The final year before retirement isn’t just a countdown to your last day of work. It’s also one of your last chances to make financial adjustments while you still have a regular paycheck coming in.
That doesn’t mean completely overhauling your finances at the eleventh hour. Instead, this is the time to test whether your retirement budget actually works, deal with expenses that could become harder to absorb later, and make decisions about everything from Social Security to health insurance.
A little preparation can also help you avoid costly surprises once those paychecks stop. If retirement is about a year away, here are 12 money moves before retirement worth putting on your to-do list.
Practice Living on Your Retirement Income
A retirement budget can look perfectly reasonable on a spreadsheet and feel completely different once you actually have to live on it. Estimate how much you’ll receive each month from Social Security, pensions, and planned withdrawals, then try living on roughly that amount for several months.
Instead of spending the rest of your paycheck, automatically move the difference into savings. You’ll get a more realistic picture of whether your planned budget can handle groceries, housing, transportation, entertainment, travel, and other everyday expenses — while building up your retirement savings at the same time.
Build Up a Cash Cushion
Retirement doesn’t make unexpected expenses disappear. Cars still break down, appliances stop working, and medical bills have an inconvenient habit of arriving when you weren’t expecting them.
Before your paycheck disappears, consider how much you’d be comfortable keeping readily accessible for emergencies and near-term expenses. Having cash available can also mean you’re less likely to need a large, unplanned investment withdrawal when the market is down. Don’t forget predictable expenses, either: If you know the car will need tires next year or the water heater is on borrowed time, include those in your calculations.
Pay Down Expensive Debt
Carrying a balance at a high interest rate is inconvenient while you’re earning a salary. It can become much more burdensome when you’re living on retirement income.
Focus on high-interest credit cards and personal loans first. Eliminating a $400 monthly payment, for example, gives you $400 less that your retirement income needs to cover every month. That doesn’t necessarily mean you need to enter retirement completely debt-free. Paying off a low-rate mortgage early, for example, won’t make sense for everyone. Concentrate on the debt that’s costing you the most.
Give Your 401(k) One Last Push
Your final working year could be one of your last opportunities to put a substantial chunk of a paycheck into an employer-sponsored retirement account — especially if your employer offers matching contributions.
For 2026, employees can contribute up to $24,500 to most 401(k), 403(b), and governmental 457 plans. Workers 50 and older can generally contribute an additional $8,000. Those ages 60 through 63 have a higher catch-up limit of $11,250 instead. Individual plans can impose their own restrictions, so check yours before changing contributions.
Even if maxing out your account isn’t realistic, make sure you’re contributing enough to collect any employer match available to you.
Decide When You Actually Want Social Security to Start
Your retirement date and the date you start collecting Social Security don’t have to be the same.
Before automatically filing when you leave work, compare your personalized Social Security estimates at several ages. For people born in 1943 or later, delaying benefits beyond full retirement age generally earns delayed retirement credits equivalent to 8% per year until age 70, when those increases stop.
Waiting isn’t automatically the right decision. Your health, savings, spouse’s benefits, expected longevity, and other income all matter. The important thing is to know what the different claiming dates would mean for your monthly benefit before choosing one.
Trending on Cheapism
Figure Out Health Insurance Before Your Last Day
Don’t wait until your retirement party to figure out what happens to your health insurance. Find out exactly when your employer-sponsored coverage ends and when Medicare, retiree insurance, COBRA, a spouse’s employer plan, or another replacement policy would begin.
For retirees moving to Medicare, the standard Part B premium is $202.90 per month in 2026, although higher-income beneficiaries can pay considerably more. Medicare enrollment timing matters, too. Depending on your circumstances, missing the appropriate enrollment period can result in a gap in coverage and a Part B late-enrollment penalty that may follow you for as long as you have Part B.
Watch Your HSA Contributions If Medicare Is Coming
If you’re working past 65 and contributing to a health savings account, Medicare requires a little extra planning.
