Retired tech professionals: planning the years between the last paycheck and Social Security

The retired tech professional has a recognizable balance sheet: a large pre-tax 401(k) built over twenty years of maxed deferrals and matches, a taxable account dominated by one employer's stock, and no paycheck at 52 or 55. They are about sequencing: which account to draw from first, how much to convert to Roth and when, how to keep health insurance affordable for a decade before Medicare, and how to unwind a concentrated position without handing a third of it to the IRS. This guide works through each decision with 2026 figures.

Sequence-of-returns risk and the cash buffer

Someone who leaves tech at 52 has ten years before Social Security can start, thirteen before Medicare and twenty-three before required minimum distributions. Those are the lowest-income years of their adult life, which makes them the cheapest years to move money out of pre-tax accounts. But every dollar of income you create, by selling stock or converting to Roth, also counts against health insurance subsidies.

Two retirees can earn the same average return over a decade and end up far apart if one hits the bad years first, because money withdrawn during a drawdown never recovers. Take a $2,000,000 portfolio with $80,000 withdrawn at the start of each year: returns of -20% then +20% leave $1,747,200 after two years, while the reverse order leaves $1,779,200. Same average, $32,000 apart, and the gap widens every year. The standard defense is one to three years of spending in cash, Treasury bills or a short bond ladder so nothing is sold in a downturn. Fund the buffer before the last paycheck, ideally from staged stock sales in the final working years.

Before 59 1/2: the Rule of 55 and 72(t)

Distributions from retirement accounts before 59 1/2 generally carry a 10% additional tax. The IRS exception table lists two routes that matter here.

The Rule of 55

Section 72(t)(2)(A)(v) waives the penalty on distributions from a qualified plan if you separated from service "during or after the year" you reached 55. It applies to the 401(k) of the employer you left, not to IRAs, so rolling that plan into an IRA destroys the exception. It does not apply if you left at 52 and waited until 55. If you are negotiating an exit in the year you turn 55, this provision alone can be worth staying until January.

Substantially equal periodic payments (72(t))

You can take penalty-free distributions from an IRA or plan as a series of substantially equal periodic payments. The IRS FAQ allows three calculation methods (required minimum distribution, fixed amortization, fixed annuitization), permits an interest rate up to the greater of 5% or 120% of the federal mid-term rate for the amortization and annuitization methods, and requires payments to continue for the longer of five years or until 59 1/2. Modify the schedule early and the 10% tax applies retroactively to every prior payment, with interest.

Roth conversions in the low-income years

A Roth conversion moves money from a pre-tax account to a Roth, paying ordinary income tax now so that the money and its growth are never taxed again and never subject to RMDs. It is cheapest in the low-bracket years between the last paycheck and the first Social Security check. The 2026 federal figures from Rev. Proc. 2025-32:

2026	Single	Married filing jointly
Standard deduction	$16,100	$32,200
Top of 12% bracket (taxable income)	$50,400	$100,800
Top of 22% bracket	$105,700	$211,400
Top of 24% bracket	$201,775	$403,550
Top of 0% long-term capital gains rate	$49,450	$98,900

A married couple with no other income could convert $133,000 in 2026 and stay inside the 12% bracket ($32,200 deduction plus $100,800), paying about $11,600 of federal tax to make $133,000 permanently tax free. Two cautions: conversion income counts toward ACA subsidy eligibility, and it feeds the income test for Medicare premium surcharges in later years. Colorado residents 55 and over can shelter up to $20,000 of retirement income a year from state tax (Colorado guide).

Health insurance before Medicare: ACA credits in 2026 and 2027

The enhanced premium tax credits enacted in 2021 expired at the end of 2025, and as of November 2026 Congress has not restored them (KFF).

First, the 400% cliff is back: a household with modified adjusted gross income above 400% of the federal poverty level gets no credit at all. Eligibility uses the prior year's guidelines, so 2026 coverage uses the 2025 figures of $15,650 for one person and $21,150 for two, putting the cliff at $62,600 for a single retiree and $84,600 for a couple. For 2027 coverage the 2026 guidelines apply ($15,960 and $21,640), moving the cliff to $63,840 and $86,560.

Second, the share of income you are expected to pay toward the benchmark plan rose. For 2026, Rev. Proc. 2025-25 sets the applicable percentage from 2.10% of income below 133% of poverty to 9.96% between 300% and 400%; for 2027, Rev. Proc. 2026-26 raises the range to 2.15% through 10.22%. A couple at $84,000 of MAGI in 2026 pays at most about $8,370 a year for the benchmark silver plan; at $85,000 they pay the full premium. Roth conversions, capital gains and 72(t) payments all count toward MAGI, so the conversion budget in a marketplace year is whatever fits under the cliff.

Medicare begins at 65, with a seven-month initial enrollment window around your birthday (Medicare.gov). The 2026 standard Part B premium is $202.90 a month, with income-based surcharges above thresholds Medicare publishes.

