[TR-01] The Five-Year Runway

The tasks are ordered by deadline, not by importance — and six of them are one-way doors

Pillar: Approaching Retirement & Transitions · Applies to: Anyone with a retirement date in the next five years, at any age Last verified: August 2026 · Refresh cadence: Evergreen (the sequence); figures via FN-02 Related: ER-02 Roth Conversion Ladder · ER-04 Rule of 55 · TR-05 Exit Logistics · HC-01 ACA Bridge · HC-04 HSA Mastery · TX-03 Withdrawal Sequencing · ST-03 Changing Domicile · EP-01 Core Document Stack

Not advice. This is a sequence, not a plan. Your plan document, your state, and your employer’s rules override every default here — and the one-way doors in §6 are the places where being wrong is expensive and permanent. Confirm each against your own plan administrator before you act on the calendar.

---

TL;DR

• Retirement planning content optimises; retirement execution sequences. A dozen tasks share one date, they have wildly different lead times, and the ones with the longest lead times are not the ones people start with.
• The two longest lead times are health insurance and domicile — not the portfolio. A Roth conversion ladder needs five years of seasoning before it feeds you (ER-02), and a state move wants to precede your big income events (ST-03).
• Six one-way doors (§6). The sharpest: a routine 401(k)-to-IRA rollover destroys the Rule of 55 and cannot be undone. §5 prices one at $24,500.
• The last unconstrained income year is the year you turn 62. From 63 on, every extra dollar of MAGI is also a Medicare premium decision, because IRMAA looks back two years (HC-06).
• Get the mortgage while you still have a W-2. Underwriting on portfolio income is a different and much worse conversation.

---

1. Why a timeline beats a checklist

A checklist implies the items are independent and can be done in any order. They cannot. Three properties make retirement prep a scheduling problem:

• Lead time. Some tasks take five years to bear fruit — a conversion ladder, a domicile change, a bridge account. Starting them at T-minus-6-months does not produce a compressed version of the result; it produces no result.
• Ordering constraints. Converting after establishing domicile in a no-tax state is worth real money; the same conversion a month earlier is not (ST-03, TX-02).
• Irreversibility. A handful of decisions close permanently on a date, and most of them close around the separation date rather than on it.

So the organising question is not “what matters most” but “what closes first.” Everything below is ordered by deadline. Where a task is also a one-way door, it is flagged ⛔.

2. T-minus 60 to 36 months

The long-lead work. Nothing here is urgent and all of it is slow.

• Build the bridge. If you are retiring before 59½ you need spendable money that is not in a traditional account. A Roth conversion ladder’s first rung is not penalty-free for five years (ER-02), so the bridge has to already exist on day one. §5 sizes one.
• Max the HSA while you are still HDHP-eligible (HC-04). This window closes at Medicare, and the receipts you shoebox now are tax-free cash later.
• ⛔ Decide the domicile question and start executing it (ST-03). Moving before the conversion years and before a business sale is worth far more than moving after, and sticky states audit departures. Total-cost framework: ST-02.
• Fix your asset location, not just allocation. Which pocket a dollar sits in determines what your MAGI looks like later, and MAGI is the master variable for both ACA subsidies and IRMAA (TX-03).
• ⛔ Do the medical work while you are on employer coverage — elective procedures, dental, anything with a deductible you’ve already met. Dental in particular is barely covered after 65 (HC-07).
• Check your Social Security earnings record for missing years. Correcting an old employer’s misreport takes time and documentation (SS-04).

3. T-minus 36 to 24 months

• ⛔ Get any mortgage, refinance, or HELOC done now. Underwriting wants W-2 income; portfolio and drawdown income qualify far less easily. A HELOC opened while employed is a standing sequence-of-returns buffer you may never draw (ER-06).
• Model the MAGI plan for the whole bridge, year by year, to your first Medicare year (HC-01, TX-03). This is the single most valuable spreadsheet in the process, and it is what tells you whether you are a subsidy household or a conversion household — you generally cannot be both (ER-02).
• Price your county’s actual ACA benchmark, age-rated to your real age at retirement, not the published 40-year-old figure (ST-02 §2).
• Rehearse the budget. Live on the retirement number for six months while still earning. The gap between modelled and actual spending is usually discovered too late to matter.

4. T-minus 24 to 12 months

• ⛔ Deferred compensation elections. Most non-qualified deferred comp requires the payout schedule to be elected well in advance and locks it thereafter ◻️. A lump sum landing in your first retirement year can obliterate an ACA subsidy plan and spike a single year’s bracket (TR-05).
• Map the vesting calendar — equity cliffs, pension accrual dates, employer match true-ups, sabbatical accrual. The separation date is worth optimising and is usually the cheapest lever available; a departure two weeks later can be worth an entire vest.
• Choose the health path for the gap years and confirm eligibility rather than assuming it: marketplace (HC-01), a spouse’s plan, COBRA (HC-05), or retiree coverage. Note that COBRA and retiree coverage do not count as employer coverage for delaying Medicare (HC-02).
• Get the document stack current (EP-01) — and if you moved in §2, re-execute it under the new state’s law.

