Retirement Planning for Ages 55 to 64: Fine-Tuning Your Financial Future

If retirement planning is indeed a marathon, you’re coming into the final stretch now. You've worked hard and made some smart moves with the help of your planner. But these last few years before retirement can be critical. It’s a time to continue your momentum, make any needed adjustments, and prepare for new challenges that come with the transition into retirement.

Let’s look at 12 opportunities to help you optimize savings, turn savings to income, manage taxes and prepare for long-term care.

Maximizing Retirement Savings and Catch-Up Contributions

1. Max out 401(k) and IRA contributions

Are you taking advantage of your peak earning years by making the most of your 401(k), 403(b) or other employer-sponsored plan? At minimum, you should contribute enough to earn an employer match, if available (it’s free money after all). Ideally at this stage though, you should be maxing out your contributions. Then, if you still have funds available to invest, aim to maximize contributions to an IRA.

The 401(k) contribution limit in 2025 is $23,500. Now that you're over 50, you can add a catch-up contribution of $7,500, raising the limit to $31,000. That can be big, especially if you got a late start in saving for retirement.

For IRAs – traditional and Roth – the contribution limit is $7,000, with an additional $1,000 in catch-up contributions at 50 or older. Want both kinds of IRAs? No problem. But the annual contribution limit applies across all your IRAs, not per account.

2. Take advantage of new super catch-up contributions

Retirement plan contribution opportunities get better with age. Thanks to a change under the Secure 2.0 Act of 2022, you can now make an even higher contribution to your employer-sponsored retirement plan at ages 60 to 63. In 2025, that super catch-up contribution limit is $11,250 instead of $7,500, offering a great opportunity to help boost your savings before retirement.

3. Consider backdoor Roth and mega backdoor Roth strategies

Roth IRAs offer a tax-smart way to save for retirement, but at this stage, you may be subject to their income restrictions. If you’re filing as single in 2025 and your income is between $150,000 and $165,000, the maximum contribution you can make is “phased out” or reduced. And you can’t make a contribution at all if your income is over $165,000. If you’re married filing jointly, that “phase out” range is between $236,000 and $246,000.

The backdoor Roth IRA is a strategy that lets high-income earners convert a traditional IRA into a Roth IRA. Generally, you’d start by opening a traditional IRA or using an existing one to make a nondeductible contribution (staying within the contribution limits mentioned earlier). Once you’ve made your contribution, you can immediately convert the account into a Roth IRA to take advantage of future tax-free distributions and the opportunity for tax-free growth – because Roth conversions don’t have any income limitations.

There’s also what’s called a mega backdoor IRA. With this strategy, you contribute after-tax money into your employer-sponsored 401(k) plan, then convert that money into a Roth, either within the 401(k) account or a Roth IRA. The “mega” part? It can provide a significant boost to your retirement savings because 401(k) plans have a maximum contribution limit of $70,000 in 2025 between employer and employee contributions.

A word of caution: There are also potential tax implications and rules to be aware of with these strategies, and we don’t recommend executing them on your own. Discuss backdoor IRAs with your planner and tax professional to fully understand the pros, cons and risks involved.

Managing Risk and Protecting Assets

4. Start planning for long-term care insurance

Long-term care is a range of services that assist you with activities of daily living – like bathing, dressing and using the toilet – which you’re more likely to require as you age. Today’s 65-year-old has almost a 70% chance of needing long-term care – and 20% of them will need care for more than five years.

So, who pays for this care? Medicare only pays for a portion of services under certain unique circumstances. And employer-sponsored or private health insurance plans generally cover the same limited services as Medicare. That means the responsibility is largely on you.

Long-term care insurance can help protect your assets against the potentially high costs of care – according to Genworth, a private room in a nursing home has a national median cost of more than $120,000 a year. In many states, the actual cost can be much higher. Long-term care insurance coverage gets more expensive the longer you wait, and your health will play a role in your eligibility – and possibly the premium. That’s why your 50s is typically a good time to consider it. We can help you explore options from traditional policies that pay for covered services (up to a daily, weekly or monthly limit) for a set period to hybrid policies that combine the death benefit of life insurance with long-term care insurance.

5. Reevaluate life insurance needs

As your goals and priorities shift, your life insurance needs might likewise change. Earlier in your working years, your focus may have been protecting your family and your assets in case you died unexpectedly.

Now that you’re closer to retirement, you may have paid off your mortgage (or you’re getting close). Your kids may be in college or have flown the nest. Divorce or remarriage may have changed your family dynamic. Now is a good time to reevaluate your life insurance needs and make sure they align with where your life is now. Do you have the right amount of coverage? Do you still need the term coverage you purchased years ago? Your planner can help you answer questions like these and determine where life insurance fits into your overall plan today.

Health Care and Medical Planning Before Retirement

6. Keep contributing to a health savings account

Health care could very well be your biggest expense in retirement. And you’ll want to have as many sources in your arsenal as possible to help pay for it. When those sources are tax advantaged? Even better.

If you’ve been contributing to an HSA, you probably already know about its triple tax benefits: Contributions are tax deductible, earnings are tax deferred, and distributions are tax-free if you use the money for qualified medical expenses (like deductibles, copayments and coinsurance).

