You’ve spent decades stuffing money into your 401(k). You’ve watched it grow, watched it crash, watched it recover. And now, finally, the finish line is in sight.
But here’s the thing nobody tells you: The week before you retire is one of the most dangerous moments for your money.
I’ve been a CPA since 1981, and I’ve seen people walk out the office door with a half-million-dollar 401(k) and absolutely no plan for it.
Within a year, they’ve made tax blunders, overlooked paperwork or picked the wrong rollover, and they’re out tens of thousands of dollars they’ll never get back.
Don’t be that person. Here’s exactly what to do with your 401(k) in your final days on the payroll.
1. Check your beneficiary designations right now
This takes five minutes and could save your family from a nightmare.
Your 401(k) beneficiary form is a legal document that overrides your will. Read that again. It doesn’t matter what your will says. If your ex-spouse is still listed on your 401(k) beneficiary form, they get the money.
Courts are full of cases where plan assets went to an ex-spouse or defaulted to an estate because no one updated the paperwork. And under federal law, the surviving spouse is generally entitled to the 401(k) unless a different beneficiary has been formally designated.
Call your plan administrator. Confirm your primary and contingent beneficiaries. If you’ve gotten married, divorced, had kids or lost a spouse since you last filled out that form, update it before your last day.
If you’ve inherited a 401(k), that’s a whole separate mess worth understanding.
2. Decide what happens to the money — roll over or stay put
You’ve got four basic options when you leave. You can roll the 401(k) into an IRA. You can move it into a new employer’s plan. You can leave it where it is. Or you can cash it out.
Let me be blunt: Cashing out is almost always the worst choice. Withdrawals are subject to a mandatory 20% federal withholding. And if you fail to move the money into a eligible plan within 60 days, it’s taxed as ordinary income — plus a 10% penalty if you’re under 59½.
For most people, rolling into an IRA makes sense.
You’ll get access to a much wider range of investments, and you can consolidate old 401(k) accounts from previous jobs into one place. Most 401(k) plans have a solid stock fund lineup but fewer bond options, and as you near retirement, you’ll want a more diversified portfolio.
But an IRA isn’t automatically better. If you leave your employer between ages 55 and 59½, you may take penalty-free withdrawals from your 401(k), an option you’d lose with an IRA.
And large employer plans often have access to institutional-class funds with rock-bottom fees. We’ve covered the hidden features of 401(k) plans that many people overlook.
One critical detail: If you do roll over, insist on a direct rollover. That means the money goes straight from your plan to the new custodian. If a distribution is paid directly to you from a retirement plan, the plan administrator is required to withhold 20%, even if you intend to roll it over later.
3. Shift your investments from growth to income
Your 401(k) has probably been set to aggressive growth for years. That was the right call at 40. It’s potentially reckless at 65.
The week before retirement isn’t the time for a dramatic overhaul. But it is the time to review your allocation and make sure it matches someone who’s about to live off this money — not someone who’s still building it.
Moving everything into cash or CDs might feel responsible, but with inflation running where it has been, cash is guaranteed to lose purchasing power. A $500,000 cash position loses roughly $15,000 to $20,000 in real value every year.
The smarter move? Diversify across income-producing assets. Think dividend-paying stocks, bonds, and maybe a small allocation to Treasury Inflation-Protected Securities. Keep enough in cash to cover 12 months of living expenses. Invest the rest for the long haul.
You’re not done investing just because you’re done working. A 65-year-old today could easily spend 25 to 30 years in retirement. You still need growth. If you’re unsure where to start, we’ve put together a guide to rebalancing your investments.
4. Build your withdrawal strategy before you need the money
Here’s where people get sloppy. They retire on Friday and start pulling money out on Monday with zero plan. That’s how you end up paying far more in taxes than you need to.
It’s critical to determine your withdrawal strategy, including how much to take each year and which accounts to tap first. A thoughtful approach can reduce your tax burden and help your savings last longer.
Start with this: At age 59½, you can withdraw from your 401(k) without incurring the 10% federal early withdrawal penalty. And by law, you must start taking required minimum distributions (RMDs) no later than April 1 of the year after the year you reach RMD age, which is currently 73.
If you’ve got both traditional and Roth accounts, the order you draw from them matters enormously. Pulling from a traditional 401(k) first cranks up your taxable income and can push you into a higher bracket.
A smarter approach for many retirees is to draw from traditional accounts strategically while letting Roth accounts grow tax-free as long as possible.
We’ve covered why Roth accounts have become even more valuable in estate planning — especially since the SECURE Act now forces most non-spouse heirs to empty inherited accounts within 10 years.
If you’re looking for a deeper comparison of traditional versus Roth withdrawal strategies, we’ve run the numbers.
5. Make your final contributions count
Your last paycheck is your last chance to contribute pre-tax dollars to a workplace retirement plan. Don’t leave money on the table.
For 2026, the IRS has set the 401(k) contribution limit at $24,500. If you’re 50 or older, you can contribute an additional $8,000 in catch-up contributions. And if you’re between 60 and 63, you’re eligible for an even higher super catch-up: $11,250, bringing your total potential contribution to $35,750.
One new wrinkle to watch: Starting in 2026, if you earned more than $150,000 in the prior year, your catch-up contributions must be made as Roth contributions. Check with payroll immediately to make sure your final contributions are routed correctly.
Also, verify that you’re getting your full employer match on those last few paychecks. Some plans match per-paycheck, which means if you front-loaded your contributions earlier in the year, you may have maxed out before receiving the full match.
Ask your HR department if they do a “true-up” at year-end to catch any missed matching dollars.
We covered how to make the most of your final working years and the new IRS limits earlier this year.
The bottom line
Retirement isn’t the finish line. It’s the starting line for a completely different financial game — one where mistakes compound just as fast as your savings used to.
Spend this final week getting your 401(k) in order. Check your beneficiaries. Choose your rollover path. Rebalance your investments. Map your withdrawals. Max out your contributions.
Do these five things, and you’ll walk out that office door knowing your money is working as hard as you did.
If you want to avoid even more common errors, we’ve compiled a list of 18 things you really should not do in retirement.
