The Five Years Before You Stop Working: A Pre-Retirement Checklist for Physicians
Sep 23, 2026You're somewhere between 55 and 65. You've been an attending for a couple of decades, and the question in your head has changed shape. It used to be "are we saving enough?" Now it sounds more like "what actually happens the week after I stop?"
Most financial content written for physicians is aimed at the first ten years out of training. It covers backdoor Roth mechanics, disability coverage, loan forgiveness, and the first house. That's useful at 34. It's less useful at 59, when the balance sheet is mostly built and the hard part is turning it into a paycheck, a health plan, and a tax return that behaves the way you expect.
The five years before your last shift are the stretch where these decisions are still cheap and still reversible. No enrollment window has closed. Your income is still high enough that catch-up contributions after 50 still land somewhere useful. That lead time is the whole advantage, and it's why retirement planning for doctors at this stage looks less like investing and more like logistics. What follows isn't a plan and isn't a set of instructions. It's the list of items that tend to be on the table when a physician household starts mapping the exit.
What You'll Actually Spend, Not What a Replacement Rate Says
The common shortcut says you'll need roughly 70 to 80 percent of your pre-retirement income. That's a survey average, not a plan, and a physician household can sit a long way from it in either direction. If you've been saving a quarter of a large income and paying payroll taxes on top of that, a big share of your gross has never been spending money at all. Your real replacement rate could be well below the rule of thumb, or above it if the first few years include the travel and family help you've been deferring since residency.
The version that holds up starts with your own statements instead of a percentage. You sort twelve to twenty-four months of actual outflow into three piles. There's spending that stops when you stop: retirement contributions, payroll taxes, disability premiums, licensing and board fees, continuing medical education travel, the commute. There's spending that continues unchanged, like housing, food, property taxes, and the cars. And there's spending that starts or grows: health premiums, out-of-pocket medical costs, travel, and often some support for adult children or aging parents.
That third pile is where the surprises live, and health coverage is usually the largest item in it. For your whole career your employer has paid most of the premium and you've seen a modest payroll deduction. Starting the month after you leave, the full cost sits with you. HealthCare.gov's page on losing job-based coverage lays out the options and the deadlines attached to them.
The Health Coverage Bridge From Your Last Day to Age 65
If you stop working at 60, you have five years to cover before Medicare eligibility begins. Stop at 62 and you have three. This single item can move a retirement date more than anything else on the list, and it catches people because it's never had to be thought about before. Employer coverage has been automatic since your first attending contract.
The Department of Labor's COBRA frequently asked questions for workers explain that when the qualifying event is termination of employment or a reduction in hours, continuation coverage under COBRA (the Consolidated Omnibus Budget Reconciliation Act) generally runs up to 18 months, with 60 days to elect it once coverage ends or the notice arrives. Eighteen months is a real bridge if you're leaving at 63 and a half. It isn't much of a bridge at 58. Here's how the common options compare.
| Detail | How long it may last | What comes up in planning |
|---|---|---|
| COBRA continuation of your employer plan | Generally up to 18 months after termination or reduced hours | Same plan and same network, at the full group premium plus an administrative charge rather than the payroll-deduction number you're used to. It does not count as coverage based on current employment for Medicare purposes. |
| A Marketplace plan under the Affordable Care Act | Renewable year to year until Medicare begins | Losing job-based coverage opens a 60-day special enrollment period. Whether a premium tax credit applies depends on household income for that coverage year, so a partial retirement year and the first full one may look very different. |
| Your spouse's employer plan | As long as your spouse stays in that job | Your loss of coverage generally opens a special enrollment window on their plan. Network, prescription coverage, and out-of-pocket maximums may differ from what you've had. |
| An employer retiree health plan | Varies widely, and many employers no longer offer one at all | Where one exists, the plan document controls eligibility, years-of-service requirements, cost sharing, and whether a spouse is included. Like COBRA, it isn't coverage based on current employment. |
| Reduced-schedule or per diem work that carries benefits | As long as you meet the plan's hours threshold | Benefit eligibility usually turns on scheduled hours rather than job title, so the hours threshold written into the plan is what governs a negotiated part-time arrangement. |
Medicare Enrollment Timing, and the Tax Return From Two Years Ago
Medicare eligibility arrives at 65, and the enrollment window is narrower than it looks. Medicare.gov describes an initial enrollment period of seven months: the three months before the month you turn 65, the month itself, and the three months after. Missing it without qualifying for a different window can mean a late enrollment penalty that follows you.