5. T-minus 12 months to day one

This is where the irreversible mechanics cluster.

⛔ The Rule of 55, and the rollover that destroys it

If you separate from service in or after the calendar year you turn 55, you may take penalty-free distributions from that employer’s plan ✅ (ER-04). Two constraints do the damage:

1. It applies only to the plan you separated from. Not to an IRA, not to a previous employer’s plan ✅.
2. Rolling that balance into an IRA extinguishes it permanently ✅. Rolling back into a new 401(k) does not restore it — the exception attaches to the plan of the employer you left.

Separates at 56 with $900,000 in the employer 401(k), needing $70,000/year until 59½ — 3.5 years, $245,000 of withdrawals.

Path	10% early-distribution penalty
Leave the balance in the plan	$0
Roll to an IRA first, then withdraw	$24,500

A routine rollover — the default advice at every exit interview — costs $24,500 here and cannot be undone. The fix is a partial rollover: leave the $245,000 you will need before 59½ in the plan, roll the remaining $655,000 for better investment options and lower fees.

Two other reasons to think before rolling, both covered elsewhere and both pointing the same way: rolling moves you out of ERISA’s automatic spousal-beneficiary protection (EP-01), and it can trade strong federal creditor protection for weak state protection (ST-01 dimension 5). The rollover is not an administrative step. It is three decisions wearing one form.

⛔ The COBRA / marketplace 60-day fork

Losing employer coverage opens a 60-day COBRA election window and a 60-day marketplace special enrollment period, and they run concurrently ✅. Two asymmetries make this worth planning rather than improvising:

• COBRA is retroactive. Elect within 60 days and coverage backdates to the day your employer coverage ended ✅, with a further 45 days to pay ✅. So the 60 days function as free optionality: stay unenrolled, and elect only if you actually incur a claim.
• But dropping COBRA voluntarily later is not a qualifying event ✅. Choose COBRA past the window and you are on it until it exhausts (up to 18 months ✅) or the next open enrollment. Only exhausting COBRA reopens a special enrollment period.

Since COBRA premiums do not qualify for premium tax credits and marketplace coverage often does, the marketplace is frequently far cheaper for an early retiree with managed MAGI (HC-01). Run both before the window opens, not during it.

The rest of the final year

• Time the separation date against vesting, bonus payout, and the calendar year — a January departure and a December one produce very different first-year MAGI.
• Spend the FSA (use-it-or-lose-it); the HSA is yours forever and needs no action (HC-04).
• Confirm the first year’s income plan to the dollar, including any final paycheck, PTO payout, and bonus, all of which land in the retirement year’s MAGI.

6. The one-way doors

The article in one table. Everything else is recoverable.

Door	Closes	Cost of missing it
Rule of 55	the moment the 401(k) is rolled to an IRA	penalty-free access at 55–59½, gone permanently — $24,500 in §5 ✅
Deferred comp election	often 12+ months before separation ◻️	payout schedule locked; a lump sum can wreck the first year’s MAGI plan
Age-63 MAGI	31 December of the year you turn 63 ✅	sets your age-65 IRMAA tier via the two-year lookback (HC-06)
COBRA vs. marketplace	60 days after coverage ends ✅	voluntarily dropping COBRA is not a qualifying event; you wait for exhaustion or open enrollment
Medigap open enrollment	6 months after Part B starts ✅	medical underwriting applies thereafter, unless your state says otherwise (ST-04 §5)
Mortgage underwriting	your last W-2 paycheck	qualifying on portfolio income is materially harder

Read the third row again. The two-year IRMAA lookback means the year you turn 63 is the first year whose income sets a Medicare premium ✅ — so the last unconstrained conversion year is the year you turn 62, and from 63 onward every conversion is simultaneously a premium decision (TX-02, HC-06).

7. Sizing the bridge — a worked example

Retiring at 50, spending $80,000/year, planning to live off a Roth conversion ladder.

A conversion made in year 1 is not penalty-free until year 6 (ER-02). So years 1–5 must be funded entirely from money you can already touch:

5 years of spending	5 × $80,000 = $400,000
Conversion tax, paid from taxable	5 × ~$8,000 = $40,000 ◻️
Accessible before day one	$440,000

Two traps inside that arithmetic. Paying the conversion tax out of the conversion defeats it — the withheld amount is itself an early distribution, penalised. And “accessible” is narrower than it sounds: taxable brokerage, Roth contribution basis, and cash count; the traditional balance you are converting does not (ER-05).

Add a cash buffer on top for sequence-of-returns risk (ER-06). The ladder assumes you never have to sell the bridge into a bad market to feed it.

Three Scenarios

A. The 56-year-old with one good option. He has $900k in the 401(k) and three years to 59½. His advisor recommends consolidating everything into an IRA “for simplicity.” That single step costs him $24,500 and forces him into a SEPP (ER-03) with its bust penalty and rigidity. The right move is a partial rollover, and it takes one extra sentence on the paperwork.

