Guide for Pre-Retirees
Retirement Planning for Pre-Retirees and Work-Optional Individuals
You have spent years building your savings. Now the questions shift from accumulation to strategy: When can you step back? How much income will you need? What decisions matter most in the years leading up to retirement? This guide walks through the planning priorities unique to the pre-retirement window.
Schedule a ConsultationWhat This Guide Covers
What Is Pre-Retirement Planning?
Pre-retirement planning is the process of preparing financially, tax-wise, and personally for the transition out of full-time work. For pre-retirees and work-optional individuals, this typically means the 5 to 10 years before you plan to step back, scale down, or retire fully. The focus shifts from accumulating assets to coordinating how those assets will generate income, minimize taxes, and support the lifestyle you want.
At Independence Wealth in Voorhees, NJ, Eric Nelson, CFP® and CEPA®, works with individuals who are approaching this transition. The goal is not to tell you when to retire, but to give you the clarity to make that decision on your own terms, with a coordinated plan that addresses income, taxes, investments, Social Security, and estate considerations together.
Are You in the Pre-Retirement Window?
You may benefit from pre-retirement planning if you:
- 1 Are within 5 to 10 years of wanting to step back from work
- 2 Have accumulated meaningful savings but are unsure if it is enough
- 3 Want the option to work less without fully retiring
- 4 Need to coordinate Social Security, taxes, and investment decisions
- 5 Own a business and need to plan an exit or succession strategy
Six Priorities
Key Areas of Focus for Pre-Retirees
The decisions you make in the years before retirement can have an outsized impact on your long-term financial security. These six areas deserve attention during the pre-retirement window.
Retirement Readiness Assessment
Before setting a retirement date, you need a clear picture of your expected expenses, income sources, and savings. We help you categorize spending into needs, wants, and wishes, then evaluate whether your current trajectory supports your goals. This assessment may reveal gaps that require adjustments to savings rate, timeline, or lifestyle expectations.
Social Security Timing
For those born in 1960 or later, full retirement age is 67. Claiming at 62 reduces your monthly benefit by approximately 30%, while delaying to age 70 increases it by roughly 24% above the full retirement age amount.1 The right timing depends on your health, spouse, other income, and tax situation, not a one-size-fits-all rule.
Tax Planning Opportunities
The years between retiring and starting required minimum distributions (RMDs at age 73 for those born 1951 through 1959, or age 75 for those born 1960 or later)2 may create a window for Roth conversions at lower tax rates. Results vary by individual tax situation and may involve trade-offs.
Maximizing Catch-Up Contributions
In 2026, workers age 50 and older can contribute up to $32,500 to a 401(k) ($24,500 base plus $8,000 catch-up), and those ages 60 through 63 may qualify for a super catch-up of up to $35,750. IRA contributors 50 and older can save up to $8,600.3 Higher contributions may help close savings gaps, though tax outcomes depend on your individual situation.
Investment Strategy Transition
As retirement approaches, your investment approach may need to shift from growth-focused accumulation to a balance of growth, income, and stability. This does not mean abandoning equities entirely, but rather aligning your portfolio with your actual retirement timeline and income needs. Market volatility remains a risk at every stage.
Estate Plan Coordination
Pre-retirement is an ideal time to review beneficiary designations, account titling, and estate documents. We coordinate with your estate planning attorney to help ensure your financial plan and estate plan work together. Outdated beneficiaries or account titles can create complications regardless of how well your investments perform.
The Work-Optional Approach
Making Work Optional, Not Mandatory
For many pre-retirees, the goal is not to stop working entirely but to reach a point where work becomes a choice rather than a necessity. This "work-optional" lifestyle might mean scaling back to part-time, transitioning to consulting, or simply knowing you could walk away if you wanted to.
Achieving this requires a plan that accounts for reduced earned income, potential gaps before Social Security and pension payments begin, and the tax implications of drawing from investments earlier than planned. The transition may also involve healthcare coverage decisions before Medicare eligibility at age 65, which can add costs that need to be built into your income plan.
A coordinated plan that ties together retirement income planning, tax strategy, and investment management can help you understand your options and make informed decisions about when and how to scale back.
Questions Pre-Retirees Commonly Ask
- ? Do I have enough to maintain my lifestyle without constantly worrying about running out?
- ? How do I minimize the amount I pay in lifetime taxes?
- ? Am I taking the right amount of investment risk for this stage?
- ? How does Social Security fit into my overall income plan?
- ? How do I simplify my finances without losing control?
