5 Financial Tasks to Take Care of the Year before You Retire

As you enter the last year before your retirement, it’s tempting to assume that all the retirement planning work you need to do is already done. After all, you’ve hopefully been able to spend decades preparing for this moment, so what could possibly be left to take care of?

The truth, however, is that the year just before you retire is not simply the kickoff to a life of leisure, but rather a crucial transition point between your working life and your post-work future. As such, you’ll need to take care of a few last critical tasks during this time to help set you up financially for your life as a retiree and ensure that the years ahead will be comfortable and worry-free.

The most important financial steps to take in the year before you retire include:

1. Updating (or creating) your retirement budget💲.

You’ve probably created retirement budgets before—this is usually a key step in retirement planning as it helps you figure out your savings goals. But now that you’ve reached the year before retirement, you’ll be able to create a budget that is much more accurate than previous ones.

At this point, you’ll have a clearer idea about what your expenses during the first year or two of your retirement are likely to be. For example, by now you’ll probably know whether you intend to take a big trip or make a major purchase such as a vacation home shortly after you retire. Similarly, you’ll know more about your liabilities, such as precisely how much money, if any, you’ll still owe on a home or vehicle when you stop working.

Having this level of detail about your personal finances will help this version of your retirement budget reflect reality as closely as possible. This, in turn, will help you correctly calculate your retirement withdrawals.

2. Adjusting your portfolio 💼for income.

Speaking of withdrawals, the year before you retire is an excellent time to plan how and when you’re going to withdraw money from your various retirement accounts. You’ll need to find the right balance between ensuring that you have enough income to support yourself and avoiding running out of money during your retirement years.

Some key things to think about here include what withdrawal rate you’ll use (many experts recommend 4 percent as the magic figure, but in the current very low interest rate environment, that may be too high to be sustained), which investments you’ll plan to sell each year in order to achieve that withdrawal rate, and how you’ll manage your asset allocation so that you won’t end up having to sell investments at a loss if the market takes a turn. Hopefully, you have already established one or more income annuities or other more formalized income generation vehicles and plans before this last year of work, so that the bulk of your income in retirement will NOT involve annual sales of securities.

Note that these can be complex considerations. You may find it worthwhile to get some expert advice from a financial planner, especially one who specializes in retirement income planning, if you haven’t consulted any financial professionals prior to this.

3. Educating yourself about Medicare🩺.

Unless you are able to set up a private alternative, you’ll likely be relying on Medicare once you’re retired and no longer covered by employer-provided health insurance. In the year before your retirement, take the time to research the ins and outs of Medicare.

Be sure you understand key details such as the four parts of Medicare and what is covered by each one, when you need to sign up, what your premiums will be, and what coverage gaps you might encounter. It’s essential to learn about your new insurance well before you have to use it.

This not only helps protect you from unpleasant surprises down the road, it also gives you the option to make strategic purchases or decisions while you’re still working, such as buying new glasses or having an elective procedure.

4. Refinancing your mortgage as needed🏘️.

If you still owe money on your home and you’re thinking about refinancing your mortgage, it’s a good idea to do this the year before you retire rather than waiting until after you stop working. Even if you have ample retirement assets, getting approved can still be easier when you’re employed.

And if you’re nervous about carrying a mortgage into your retirement, don’t be. While conventional wisdom used to hold that your mortgage should be paid off prior to retirement, continuing to make mortgage payments after you stop working is not an issue if you can do it without sacrificing your standard of living.

Furthermore, if you rush to pay off a mortgage before you retire, this could leave you without accessible funds to cover unforeseen costs or emergencies such as medical expenses.

5. Making decisions about Social Security⛱️.

Depending on how old you are when you retire, you may have a choice between claiming Social Security benefits right away and waiting to claim them later. The year before your retirement is a great time to think about which of these options would best suit your lifestyle and retirement plans.

Don’t forget to think about your health and your family history when making this decision. Waiting to claim your Social Security benefits will get you a bigger monthly check, but it won’t necessarily having you coming out ahead overall.

Many retirement planners offer a free “Social Security Maximization Study” that shows you all of the possibilities, year by year, up to age 70.


Robert Ryerson

Although Robert M. Ryerson completed all the necessary requirements to earn bachelor of arts degrees in both English and economics at Rutgers University, college policy at the time prohibited the issuance of dual degrees. As a result, he graduated from Rutgers with a single bachelor of arts in economics before finding employment as a stockbroker with Shearson Lehman American Express in New York City 1984. Robert M. Ryerson has since established himself as a respected estate administrator and legacy planner. In addition to his economics degree from Rutgers, Mr. Ryerson holds several professional designations including Retirement Income Certified Professional (RICP)®; Certified In Long Term Care (CLTC)®; Certified Financial Fiduciary (CFF)®, and Certified Identity Theft Risk Magenament Specialist (CITRMS)®. He has shared his knowledge on the subject of identity theft as the author of the book What’s The Deal With Identity Theft?: A Plain-English Look at Our Fastest Growing Crime. He has also covered identity theft issues directly for students as the instructor of the adult education course Understanding Identity Theft: Our Fastest Growing Crime.

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