B. The 50-year-old with a full plan and an empty bridge. Her conversion ladder is modelled correctly, her state is chosen, her documents are current — and she has $180,000 outside her traditional accounts against a $440,000 need. She is not five years from retiring; she is five years from being five years from retiring. The fix is unglamorous: redirect savings to taxable for three years rather than maxing pre-tax.

C. The 62-year-old converting on autopilot. He has been filling the 22% bracket for four years and intends to continue through 64. The year he turns 63, the same conversion begins setting his age-65 Medicare premium. Nothing about his spreadsheet changes on that birthday, which is exactly why it gets missed — the constraint arrives silently and two years early (HC-06).

💡 Pro-Tips

1. Work backwards from the closing dates, not forwards from today. Put the six doors in §6 on a calendar first; everything else fits around them.
2. Never roll the 401(k) before checking the Rule of 55, and consider a partial rollover as the default rather than the exception.
3. Optimise the separation date. It is usually the highest-value, lowest-effort lever in the whole runway — vesting, bonus timing, and the calendar year all hinge on it.
4. Treat the year you turn 62 as the last free income year and size that year’s conversion accordingly.
5. Open the HELOC before you quit, even if you never draw it.
6. Use the COBRA 60 days as an option, not a decision — it is retroactive, so you can wait and see.
7. Rehearse the budget for six months while still earning, so the discovery happens while you still have income.
8. Re-run the whole runway after any move, because domicile changes the answer to the tax, estate, and healthcare questions simultaneously (ST-01).

⚠️ Common Pitfalls

1. Rolling the 401(k) to an IRA at separation and destroying the Rule of 55 — irreversible, and the most expensive default in the process.
2. Building a conversion ladder with no bridge to survive its five-year seasoning.
3. Paying conversion tax out of the conversion, turning the withholding into a penalised distribution.
4. Converting at 63 and 64 without pricing the IRMAA consequence two years out.
5. Assuming COBRA and retiree coverage let you delay Medicare. They do not (HC-02).
6. Electing COBRA on day 3 and discovering the marketplace was cheaper on day 45 — after the window has effectively closed to a costless switch.
7. Moving states after the conversion years rather than before (ST-03).
8. Leaving the mortgage or HELOC until after the last paycheck.
9. Missing a deferred-comp election deadline and taking a lump sum into the first retirement year.
10. Letting the separation date be chosen by an emotional moment rather than by the vesting calendar.
11. Treating the runway as a portfolio exercise. The portfolio is the part most likely to already be fine.

✅ Actionable Checklist

T-60 to T-36

• Size the bridge (§7) and compare it to what you actually hold outside traditional accounts
• Max the HSA while HDHP-eligible; start the receipt shoebox (HC-04)
• Decide the domicile question and begin executing it (ST-03)
• Fix asset location so future MAGI is controllable (TX-03)
• Do the deferred medical and dental work while on employer coverage
• Pull and correct your Social Security earnings record

T-36 to T-24

• Open any mortgage, refinance, or HELOC while you have W-2 income
• Build the year-by-year MAGI plan to your first Medicare year (HC-01)
• Price your county’s age-rated ACA benchmark (ST-02 §2)
• Live on the retirement budget for six months

T-24 to T-12

• Confirm deferred comp election deadlines and payout elections (TR-05)
• Map the vesting, bonus, and pension-accrual calendar
• Choose and verify the health path for the gap years
• Refresh the document stack under your current state’s law (EP-01)

T-12 to day one

• Check the Rule of 55 before authorising any rollover (ER-04)
• Decide the rollover deliberately — access, spousal protection, creditor protection (TR-05, EP-01, ST-01)
• Model COBRA against the marketplace before the 60-day window opens
• Choose the separation date against the vesting calendar and the tax year
• Spend the FSA; confirm final paycheck, PTO payout, and bonus in the first-year MAGI plan

First 90 days

• Verify coverage is actually in force before you need it
• Re-confirm every beneficiary designation post-rollover (EP-01)
• Execute the first conversion or withdrawal on the plan, not on instinct (TX-03)

Sources & further reading (verified August 2026)

• IRC § 72(t)(2)(A)(v) — the separation-from-service exception (Rule of 55): available from the plan of the employer you separate from in or after the year you turn 55, and lost on rollover to an IRA → ER-04
• IRS Pub. 575 and plan-administrator guidance on qualified plan distributions and rollovers
• COBRA (29 U.S.C. § 1161 et seq.) and CMS marketplace rules — the concurrent 60-day election and special enrollment windows, COBRA’s retroactivity and 45-day payment window, the 18-month maximum, and the rule that only exhaustion reopens a special enrollment period
• FN-02 for every federal figure used here; HC-06 for the IRMAA two-year lookback that closes the age-63 door; ER-02 for the five-year conversion clock this runway is built around; TR-05 for the exit-logistics detail this page only sequences