Retirement Retirement Planning

The 401(k) Rule That Matters Most Once You're Within 6 Months of Retirement

This trick can help you prepare to transition into retirement.

By Catherine Collins , Edited by Laura Hohenstein

Updated Sept. 12, 2026

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If you are within six months of retirement, there are a few financial tasks to complete before you leave the workforce. First, review your 401(k) retirement plan and adjust your asset allocation for retirement. A financial planner can help you make an asset allocation plan based on your risk tolerance as well as a withdrawal strategy.

Here are more things to consider if you're within six months of retirement to ensure that you can finish working on time and enjoy your golden years.

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The 401(k) rule that matters most: getting your asset allocation right

Getting your asset allocation right is one of the most important steps to take when you are near retirement. Typically, financial experts recommend that those who are nearing retirement shift their investments to be more conservative. This can help to preserve your funds for the long haul. After all, the stock market will continue to go through cycles, with some years feeling more like a downturn than others.

With the right asset allocation and withdrawal strategy in retirement, you can help to protect the portfolio that you worked hard to grow. Charles Schwab recommends that if you're age 60-69, shift to 60% stocks, 35% bonds, and 5% cash.

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Make sure you have a full emergency fund before retiring

In addition to planning your asset allocation and full withdrawal strategy, it's also important to make sure that you have a full emergency fund before retiring. An emergency fund can help you transition into your retirement years and can help fund any unexpected expenses without you having to dip into your 401(k) account more than necessary.

Confirm your vesting status and review rollover options

Another step to complete before you leave the workforce is to confirm your employer's vesting status and review your rollover options. Being fully vested in your 401(k) retirement plan means that you have complete ownership over the funds you contributed and all of the matching funds that your employer contributed. Some workplaces have different policies when it comes to vesting, so make sure that you review your workplace plan in depth to ensure that you get to keep everything in your 401(k) account.

Additionally, weigh the options between rolling over your 401(k) or leaving the plan with your employer. There are pros and cons to each option, especially if you are retiring early, using the Rule of 55. The Rule of 55 allows you to retire early without incurring a 10% penalty, but you have to leave the funds in your employer's plan.

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Maximize your 2026 catch-up contribution opportunities

If you're 50 or older, consider maximizing your catch-up contribution. As of 2026, the limit is $8,000 for most people age 50 and older, but those ages 60–63 can contribute an additional $11,250.

Keep in mind that if your prior-year FICA wages from your current employer exceeded $150,000, any catch-up contributions you make in 2026 generally must be made as Roth (after-tax) contributions — and if your plan doesn't offer a Roth option, you generally won't be able to make catch-up contributions.

Make sure you understand RMD rules and policy updates

Required Minimum Distributions (RMDs) are amounts you must withdraw from your 401(k) once you turn 73. The SECURE 2.0 Act raised the age from 72 to 73, and in 2033, it will rise again to 75. If you don't follow RMD policies and guidelines, you may face penalties, so make sure you understand the requirements and stay up to date with any new guidelines.

How to smoothly transition to a smaller retirement income

Many people live on less income in retirement than they do during their working years. For that reason, it can be a transition to go from a salaried income to a fixed income. A good way to prepare during your last six months of working is to practice living on your retirement income. Track your spending and see whether you can enjoy your day-to-day life while also staying within a specific retirement budget.

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How a financial planner can help you prepare for retirement

One of the most important considerations when it comes to your 401(k) withdrawals is to do it in the most tax-efficient way. A financial planner and an accountant can help you make sure that you're following all withdrawal rules, taking an amount that preserves your wealth for the future, and minimizing your tax liability at the same time. A financial planner can also help ensure that you're on track and ready for retirement, as well as make suggestions on how you can reach your retirement goals.

Bottom line

If you only have six months before retirement, you're probably more ready than ever to get to those blissful, stress-free retirement years.

However, before you work your last day at your job, there are several important money moves seniors should take to ensure that you can retire successfully with enough money to live on. If you have questions about setting up your withdrawal strategy and asset allocations in retirement, speak with a qualified financial advisor.

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