If you're still working at 65 with coverage through that job, a separate eight-month special enrollment period starts when the employment or the coverage ends, whichever comes first. The trap sits in the definition. Medicare.gov's guidance on working past 65 is explicit that COBRA and retiree coverage aren't treated as coverage based on current employment. So the sequence that gets physicians into trouble looks like this: you leave at 64, elect COBRA, turn 65 while you're on it, and assume the COBRA end date opens a window. It doesn't. The clock started when you stopped working.
Then there's what you'll pay. Most people pay the standard Part B premium. Above certain income thresholds you also pay an income-related monthly adjustment amount on Part B and Part D. The Social Security Administration sets it using the modified adjusted gross income on your federal tax return from two years earlier. Set that against your own career: the premium you pay in your first Medicare year is priced off what you earned at 63, when you were working full time and possibly picking up extra shifts.
There's a defined path for the mismatch. The Social Security Administration's page on requesting a lower income-related monthly adjustment amount lists work stoppage among the life-changing events that support a request, made on Form SSA-44 with documentation of the retirement. If you retire mid-year you may be in exactly this position, and it's a common item for a planner and a tax professional to coordinate in a first retirement year.
Medicare enrollment also closes the door on health savings account contributions, and Part A coverage can be backdated when you enroll after 65. If you've been treating your health savings account as a long-term retirement account, the timing of that last contribution and the timing of your enrollment interact, and the specific dates are worth confirming with your tax professional. The balance you've already built stays yours and can be used for qualified expenses, including Medicare premiums.
Which Accounts Pay the Bills, and in What Order
For your whole career, money moved one direction. Now it reverses, and the accounts don't behave the same way on the way out. Taxable brokerage dollars carry a cost basis, so tax applies only to the gain, generally at capital gains rates. Tax-deferred dollars in a 401(k), 403(b), governmental 457(b), or traditional individual retirement account (IRA) come out as ordinary income. Roth dollars come out with no tax on qualified distributions.
The conventional sequence you'll read about is taxable first, then tax-deferred, then Roth. It's a reasonable starting point and rarely the whole answer. Which account you draw from sets your taxable income for the year, and that number reaches further than the tax bill: it may affect your capital gains rate, the taxable share of your Social Security benefit, and your Medicare premium two years later. Blended approaches are common, where taxable dollars fund the spending while a measured amount of tax-deferred money is withdrawn or converted to fill a lower bracket.
Age rules shape the menu too. The Internal Revenue Service's list of exceptions to the additional tax on early distributions includes distributions to an employee who separates from service during or after the year they reach age 55, taken from that employer's qualified plan. That exception doesn't extend to individual retirement accounts, which is one reason rolling an old 401(k) into an IRA isn't an automatic call for someone retiring at 56.
If part of your savings sits in a 457(b), the governmental versus non-governmental distinction matters more now than it ever did. A governmental 457(b) can generally be rolled over like other plan money. A non-governmental 457(b) is a different animal: the balance stays an asset of the employer and subject to the employer's creditors, distributions follow a schedule the plan sets and you elected in advance, and the money can't be rolled into an individual retirement account. A payout election made eight years ago may dictate a large taxable distribution in your first retirement year.
The Window Between Your Last Paycheck and Your First Required Withdrawal
Retirement accounts don't stay untouched forever. The Internal Revenue Service's frequently asked questions on required minimum distributions state that you generally must start taking withdrawals from a traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 73. The SECURE 2.0 Act of 2022 also set a later applicable age of 75 for younger birth cohorts, so which age governs your accounts depends on your year of birth and is worth confirming. The same guidance notes that a workplace plan participant can delay required withdrawals until the year they retire unless they own 5 percent or more of the business, and that this never applies to IRAs.
Put those facts next to your retirement date and a gap appears. Say you stop working at 61 and required withdrawals don't begin until 73. If Social Security hasn't started either, there may be a stretch of years where your taxable income is the lowest it's been since fellowship, sitting between the top of your earning years and the point where the tax code starts pulling money out whether you need it or not.
That gap is why partial Roth conversions come up so often in planning conversations at this stage. A conversion moves money from a tax-deferred account to a Roth account and adds the converted amount to your ordinary income for that year. The trade-off is paying a known rate now against an unknown rate later, and the second-order effects are real: a conversion raises the income that sets your Medicare premium two years out, and it interacts with the taxable portion of Social Security. The tax picture here has shifted more than once recently, which we covered in our look at Roth conversions and the sunset that didn't happen. It's a year-by-year calculation, and one a CFP® professional and a tax professional usually run together.
