Turning 59½: 5 Planning Moves Most Pre-Retirees Overlook

An older man carries a surfboard on the beach.

As you approach retirement, certain ages come with their own planning rules, and 59½ is one of the most misunderstood.

Many people see this age only as the point when withdrawals from retirement accounts no longer trigger a 10% penalty. But stopping there misses a much bigger opportunity.

This age opens a valuable window, one that falls before Medicare begins at 65 and before required minimum distributions (RMDs) start later on, where smart tax, income and health care decisions can meaningfully shape your retirement trajectory.

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Think of 59½ not as a finish line, but as the moment your planning toolbox expands. Here are five moves that can help you build a more flexible, tax-efficient retirement income plan.

Move No. 1: Consider an in-service rollover

If you're still working, your 401(k) may allow an in-service rollover, which is a transfer of some of your balance into an IRA while you continue contributing to your workplace plan.

Why this matters:

More investment choice. IRAs typically offer far broader investment options than employer plans.
Better income planning. IRAs can make strategies like bond ladders, Roth conversions, or multi-bucket income approaches easier to implement.
Smoother coordination. Having assets in an IRA can simplify planning across taxes, health care and retirement income.

This isn't about taking money out. It's about moving money into an account structure that gives you more control over future decisions.

About Adviser Intel

The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Move No. 2: Enter the Roth conversion 'golden zone'

Before age 59½, using retirement account dollars to pay the tax bill on a Roth conversion could trigger penalties. After 59½, that restriction lifts, making this a particularly attractive period to shift pretax assets into a Roth.

Why this window is so valuable:

Future tax-free income. Money in a Roth grows tax-free and can be withdrawn tax-free in retirement.
Lower future RMDs. Converting now can reduce taxable distributions in your 70s.
Potential Medicare and Social Security advantages. Lower taxable income later may help reduce IRMAA surcharges and limit how much of your Social Security benefit is taxed.
Flexibility. If you're still working, wages can help cover the tax cost, allowing you to convert intentionally and gradually.

The goal isn't to convert everything — it's to create a more tax-diversified retirement income plan.

Move No. 3: Build a smarter pre-Medicare health care strategy

Health care planning is one of the biggest variables for people considering retirement before 65. Once you turn 59½, penalty-free withdrawals give you more ways to manage taxable income, which is an important factor if you'll rely on the Affordable Care Act (ACA) marketplace before Medicare kicks in.

ACA premiums are based on your income, not your assets. That means:

Roth withdrawals don't count as taxable income
Traditional IRA withdrawals do
Managing the mix can significantly affect your monthly premium

For some retirees, coordinating withdrawals across account types can reduce premiums from several thousand dollars each month to just a few hundred. This planning alone can extend the life of a portfolio.

You can't claim Social Security at 59½, but this is the right time to begin planning for it because your income decisions today can affect how much of your benefit is taxed tomorrow.

Key considerations:

Up to 85% of your benefit can be taxable, depending on your income
Strategic Roth conversions now can help reduce that future income
Balancing pretax, Roth and taxable accounts gives you more control over your long-term tax picture

Social Security planning doesn't start when you file; it starts with the tax and income decisions you make in the years leading up to it.

Move No. 5: Plan retirement in phases, not as one long block

Retirement isn't a single stage. Viewing it that way can lead to missed opportunities, especially between ages 59½ and 65.

Consider a three-phase view:

Phase 1: Freedom years (59½ to 65)
High activity, high flexibility. Ideal for Roth conversions, ACA planning and intentional withdrawals.

Phase 2: Stability years (65 to 75)
Medicare begins, RMDs may start, and tax planning evolves into managing brackets, premiums and spending trends.

Phase 3: Legacy years (75-plus)
Spending often declines while health care needs grow. This is the time to revisit estate planning and family involvement.

Structuring your decisions around these phases helps create a more resilient long-term plan.

What this means for you

Turning 59½ creates an opportunity to step into a planning window that can shape the next three decades of your financial life.

Whether it's expanding investment flexibility, beginning tax-smart Roth conversions, managing health care costs before Medicare, or preparing for Social Security, the choices you make now can have a meaningful impact later on.

It'd be far smarter to plan now than wait until retirement to fix everything you overlooked.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Kyle Hammerschmidt is the founder and CEO of MOKAN Wealth Management, a firm dedicated to helping self-made 401(k) and IRA millionaires keep more and pay less in retirement through a plan-led approach. He developed The Five Seed System™, a framework that connects all key areas of retirement — income, taxes, investments, health care and legacy — into one coordinated plan.