The Year Before You Retire Is Financially More Important Than the 10 Before It
In Grosse Pointe, most of the families I meet within a year of retirement are not underprepared.
They have saved diligently.
They have significant brokerage balances.
They may own multiple properties.
They often have $3M to $10M invested.
The problem is rarely accumulation.
The problem is transition.
The final 12 months before retirement carry more structural risk than the previous decade combined.
Here is why.
1. Your Income Structure Is About to Permanently Change
For 20 or 30 years, your financial life likely looked like this:
High W-2 income
Ongoing 401k contributions
RSUs or bonuses
Growing brokerage balances
Then, within a 12-month window, that engine shuts off.
You are moving from:
Income-funded investing
To
Portfolio-funded living
That is not a small shift.
It is a structural change.
Mistakes made in this window — distribution timing, diversification failures, tax stacking — compound immediately once paychecks stop.
You no longer have earned income as a shock absorber.
2. Sequence of Returns Risk Becomes Real Overnight
In accumulation years, market downturns are uncomfortable.
In distribution years, they are mathematical.
If markets decline significantly in the year before or immediately after retirement and you begin withdrawals at the same time, the impact can permanently reduce portfolio longevity.
The irony is this:
The final year before retirement is often when people take the most risk.
They are still fully invested.
They may still be concentrated in company stock.
They assume “one more year” will not matter.
It matters more than most realize.
De-risking does not mean abandoning growth.
It means separating near-term income from long-term capital intentionally before retirement begins.
3. The Tax Window Is Narrower Than It Appears
The year before retirement may be the last year of peak income.
The year after may be the first year of significantly lower income.
That creates planning opportunities that do not exist at other times:
Coordinated Roth conversions
Capital gains realization before brackets compress
Managing Medicare IRMAA exposure
Timing RSU vesting or bonus payouts
If ignored, these windows close quickly.
Tax structure set in the final working year often defines the first decade of retirement.
4. Healthcare Decisions Become Permanent
In the final year before retirement, you must decide:
When Medicare begins
How supplemental coverage is structured
How premiums interact with income levels
Medicare IRMAA brackets are based on income from two years prior.
That means income decisions made in the final working year may influence Medicare costs shortly after retirement.
Most people do not connect these dots.
High earners often unintentionally trigger higher premiums simply because no one modeled the interaction.
5. Your Estate and Asset Structure Should Be Finalized Before Income Stops
For affluent households, retirement is often when estate intentions become clearer.
Questions surface:
Should trusts be updated?
Should real estate be retitled?
Should gifting accelerate?
Should charitable structures be formalized?
It is easier to adjust these while income and liquidity are stable.
Waiting until after retirement introduces uncertainty.
The year before retirement is a planning year.
The year after retirement is an execution year.
6. Identity and Risk Tolerance Shift Faster Than Expected
The final year of work carries confidence.
The first year of retirement often carries caution.
When paychecks stop, even affluent households can feel exposed.
That emotional shift frequently leads to reactive investment decisions in year one.
The correct time to design the income strategy and risk allocation is before the emotional shift occurs.
Not after.
The Pattern I See
In Grosse Pointe, most families preparing for retirement are financially capable.
What determines long-term success is not whether they saved enough.
It is whether they structured the transition properly.
The final year before retirement should focus on:
Liquidity separation for near-term income
Tax modeling across multiple years
Diversification of concentrated stock
Estate coordination
Healthcare premium strategy
Once retirement begins, options narrow.
When income is high and flexibility exists, that is when structure should be finalized.
The Real Question
The question is not:
“Are we ready to retire?”
The better question is:
“Is our structure ready for retirement?”
Because the year before you retire is not just another year of accumulation.
It is the hinge year.
And hinges determine how smoothly the next 30 years move.