As long as you remain in a high-deductible health plan, you can keep contributing to your HSA. Take advantage of the opportunity while you can because you can’t contribute after you enroll in Medicare coverage. In fact, you need to stop HSA contributions at least six months prior to enrollment in Medicare if you are over age 65 when you enroll because Medicare is retroactive six months (not going back further than the month of your initial enrollment eligibility). However, the HSA is always yours, even if you got it through work and you leave the job or retire. And the money stays in the account until you use it.

7. Plan major medical procedures

If you have any surgeries or medical procedures on the horizon, it might be a good idea to take care of them before you transition to retirement. Your current employer health plan may provide more coverage, lower out-of-pocket costs and greater flexibility than what you’ll have after retirement – likely either Medicare or a private health plan if you’re too young to qualify for Medicare. Also, having a major procedure while still on your employer’s plan can help avoid unexpected costs or delays. Bottom line: Go with coverage you already know – at costs that are more predictable.

Retirement Income and Tax Planning

8. Develop a tax-efficient withdrawal strategy

You’ve spent decades saving for retirement, likely in a mix of different accounts. So when it’s time to shift from saving to spending, make sure you do it in a tax-smart way.

What’s the most tax-efficient order to withdraw your money? Conventional wisdom says to tap into your taxable accounts first, tax-deferred accounts, like traditional IRAs and 401(k)s, next, and tax-free or Roth accounts last. The logic is that you’ll get to enjoy those tax advantages for as long as possible.

There’s not one rule that works for everyone. A different sequence might be more appropriate for you. Or you can withdraw proportionally based on the balances in each account, potentially spreading out your tax liability. Your planner can work with you and your tax professional to develop a tax-efficient withdrawal strategy that’s right for you and your situation.

9. Explore Roth conversions

Roth conversions – converting a pretaxed account like a traditional IRA or 401(k) to a Roth IRA – are a hot topic right now. While it can be a smart move for some, it’s not for everyone. It’s important to weigh the pros and cons of this strategy before deciding.

The pros: You’ll enjoy the tax-free withdrawals that come with a Roth IRA, you’ll have smaller Required Minimum Distributions or RMDs, and you’ll have the potential for lower taxes in retirement if you expect to be in a higher bracket.

The cons: You may have to pay taxes on the conversion, which can bump you into a higher tax bracket if the funds you convert are all transferred in the same year. That can also trigger what’s called IRMAA (Income-Related Monthly Adjustment Amount), a surcharge added to Medicare Part B and Part D premiums if your income exceeds certain thresholds.

Roth conversions are worth exploring. But they can be more complex than they appear. Talk to your planner and tax professional to better understand the impact on your retirement and your overall finances.

10. Evaluate pension options

Outside of certain industries and sectors, pensions are relatively rare these days. If you’re fortunate enough to have one, it can provide a key source of income for your retirement.

The choice you’ll likely have to make when it’s time to draw from your pension is whether to take the money as a lump sum or an annuity payout. The lump sum can have a lower lifetime value. However, you’ll have immediate access to your funds to spend or invest as you wish. Annuity payouts can add up to a higher total over the long run and provide steady income for the rest of your life. But if you die prematurely, your heirs could end up with far less than expected (although some annuities have a survivor option).

Aside from the financial considerations, it may simply be a matter of what makes you more comfortable: the control and flexibility of getting a lump sum, or the simplicity and predictability that comes with getting a regular paycheck in retirement. Your planner can help you run through different scenarios and decide which option is right for you.

Social Security and Retirement Income Testing

11. Create a Social Security claiming strategy

One of the most pivotal retirement decisions you’ll have to make is when to begin receiving Social Security benefits.

You can start your benefit at any point from age 62 until age 70, but your payment will be higher the longer you delay. How much does it pay to wait? Your monthly benefit could be 30% higher at your full retirement age of 67 than at 62. At age 70, it could be about 77% higher than at age 62.

But just like the pension decision we discussed above, the choice often goes beyond pure numbers. Do you need “bridge” income between your retirement and the start of Medicare? Is it better to rely on other income sources early and put off Social Security instead? Do you feel more at ease locking in payments earlier, even if they’re lower?

Ultimately there’s no best age for everyone. It comes down to your personal needs and preferences. Your planner can help you weigh different factors and create an informed strategy for claiming Social Security.

12. Test monthly withdrawal amounts

As you approach retirement, you and your planner can test monthly withdrawal amounts to see how they would match up with your retirement lifestyle. Consider it a dress rehearsal for retirement.

Start by adding up all sources of income including 401(k)s, IRAs, Social Security and other investment accounts. Then create a detailed budget of expected monthly expenses, from housing to groceries to travel – some of which will likely change once you stop working.

Using a withdrawal strategy that you and your planner agree upon, see what it’s like to live on the income that strategy would yield. It can be for any period you choose – one month, three months, even six months. Track your actual expenses and compare them to your budget. Will you have enough income to live the way you want in retirement? Once you test how your withdrawal strategy could perform, you can make adjustments – and help ensure you’re ready for the real thing.

Prepare for a Smooth Retirement Transition

Retirement planning between ages 55 and 64 is about maximizing sources of retirement income, managing risk and preparing for decisions around long-term care, Social Security, tax-smart withdrawals and more. Talk to your planner to help make the right moves in the years leading up to retirement – so the transition is as seamless as it can be.