Key Takeaways
- Your retirement date sets off a chain of deadlines. The exact day you leave can change your pension credit, stock vesting, bonus and when your health coverage ends. Check it against your plan documents before you give notice.
- Many final-year choices can’t be undone. Pension payout choices, survivor elections and deferred pay schedules often lock in once you sign. Read each form before you submit it.
- Your first year of retirement needs its own plan. Mapping when Social Security, any pension and your savings withdrawals start, plus how you’ll pay for health coverage until Medicare, shows what your savings actually have to cover.
Retirement doesn’t always happen on the date you circle on the calendar. In a 2026 survey by the Employee Benefit Research Institute (EBRI), nearly half of retirees said they retired earlier than they had planned.1 So once you’re about a year out, it’s smart to start working through your checklist now instead of saving it for the final few months.
Aerospace careers, especially, can add moving parts. A pension formula, a vesting schedule, a deferred pay election and retiree health rules can all hinge on the same last day of work, and each one affects the others. Your job this year is to line them up before your paycheck stops.
Confirm Your Retirement Date and What It Triggers
Depending on your employer, the day you leave can decide how many years count toward a pension, whether stock awards finish vesting, whether you get this year’s bonus and whether you qualify for retiree medical coverage. Leaving a few weeks early or late can change those answers.
Ask your benefits center for estimates based on your exact date. Also ask how long each request takes to process, since pension paperwork can take months. For every benefit, write down your last day of work and the day that benefit actually starts, because they’re often different.
If you’re still weighing a few more months on the job, deciding whether to retire now or work one more year handles that tradeoff in detail.
Review Your Employer Benefits, Pension, and Compensation Elections
Start with a full list of what you’ll leave with. Not everyone has a pension, stock awards or deferred pay, and plans differ a lot from one employer to the next. For each benefit you do have, gather the plan document and the election forms, because your plan’s rules are the ones that count.
Palm Capital’s planning for aerospace and defense engineers starts from the same place, with the benefits you actually have.
Your 401(k) and Final Employer Contributions
Check how your plan handles the employer match in your last year. Some plans add the match every paycheck, while others pay it later or require you to be employed on a certain date. That detail can change how much lands in your account, so read it before you choose a last day.
Next, decide what happens to the account. You can often leave it in the plan, move it to an Individual Retirement Account (IRA), or split it. A direct rollover sends the money straight to the new account. If the check is paid to you instead, you generally have 60 days to deposit it to avoid owing tax on it.2 If your 401(k) holds your employer’s stock, have it reviewed before you move anything, since it can be taxed differently. This guide to IRAs covers the account basics.
Pension Payout and Survivor Options, If You Have One
If you have a pension, your plan may offer a monthly payment for life, a lump sum or a choice between them. You’ll also decide whether payments continue to your spouse after you die, which usually means a smaller check while you’re alive. Many plans require your spouse’s signed consent for some of these choices.
These elections are often permanent once payments begin. The survivor decision gets a fuller look in Five Years from Retirement: The Financial Decisions Aerospace Professionals Should Be Making.
Equity Awards and Deferred Compensation, Where They Apply
Executives and some employees have pay that keeps arriving after their last day. If that’s you, check these items in your award agreements and plan documents:
- Vesting schedules: Find out which awards finish vesting by your date and whether your plan has a retirement rule tied to your age or years of service.
- Stock option deadlines: Options usually come with a limited window to exercise (buy the shares) after you leave.
- Restricted stock units (RSUs): These are shares your employer grants that turn into yours on set dates. Note each date and the tax that comes with it.
- Deferred compensation payouts: A nonqualified deferred compensation plan lets you push part of your pay into later years. It pays out on a schedule you usually picked years ago, under federal rules in Section 409A of the tax code.3 Confirm that schedule now, because changes are usually restricted.
Terms vary by employer and by grant. Palm Capital’s planning for managers, directors and executives looks at equity and deferred pay together with the rest of the plan.
Estimate Your First-Year Spending and Income Sources
Your first retirement budget won’t look like your working budget. Split your spending into must-pay costs, like housing, food and insurance, and flexible costs, like travel and gifts. Then add the one-time costs of year one, such as health premiums before Medicare, a move or a new car.
Next, write down when each income source starts. You can apply for Social Security up to four months before you want payments to begin.4 Add any pension, consulting income and planned savings withdrawals. Whatever spending those sources don’t cover is the gap your savings have to fill.
The timing of that gap matters as much as its size. Take a hypothetical household, for illustration only, that spends $120,000 a year and gets a $40,000 pension (this example ignores taxes, inflation and investment growth). It would need $80,000 a year from savings until Social Security starts, then about $35,000 a year once a $45,000 benefit begins. One start date more than doubles what savings must supply in the early years.
Position Your Investments for the First Withdrawals
Your portfolio now has two jobs. It needs easy-to-reach money for the withdrawals coming up soon, and the rest has to stay invested for a retirement that could last decades.
Plenty of people shift everything to conservative investments as retirement gets close. That can feel calmer, but it may leave your money falling behind inflation over a long life. Building around your actual spending gap helps you decide how much to keep close at hand and how much can stay invested for growth, which still carries market risk. Stress-testing your retirement plan for inflation and longevity shows how to check that balance.
