Preparing for Retirement

Preparing to decumulate a lifetime of wealth requires standing up structural scaffolding years before the paycheck stops. These are the levers that minimize taxation and maximize your starting balance, in rough order of how much they move.

Maximize IRA, 401(k) contributions

Contribute the maximum allowable amount to your 401(k) plan: $24,500 in 2026 (the base employee-deferral limit, indexed). Age 50+ adds an $8,000 catch-up, and SECURE 2.0’s “super catch-up” for ages 60–63 raises that to $11,250 (or 150% of the standard catch-up, whichever is greater). The base deferral reduces your taxable income today; the trade is paying tax on withdrawal, ideally at a bracket you have engineered to be lower (section “Tax-Efficient Decumulation”).

The catch-up no longer works that way for you. Since 1 January 2026, IRC §414(v)(7), “Definitions and special rules” requires that if your prior-year wages from the employer sponsoring the plan exceeded $150,000, every catch-up dollar must be a Roth contribution — there is no pre-tax catch-up available at this income level, and if the plan does not offer a Roth option it cannot accept your catch-up at all. Treasury finalized the regulations in September 2025. Do not model the $8,000 or $11,250 as a deduction; model it as forced Roth funding, which is a better outcome than it looks (section “Regulations Governing Contribution Limits to Qualified Retirement Plans”). Pair with Roth IRAs or Roth 401(k)s during your working years to diversify the tax exposure of your future distributions. If your income exceeds the Roth IRA contribution limits, use a backdoor Roth IRA conversion—contribute to a traditional IRA and convert. You will pay tax on the conversion, but future withdrawals and growth are tax-free, hedging against future rate increases. OBBBA made the TCJA individual brackets permanent, but “permanent” in tax law means “until Congress changes its mind”; converting in low-income years still locks in today’s relatively low rates.

Leverage Health Savings Accounts (HSAs)

Max out contributions to an HSA if you have a high-deductible health plan. Contributions are tax-deductible, grow tax-free, and withdrawals for qualified medical expenses are tax-free. Post-65, you can use HSA funds for non-medical expenses without penalty, though they will be taxed as ordinary income.

Delaying Social Security

Postpone your Social Security claim toward age 70. This increases your monthly payment by a simple, guaranteed 8% per year past your FRA. Build sufficient taxable cash reserves to fund the gap years so you do not have to tap pre-tax retirement accounts early.

Decumulation choreography

Roth conversion timing, withdrawal sequencing across taxable / pre-tax / Roth buckets, QCDs, cliff management (IRMAA, NIIT, the Social Security tax torpedo, 0% LTCG harvest), buy-borrow-die and the C-corporation as a fourth bucket, domicile-change arbitrage—all of it lives in its own chapter (chapter “Tax-Efficient Decumulation”). The retirement chapter sizes the engine; the decumulation chapter runs it in reverse at the lowest lifetime tax cost the law allows. Do not skip that chapter on the assumption that a default “taxable first, then pre-tax, then Roth” ordering is correct—above a meaningful pre-tax balance it is precisely wrong.

Part-time work or consulting

Part-time work or consulting in early retirement keeps you mentally engaged and provides marginal income; billing through a C-corporation rather than as a sole proprietor lets you decouple the timing of earning from the timing of recognizing personal income, an IRMAA and tax-bracket lever discussed in section “The Three Buckets and Their Tax Surface”. Hobbies-into-income work the same way—the entity structure determines whether the cash flow lands on your 1040 or sits inside a wrapper until you call it out. Do not overlook the retirement plan the entity can carry: a solo 401(k) shelters the IRC §415(c) limit of $72,000 in 2026 against consulting income, and layering a cash-balance defined-benefit plan on top can shelter multiples of that for an older owner with no employees. For a semi-retired consultant billing a few hundred thousand a year, this is frequently worth more than the IRMAA choreography that motivated the entity in the first place (chapter “The Business Owner’s Tax Architecture”).

Charitable Remainder Trust (CRT)

A CRT lets you contribute an appreciated asset, defer the capital-gain recognition, receive an income stream for life (or a term of years), and take a present-value charitable deduction for the remainder. The mechanics, the tax treatment of the income stream, and the choice between CRAT and CRUT variants live in the charitable-giving discussion of chapter “Estate planning”.

Optimize expenses and investments

Maximize itemized deductions and establish tax-efficient asset location: taxable bonds, REITs, and high-turnover funds inside the tax-advantaged wrappers; tax-exempt municipal bonds and broad index equity in taxable (section “Assigning Assets into Tax Buckets”). Audit health insurance plans before enrolling in Medicare at age 65.