The final years before retirement can be some of the most important years in your financial plan. You are close enough to retirement that decisions about taxes, savings, healthcare, and future withdrawals can have a meaningful impact, but you may still have time to make adjustments. Think of it as the retirement red zone. Here are four areas worth reviewing.
1 – Maximize Tax-Advantaged Retirement Accounts
If you are still working, the years immediately before retirement may provide an opportunity to increase retirement savings. For 2026, the basic employee contribution limit for most 401(k), 403(b), governmental 457 plans, and the federal Thrift Savings Plan is $24,500. The general catch-up contribution for eligible participants age 50 and older is $8,000, while workers ages 60 through 63 may qualify for a higher $11,250 catch-up contribution (IRS). Those additional contributions can be particularly valuable late in your career. but deciding where to contribute is also important. Traditional and Roth accounts have different tax treatment, so the goal is not simply maximizing one account, it is creating a mix that fits your current and future tax situation.
2 – Review Your IRA and Roth Strategy
The 2026 IRA contribution limit is $7,500, with an additional $1,100 catch-up contribution for individuals age 50 or older. Eligibility for deductible traditional IRA contributions and direct Roth IRA contributions can depend on income and participation in workplace retirement plans (IRS). Roth accounts can be particularly useful for tax diversification because qualified withdrawals can be tax-free. A Roth conversion may also be appropriate in certain situations, but converting previously untaxed retirement assets generally creates federal taxable income in the year of conversion (IRS). That is why Roth planning should be coordinated with your tax bracket, Medicare considerations, other income, and long-term financial plan rather than treated as an automatic decision.
3 – Don’t Overlook the HSA
For eligible individuals, a Health Savings Account can be one of the most tax-efficient accounts available. Under IRS rules, eligible HSA contributions may be deductible or excluded from income, earnings are not included in taxable income while held in the account, and distributions used for qualified medical expenses are generally tax-free (IRS). That combination can make an HSA useful not only for today’s healthcare expenses, but potentially for healthcare costs later in retirement. The key here is understanding what qualifies as a medical expense. For example, ordinary gym memberships for general wellness generally do not qualify simply because they promote good health (IRS).
4 – Understand Required Minimum Distributions Before They Begin
One of the most common assumptions about retirement is that taxes will automatically go down, but that is not always the case. Traditional retirement accounts can eventually create required minimum distributions, or RMDs. Under current law, the applicable RMD age is 73 for many retirees and rises to 75 for individuals born in 1960 or later. Roth IRAs and designated Roth employer-plan accounts generally do not require RMDs while the original owner is alive (IRS). Large future RMDs can affect taxable income and interact with other areas of the retirement plan. That is why tax planning can be especially valuable before required distributions begin.
Bonus Step: Coordinate the Pieces
A 401(k) decision affects taxes, Roth conversions affects taxes, and taxes can affect Medicare costs. Healthcare planning affects how much income your portfolio needs to generate, and all of those decisions ultimately affect your legacy and long-term financial security. Retirement planning works best when these pieces are considered together. The goal is not just to grow your assets. It is to create a strategy for turning those assets into the income, flexibility, and lifestyle you want in retirement.
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