Decide which accounts you’ll draw from first, and size a cash reserve to the gap you found above. If a large share of your money sits in your employer’s stock, deal with that before your paychecks stop, since that’s when a drop in one company’s stock can hurt the most. Palm Capital’s financial planning and wealth management services cover this step.
Plan Taxes, Healthcare, and Insurance Before Coverage Ends
Three things change when your paycheck stops. Your income is taxed differently, your health coverage has to come from somewhere new, and some of your work insurance may end. Each one comes with its own deadlines.
Your Retirement-Year Tax Picture
Your last working year can pile a lot of income onto one tax return. Part of a salary, a final bonus, a vacation payout, vesting stock and deferred pay may all land in the same year. Check your withholding so you don’t get hit with a large bill in April.
The years after you stop working can look very different. With less income coming in, some people move money from a traditional IRA to a Roth IRA, which is called a Roth conversion. You pay income tax on the converted amount now, and whether that makes sense depends on your tax bracket today compared with later. Required minimum distributions (RMDs), the withdrawals the IRS requires from most retirement accounts, generally start at age 73.5
Healthcare From Your Last Day to Medicare
If you retire before 65, you’ll need coverage until Medicare starts. Your options may include retiree medical from your employer, a spouse’s plan, COBRA or a marketplace plan. COBRA lets you keep your work health plan for a while, but you usually pay the full premium, and you have 60 days to sign up.6 It generally lasts 18 months.7
Medicare’s first sign-up window is seven months long, starting three months before the month you turn 65.8 If you’re already 65 and leaving a job with health coverage, you have eight months to sign up for Part B, and that clock starts when you stop working, even if you choose COBRA. To have Medicare begin right when your job coverage ends, sign up the month before you retire.
Watch for one trap. COBRA and retiree health plans don’t count as coverage from a current job, so they don’t stretch your Medicare sign-up window.
Insurance, Debt, and Cash Reserves
Life and disability insurance through work usually ends or shrinks when you leave. Some plans let you convert it or take it with you, but only for a short window, so ask HR for the exact deadline.
Then look at any debts you’d like paid off before retirement, your emergency fund and the big costs you expect in the first few years, like a roof, a car or helping family.
Build Your Final-Year Retirement Timeline
Putting each step on a calendar keeps any one deadline from sneaking up on you. Use these windows as a starting point and adjust them to your plan’s processing times:
- 12 months out: Settle on your target date, request benefit estimates and plan documents, and draft your first-year budget.
- 6 months out: Review vesting, option and deferred pay dates, compare health coverage options and run a tax projection for your final year.
- 3 to 4 months out: Submit pension paperwork if you have a pension, and apply for Social Security if you plan to start it soon.
- Final 30 days: Sign up for Medicare if it applies, set up rollover instructions, update your beneficiaries and confirm what your last paycheck includes.
- First 60 days after: Decide on COBRA, take your first planned withdrawal and compare your actual spending with your budget.
Some of this list has nothing to do with money. Think about what a normal week will look like, whether you’ll do some consulting and where you want to live. Before you sign any election you can’t reverse, have someone review the whole picture with you.
One Year from Retirement Checklist FAQs
Can I Keep Contributing to My 401(k) in My Final Year of Work?
Yes. You can usually keep contributing through payroll until your last paycheck, up to the annual limits the IRS sets. Ask your plan whether a final bonus can also go into your 401(k), since plans handle bonus deferrals differently.
How Do I Decide Between a Pension Lump Sum and Monthly Payments?
The right answer depends on your health, your spouse’s needs, your other income and how comfortable you are managing investments. A monthly payment gives you a set check for life, while a lump sum gives you control along with the investment risk that comes with it. Compare both using your plan’s own numbers, and keep in mind the choice is usually permanent.
Can I Change My Retirement Elections After I Submit Them?
Sometimes, but often only for a short period. Many pension and deferred pay elections are hard or impossible to change once payments start. Ask your plan administrator how long you have to cancel or revise a form before you sign it.
Should I Pay Off My Mortgage Before I Retire?
It depends on your interest rate, your cash reserve and where the money would come from. Paying it off lowers your monthly costs, but pulling a large amount from a pre-tax account could raise your tax bill for that year. Compare the payoff with keeping that money invested and easy to reach before you decide.
Coordinating Your Final Year Before Aerospace Retirement
Palm Capital Management works with aerospace professionals, executives and other pre-retirees to review retirement readiness and coordinate the benefit, tax and income decisions that come due in the last year of work. That includes looking at pension and payout options, equity and deferred pay schedules, healthcare timing and a first-year withdrawal plan, built around the benefits you actually have.
If you’re about a year from retiring, a review now leaves time to adjust before forms are due. Schedule your consultation to talk through your timeline and the decisions ahead.
Resources:
- EBRI: Retirement Confidence Survey Finds Americans Less Confident About Retirement
- IRS: Retirement Plans FAQs Regarding IRAs
- IRS: Nonqualified Deferred Compensation Audit Technique Guide
- Social Security Administration: How Do I Apply for Social Security Retirement Benefits?
- IRS: Retirement Topics, Required Minimum Distributions
- U.S. Department of Labor: COBRA Continuation Coverage
- Medicare.gov: COBRA Coverage
- Medicare.gov: When Can I Sign Up for Medicare?