Social Security at 62, at Full Retirement Age, or at 70
The Accounts Still Sitting at Old Employers
You have a 403(b) from residency and a plan from fellowship. There's the 401(k) at the first attending job you left after four years, a 457(b) from the hospital system that got acquired, a rollover IRA somebody opened for you in 2011, and a health savings account at a custodian you don't have a login for. A physician career often spans several employers, and the accounts stay behind.
Scattered accounts create specific problems in this window. You can't see your actual mix of investments if you can't see all the accounts at once. Required withdrawal rules differ between employer plans and IRAs, which changes how many separate calculations have to happen each year. Old plans may carry narrow investment menus or distribution rules that limit when money can come out. Beneficiary designations from a decade ago may not match your current intentions, and they override what other documents say. And if you're still doing backdoor Roth contributions, pre-tax IRA balances anywhere in your name feed the pro-rata calculation, the tax rule that treats all of one person's traditional IRAs as a single pool when figuring the tax on a conversion.
Consolidation isn't automatically right for every account, as the age-55 separation rule above shows. The inventory comes first: what exists, where, in whose name, with which beneficiary.
Tail Coverage and the Rest of the Exit Paperwork
If your malpractice policy is claims-made, it covers claims reported while the policy is active. When it ends, claims arising from care you provided while it was in force may not be covered unless extended reporting (tail) coverage is in place. Retirement doesn't shorten the statute of limitations, so it's the same question you'd face changing jobs, and we've written about how it plays out in malpractice tail coverage before changing jobs.
One nuance is specific to retiring. Some employment agreements and some carriers waive the tail premium for a physician who retires permanently after a stated age or number of years with the group. Some, not all, and the definition of "retirement" can be narrow. If you retire and then pick up locums work six months later, you may find the waiver was conditioned on not practicing at all. Reading that language while you still have room to negotiate is worth the time.
The rest of the exit paperwork arrives at once, and several pieces carry tax consequences in the year you leave. Accrued paid time off may be paid out as wages and land in a year that's already high. Nonqualified deferred compensation follows the election you made years earlier, which can force a large payout on a schedule you no longer control. Plan matches and profit-sharing contributions may require employment on a specific date to vest. Group disability coverage typically ends with employment, and group life insurance may carry a conversion right that expires quickly.
Retiring, or Changing Shape?
If you're telling people you're retiring at 60, you may not be, exactly. You're leaving a schedule you've outgrown. What comes after it might be two days a week of clinic, a block of locums work in the spring, chart review, expert witness work, or teaching. The distinction is worth naming early, because the financial consequences run in different directions than people expect.
Earned income keeps retirement plan contributions available to you, and if the work is 1099, a solo 401(k) may be an option alongside self-employment tax and quarterly estimates. Continued earnings may reduce Social Security benefits if you've claimed early, and they may raise the income that prices your Medicare premium two years later. On the other side, part-time employment sometimes carries benefit eligibility, which can solve the coverage bridge that otherwise sets your retirement date. Planning a full stop at 62 and planning six more years of half-time work are two different plans, even when the calendar date reads the same.
The Products That Show Up Around Age 60
Something changes in the mail around your sixtieth birthday. The seminars start arriving, often attached to dinner. The pitches cluster around annuities, lifetime-income products, and permanent life insurance presented as a retirement vehicle, and they arrive at a stage when certainty is appealing. Physicians are a preferred audience for this.
None of these products is automatically wrong, and some households do end up using some of them. What matters is knowing how the person explaining it is paid, because the compensation structure shapes which conversation gets started and how often. Asking directly is reasonable, and the answer should be easy to get. For our part, we are a fee-only fiduciary firm, which means we do not earn commissions and have no product to push, so the conversation we have with a physician approaching retirement is about sequencing and timing rather than about what to buy.
Five years of runway can make most of this routine. Enrollment windows get put on a calendar instead of missed. The conversion window gets used deliberately or passed on deliberately. The tail language gets read while there's still room to negotiate it. The spending number stops being a guess and becomes a figure you've checked against your own statements. Two years is enough time to handle this list. Five is enough to handle it without rushing. If you'd like our CFP® professionals to work through your household's numbers with you, you can start at physicianfamily.com/start.
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