Company stock inside the 401(k): net unrealized appreciation

If your 401(k) holds appreciated employer stock, do not roll it into an IRA before reading IRS Publication 575. The net unrealized appreciation (NUA) rules let you move the shares to a taxable brokerage account as part of a lump-sum distribution, paying ordinary income tax only on the plan's cost basis. The appreciation while in the plan (the NUA, reported in Box 6 of Form 1099-R) is taxed as long-term capital gain whenever you sell, regardless of holding period.

The conditions are strict: the distribution must be your entire balance from all of that employer's plans of the same type within one tax year, following separation from service, reaching 59 1/2, death or disability. If you are under 55 at separation, the 10% additional tax can apply to the taxable basis. NUA pays off when the basis is a small fraction of value: with a $60,000 basis on $600,000 of stock, you pay ordinary rates on $60,000 and capital gains rates on $540,000, instead of ordinary rates on all $600,000 as it leaves an IRA over the following decades.

Unwinding a concentrated position

Our high-earner guide suggests capping any single stock at 10% to 20% of liquid net worth. Getting from 50% to 15% is a multi-year project with four main tools.

• Staged sales into the 0% bracket. Long-term gains are taxed at 0% until taxable income reaches $49,450 (single) or $98,900 (joint) in 2026, 15% up to $545,500 or $613,700, and 20% above. A couple with no wages can realize about $130,000 of gains a year ($98,900 plus the $32,200 deduction) at 0% federal, selling highest-basis lots first. Reinvest in broad index funds.
• Exchange funds. You contribute shares to a private partnership alongside other concentrated investors and receive a diversified basket, deferring the gain. Trade publications report a seven-year holding period and a requirement that at least 20% of the fund sit in qualifying illiquid assets (Financial Planning).
• Donor-advised funds. Donating shares held more than a year lets you deduct fair market value and skip the gain entirely. Publication 526 limits deductions of appreciated property to public charities to 30% of AGI with a five-year carryover, and from 2026 itemizers deduct only gifts above a floor of 0.5% of AGI (IRS).
• Charitable remainder trusts. For very large low-basis positions with real charitable intent. The trust sells the stock, pays you 5% to 50% of its value annually for life or a term, and leaves at least 10% of the initial value to charity; you get a deduction equal to the present value of the remainder, and payouts are taxed to you under a four-tier system (IRS).

RMD ages under SECURE 2.0

Treasury's final regulations (T.D. 10001) set the age at which required minimum distributions begin by birth year: 73 for those born 1951 through 1958, and 75 for those born in 1960 or later; proposed regulations treat 1959 births as 73. The first RMD may be delayed until April 1 of the following year. Missing an RMD costs a 25% excise tax, reduced to 10% if corrected within two years, per the IRS RMD FAQ. Roth IRAs and Roth 401(k)s have no lifetime RMDs, the point of the conversions above. Our Amazon 401(k) guide covers in-plan Roth money and rollover mechanics.

A year-by-year sketch for a 52-year-old

Assume a married engineer born in 1974 who leaves in 2026 with $2.5 million pre-tax, $1.5 million taxable of which $900,000 is low-basis employer stock, and $110,000 of annual spending. Full retirement age is 67 for anyone born in 1960 or later; benefits claimed at 62 are reduced to about 70% of that amount, and delaying past 67 adds 8% a year to 70 (SSA).

Year (age)	What happens	Moves
2026 (52)	Last paycheck. Marketplace enrollment for 2027 opens November 1.	Decide on NUA before any rollover. Fund a two-year cash buffer from stock sales in the final high-income year.
2027 to 2033 (53 to 59)	Living on taxable assets; no penalty-free plan access (left before 55).	Each year fill income to about 395% of poverty with stock sales and Roth conversions.
2034 (59 1/2)	Penalty-free withdrawals from IRAs and plans.	Any 72(t) can end once it has run five years.
2036 (62)	Earliest Social Security.	Usually defer; the portfolio is the bridge.
2039 (65)	Medicare begins; the ACA cliff disappears.	Conversions can grow to the top of the 24% bracket if pre-tax balances are still large.
2041 (67)	Full retirement age.	Claim, or hold to 70 if health and portfolio allow.
2044 (70)	Maximum Social Security.	Claim.
2049 (75)	RMDs begin.	Ideally on a pre-tax balance already small enough that RMDs fit inside the 22% or 24% bracket.

Common mistakes

1. Rolling the 401(k) into an IRA on the way out. It forfeits the Rule of 55 and the NUA election in one step.
2. Converting past the ACA cliff. One extra dollar of income can cost the household the whole year's premium tax credit.
3. Keeping the employer stock out of loyalty or inertia.
4. No cash buffer. Forced sales in a bad year are how sequence risk bites.
5. Running a 72(t) on the whole IRA. Split it first; a modified schedule is penalized retroactively.
6. Claiming Social Security at 62 by default. That locks in roughly 70% of the full benefit for life.

Brackets, poverty guidelines, premium percentages and RMD rules change almost every year, and the ACA credit rules face pending legislation; confirm current figures with the IRS, HHS, Medicare and the Social Security Administration before acting.

Related guides

• The comprehensive guide to your Amazon 401(k)
• How often do 401(k)s compound, and how to think about investing within your 401(k)
• Intel SERPLUS: a complete guide
• Solo 401(k) contribution deadlines for 2026: employee and employer