If you’re less than 12 months away from retirement, now is the time to meet with a fiduciary financial advisor who’s legally obligated to act in your best interest. If you’re not sure where to start, this free matching tool can connect you with a vetted advisor who suits your needs.