Avoid These Pitfalls
Common Pre-Retirement Planning Mistakes
Many pre-retirees focus on a single decision, like when to claim Social Security, without considering how that choice interacts with taxes, investment withdrawals, and estate planning. Coordinated planning is designed to address these decisions together rather than in isolation.
Claiming at 62 locks in a permanently reduced benefit. For some, this makes sense; for others, delaying could mean significantly more lifetime income.
The years between retiring and starting RMDs may offer opportunities to convert traditional IRA funds to Roth at lower tax rates. Once RMDs begin, this window narrows.
The sequence in which you draw from taxable, tax-deferred, and tax-free accounts can significantly affect your tax liability and portfolio longevity.
Beneficiary designations and account titles should be reviewed before retirement, not after. Outdated documents can override even the most carefully crafted estate plan.
If you retire before age 65, you need a plan for health insurance coverage. Premiums and out-of-pocket costs can add a significant expense to your pre-Medicare years.
Our Approach
How Independence Wealth Helps Pre-Retirees
As an independent, fiduciary registered investment advisor based in Voorhees, NJ, Independence Wealth operates free from the product-selling pressures common at large broker-dealers. Eric Nelson, CFP® and CEPA®, provides coordinated planning that addresses retirement income, taxes, investments, Social Security, and estate considerations as interconnected parts of a single strategy.
Independent, Fiduciary Advice
As a fiduciary, Eric is legally obligated to place your interests first. Independence from large broker-dealers can reduce certain compensation-related conflicts, though conflicts may still exist in any advisory relationship.
Coordinated, Not Scattered
Rather than addressing investments, taxes, and estate planning in isolation, we build a single, cohesive plan. This includes coordinating with your CPA and estate attorney so all advisors work from the same blueprint.
Education-First Philosophy
An educated client is an empowered client. We take time to explain the reasoning behind each recommendation so you can make informed decisions about your financial future.
Frequently Asked Questions
Pre-Retirement Planning Questions
When Should You Start Planning for Retirement?
Ideally, retirement planning begins as early as possible in your career. However, the most critical planning window is the 5 to 10 years before you intend to retire or scale back from work. During this period, decisions around Social Security timing, Roth conversions, catch-up contributions, and withdrawal sequencing can have an outsized impact on your retirement outcomes.
What Is the Biggest Mistake Most People Make Regarding Retirement?
One of the most common mistakes is treating retirement decisions in isolation rather than as part of a coordinated plan. Claiming Social Security without considering tax implications, withdrawing from accounts without a sequencing strategy, or neglecting estate documents can each create costly consequences. Working with a fiduciary advisor who looks at the full picture is designed to help avoid these pitfalls, though no plan can eliminate all risk.
How Much Do I Need to Retire on $80,000 a Year at 60?
There is no universal answer because your savings need depends on Social Security benefits, pension income, tax obligations, expected lifestyle, and lifespan. A common starting point is the 4% rule, which suggests withdrawing 4% of your portfolio annually. If you need $80,000 in total spending and Social Security covers part of it, your portfolio needs to cover the remainder. The exact amount varies significantly by individual circumstances, which is why a personalized analysis is more reliable than any rule of thumb.
What Does "Work Optional" Mean?
Work optional means reaching a level of financial independence where continuing to work is a choice, not a requirement. It does not necessarily mean stopping work entirely. Many work-optional individuals transition to part-time roles, consulting, or reduced hours while maintaining their lifestyle. Achieving this status requires a plan that accounts for reduced income, healthcare costs before Medicare, and a sustainable withdrawal strategy from investments.
Take the Next Step
Ready to Make Work Optional?
If you are within 5 to 10 years of wanting to step back from work, now is the time to build a coordinated plan. Schedule a complimentary consultation with Eric Nelson, CFP® and CEPA®, to discuss your retirement readiness, Social Security timing, tax opportunities, and income strategy.
Independence Wealth | 221 Laurel Road, Suite 180, Voorhees, NJ | 856-229-9295
Sources: [1] Social Security Administration, "Delayed Retirement Credits," ssa.gov, accessed July 2026. Claiming at 62 reduces benefits by approximately 30% for those with a full retirement age of 67; delaying to 70 increases benefits by approximately 24%. [2] IRS, "Retirement Topics: Required Minimum Distributions (RMDs)," irs.gov. RMD age is 73 for those born 1951 through 1959 and 75 for those born 1960 or later under SECURE 2.0. [3] IRS, 2026 retirement plan contribution limits (IR-2025-111). 401(k) employee limit: $24,500 (under 50), $32,500 (50+); super catch-up for ages 60-63: $35,750. IRA limit: $7,500 (under 50), $8,600 (50+). Figures reflect 2026 IRS-published limits as of July 2026.