You generally can’t contribute to an HSA once you’re enrolled in Medicare. Medicare advises people working past 65 to stop HSA contributions six months before retiring or applying for Social Security benefits. That’s because premium-free Medicare Part A can be retroactive for up to six months when you enroll later, potentially turning seemingly valid HSA contributions into excess contributions.
You don’t lose the money already in the account, however. Existing HSA funds can still be used for qualified medical expenses after you’ve enrolled in Medicare. Because the timing rules depend on your situation, this is one area where checking with your benefits administrator or tax professional before retirement can prevent an expensive mistake.
Track Down Every Retirement Account
After decades in the workforce, it’s surprisingly easy to have money scattered across old employer plans, IRAs, pensions, HSAs, and brokerage accounts.
Make a simple inventory listing each financial institution or employer, the account type, approximate balance, beneficiary, and contact information. Look especially closely at retirement accounts left behind at former employers. While you’re at it, check the beneficiaries on each account, particularly if you’ve experienced a marriage, divorce, remarriage, or death in the family since you originally filled out the paperwork.
You don’t necessarily need to consolidate everything. The first step is simply knowing exactly what you have and where it is.
Sign up for our newsletter
Decide What to Do With Your 401(k)
Leaving your job doesn’t automatically mean you need to move your 401(k). Depending on the plan and your circumstances, you may be able to leave your savings in the employer plan, roll the money into an IRA or another eligible retirement account, or begin taking distributions.
Compare the fees, available investments, withdrawal options, and convenience before making a move. And resist treating retirement day as an excuse to simply cash out the entire account. A large taxable distribution could create a hefty tax bill and leave less money invested for the years ahead.
Map Out Your First Year of Retirement Paychecks
You may no longer receive a paycheck from an employer, but the electric company will continue sending bills right on schedule. That’s why it’s useful to decide ahead of time how you’ll turn your retirement savings and benefits into monthly income.
Figure out how much of your budget Social Security and any pension will cover, then determine where the rest will come from — whether that’s cash savings, an IRA, a 401(k), or another account. Don’t forget to account for federal and applicable state taxes when estimating what you’ll actually have available to spend.
Age matters here, too. Traditional IRA owners generally must begin required minimum distributions at age 73. Workplace retirement plans can have somewhat different timing rules, particularly for people who continue working past that age.
Take Care of Looming Home and Car Expenses
A 20-year-old furnace is unlikely to care that you just retired.
Take a look around your house, car, and other major possessions and identify expenses that are reasonably likely to hit during your first several years of retirement. That could mean an aging roof, worn-out tires, an unreliable vehicle, old appliances, necessary dental work, or home modifications that will make aging in place easier.
If something genuinely needs replacing soon, taking care of it while you’re still receiving a salary may make your early retirement budget more predictable. Just don’t turn this exercise into permission for a pre-retirement shopping spree. There’s a big difference between replacing a failing HVAC system and remodeling a perfectly functional kitchen because “we might as well do it now.”
Cut the Monthly Bills You Won’t Need Anymore
Retirement doesn’t just change your income. It changes what you spend money on.
Go through your bank and credit card statements and reconsider recurring expenses in light of what your life will actually look like after work. Commuting costs, parking, professional clothing, work lunches, memberships, storage units, and even a second vehicle may no longer make sense.
It’s also a good time to review streaming services, phone and internet plans, insurance, and other subscriptions. If you’ll be driving significantly fewer miles after retiring, for example, ask your auto insurer whether the change could affect your rate. Cutting $50 or $100 from several recurring bills can make a meaningful difference because those savings repeat every month.
Use Your Last Working Year to Test the Plan
The year before retirement should be less about counting down the days and more about finding out whether your plan works in real life. Start with the decisions that can have the biggest impact: your expected monthly income, health coverage, Social Security timing, high-interest debt, and emergency savings.
It’s also your final opportunity to take advantage of workplace benefits that disappear along with your paycheck, from employer retirement contributions to health insurance.
Most importantly, build your retirement budget around the life you actually expect to live. Finding out that your plan needs adjusting while you’re still collecting a salary is a lot easier than discovering it six months after your final paycheck.
