What High Earners Should Do Before Their Last Day of Work

High earners may face unique financial, tax, and healthcare challenges in retirement. For instance, some may be subject to the net investment income tax. And depending on your income, up to 85 percent of your Social Security benefits may be taxed. And you may also face the income-related monthly adjustment amount, a surcharge on your Medicare Part B and Part D premiums.

In addition, combined federal and state marginal rates can exceed 50 percent in high-tax states.

However, there are some key strategies you can take the year of your last day of work in order to avoid or minimize these hits.

Let’s take a closer look.

Max Out Pre-Tax Retirement Accounts

A lot of financial and tax obstacles high-income individuals face simply have to do with their high incomes.

But one way to seriously reduce your taxable income is by maxing out pre-tax accounts such as traditional 401(k)s and traditional individual retirement accounts (IRAs). This is because these accounts allow you to make tax-deductible contributions.

For 2026, you can contribute up to $24,500 to your combined 401(k)s if you’re under age 50, and up to $32,500 (including an $8,000 catch-up contribution) if you’re age 50 or older.

And if your employer’s plan allows it, those aged between 60 and 63 can contribute up to an additional $11,250 in 2026 instead of the $8,000 catch-up contribution.

For 2026, you can contribute up to $7,500 to your total individual retirement accounts if you’re under age 50 and $8,600 if you’re 50 or over.

By reducing your taxable income, you may be able to avoid or minimize burdens such as the net investment income tax, income-related monthly adjustment amount, and taxation on your Social Security benefits.

Max Out Your Health Savings Account

A health savings account (HSA) is the only investing vehicle that offers this triple tax benefit.

• tax-deductible contributions

• tax-free growth in the account

• tax-free withdrawals for qualified medical expenses

Health savings accounts can in addition come in handy to cover out-of-pocket medical costs, which may be among your highest expenses in retirement.

In 2026, you can contribute up to $4,400 to a health savings account for self-coverage, or $8,750 if you have family coverage.

But there’s one crucial rule.

After you enroll in Medicare, you and your employer can no longer contribute to your HSA without triggering major tax penalties.

Most people are eligible for Medicare at age 65. But this doesn’t mean you lose your account after enrolling in Medicare.

You can still use the funds to cover qualified medical expenses tax-free. You can even use them to pay for Medicare premiums.

And when you reach age 65, you can use your health savings account funds penalty-free for basically anything. But keep in mind that income taxes would still apply to anything that’s not a qualified medical expense.

And while you’re still on your employer’s health insurance, you should probably schedule routine doctor visits, dental checkups, and any specialist appointments you may need.

Moreover, you should also empty your flexible spending account funds, as these do not roll over from year to year as they do with health savings accounts.

Compare Healthcare Costs

If you’re not yet eligible for Medicare, you may need to seek your own healthcare coverage.

Your employer may allow you to keep its health insurance benefits for up to 18 months under the Consolidated Omnibus Budget Reconciliation Act. However, you will be responsible for the full premium.

So it may help to compare these costs to any health insurance programs available through the Affordable Care Act Marketplace.

Understand IRMAA

The income-related monthly adjustment amount (IRMAA) is a surcharge on premiums for Medicare Part B and Part D that affects high earners.

Whether you’re subject to the income-related monthly adjustment amount depends on your modified adjusted gross income from a two-year lookback period. So your modified adjusted gross income in 2024 would affect your Medicare premiums in 2026.

You’d be subject to the income-related monthly adjustment amount if your modified adjusted gross income in 2024 exceeded certain thresholds.

Those thresholds begin at $109,000 for single filers and $218,000 for married couples filing jointly.

There are a few ways to avoid or minimize the modified adjusted gross income hit, such as maxing out your traditional IRA and 401(k). But because of the lookback period and the fact that you likely would become eligible for Medicare at age 65, you should plan these strategies when you’re 63.

Mega Backdoor Roth

Roth 401(k)s and Roth IRAs offer the advantages of qualified tax-free withdrawals in retirement. And they don’t involve required minimum distributions, which can push you into higher tax brackets and quickly deplete your retirement savings.

Your employer may offer a Roth 401(k), but you may have opted for a traditional 401(k) for the immediate tax benefit.

Luckily, you can create a Roth 401(k) or Roth IRA via the mega backdoor Roth strategy. This is the process of making after-tax or non-deductible contributions to a traditional 401(k) and converting those to a Roth 401(k) or Roth IRA.

In 2026, this can allow you to contribute up to $47,500 beyond your regular 401(k) limit. So that’s $47,500 that can grow tax-free for life.

But you need to check with your employer to see if they’d allow you to take the mega backdoor Roth route.

The Bottom Line

Once high earners leave their jobs for good and enter retirement, they may encounter new tax and financial obstacles, such as net investment income tax and the income-related monthly adjustment amount. But there are moves you can make to lower your taxable income, including maximizing your traditional 401(k) and IRA contributions. You should also evaluate healthcare costs, as those can become extremely important in retirement.

The Epoch Times copyright © 2026. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.