Pre-Retirement at 55: Your 10-Year Plan, Trust Included

What are the first steps?

A 10-year checklist in five lines:

1. Use the 2026 catch-up limits every year you can.
2. Pick a health-coverage bridge to 65.
3. Sign and fund a revocable living trust.
4. Match every beneficiary form to the trust plan.
5. Map which account you'll draw from first.

How much can I save for retirement in 2026?

In 2026, you can put up to $24,500 into a 401(k) or 403(b), plus $8,000 more at 50 and older, or $11,250 more at ages 60 to 63 if your plan allows. IRAs allow $7,500, plus $1,100 at 50 and older.

With an HSA-eligible health plan, you can add $4,400 for self-only coverage or $8,750 for family coverage, plus $1,000 at 55 and older (IRS, 2026). Starting in 2026, if you earned more than $150,000 in 2025 wages from your employer, your catch-up contributions generally must go in as Roth.

What is the Rule of 55?

If you leave your job in or after the year you turn 55, withdrawals from that employer's 401(k) or 403(b) avoid the 10% early-distribution tax (IRS rules as of 2026). Income tax still applies.

It doesn't cover IRAs. Roll the money to an IRA first and you can lose it. Some public safety workers qualify at 50.

How do I cover health insurance from retirement to 65?

Medicare starts at 65. Until then, your options are retiree coverage, COBRA for up to 18 months at up to 102% of the cost, or a Marketplace plan on HealthCare.gov (as of 2026).

Marketplace premiums depend on your income. So how you draw money can change what you pay. Budget for this gap. It's often the biggest surprise.

Why set up a trust now instead of later?

Because it's easier while you're healthy and thinking clearly. A revocable living trust lets someone you choose step in if you can't manage money, without a court. It avoids probate at death and keeps your plan private.

Most important: fund it. Retitle your house and accounts into the trust. An empty trust doesn't help anyone.

Do beneficiary forms matter if I have a trust?

Yes, a lot. Beneficiary forms on 401(k)s, IRAs, life insurance, and annuities override your will and your trust. An old form can send money to an ex or skip a child.

Check every form when you sign your trust. Naming a trust as an IRA beneficiary can add control, but it has tax trade-offs. Weigh them with your attorney.

Will my estate owe Illinois estate tax?

Only if it's large. The Illinois estate tax applies when an estate is over $4 million (as of 2026). The federal exemption is $15,000,000 per person in 2026.

Illinois counts your home and life insurance you own. So more families get close to $4 million than expect it. If you're near that line, plan now.

When should I claim Social Security?

It depends on your health, your spouse, and your taxes. If you were born in 1960 or later, your full retirement age is 67. Claiming at 62 pays 70% of your full benefit for life.

Each year you wait past 67 adds 8% until 70 (SSA rules as of 2026). See our Social Security timing page for more.

How should my investments change before retirement?

Education, not advice: many people keep a few years of planned withdrawals in safer assets, so a market drop doesn't force them to sell low. The rest can stay invested for growth.

Your mix depends on your pension, Social Security, and spending. Decide your income plan first. Then build the portfolio to match it.

Should I pay off my mortgage before I retire?

Sometimes. A paid-off home lowers your monthly spending, which lowers the income you need. But pulling a large sum from a pre-tax 401(k) to pay it off can push you into a higher tax bracket. Compare the after-tax numbers first.

What is a Roth conversion, and why do it before 65?

A Roth conversion moves money from a pre-tax IRA into a Roth IRA. You pay income tax now, and qualified withdrawals later are tax-free.

The years between retirement and Social Security or RMDs are often your lowest-tax years. Watch two things: Marketplace health premiums before 65, and Medicare's IRMAA, which looks back two years, so income at 63 can affect premiums at 65.

Education, not advice. Every family is different. Talk with your own tax, legal, and financial professionals before you act. Figures are 2026 amounts from the official sources below and can change.