Updated August 7, 2026. Quick answer: the order matters more than any single decision. Four of these steps are irreversible, and three of them have age cliffs that a calendar month can decide. The expensive mistakes at 55-62 are almost never the investment ones — they are doing step four before step three, or rolling an account that should have stayed where it was.
The order
1. Do not sign yet
You have at least 21 days to consider a release of age claims, or 45 if it is a group programme, and at least 7 days to revoke after signing — during which the agreement is not enforceable at all. Signing early buys you nothing and costs you the clock. Put your dates on paper first.
2. Settle health coverage before anything irreversible
The COBRA election runs from the later of coverage ending or your notice arriving, so the deadline is often later than people assume — but the decision drives everything after it, because an ACA subsidy depends on the income you are about to choose. COBRA versus ACA is the comparison; do it before you decide how much income to realise this year.
⚠️ If you have retiree medical, check the eligibility rule before you take anything. Many plans require an age-and-service combination — commonly 55 and 10 years — measured at separation. Separating months short of it can forfeit a benefit worth more than the entire severance.
3. Do not claim Social Security reflexively
Claiming early because the income stopped is the most common expensive reflex in this age band. There is a withdrawal route — you may withdraw an application within 12 months of first entitlement — but it is once in a lifetime and every benefit already paid must be repaid, including to anyone claiming on your record. Treat it as a decision, not a default.
4. Do not move the 401(k) until you know whether the rule of 55 applies
🔴 This is the trap that costs the most and is the least known. If you separate in or after the calendar year you turn 55, you can take from that employer’s plan without the 10% early-withdrawal penalty. Roll it to an IRA and that exception is gone — IRAs do not have it. A rollover recommended in week two can close a door you needed in year three.
It also turns on the calendar year, not your birthday: laid off in November and turning 55 in January means no; laid off in January and turning 55 in December means yes. The rule of 55 applies to the 401(k) only, and 72(t) is the alternative when it does not.
5. Then the pension election, if there is one
Lump sum or annuity is priced at an interest rate that moves, and the survivor percentage is priced against two lives. It belongs after health coverage and after you know your rule-of-55 position, because both change what the money has to do. What to ask about a pension election.
6. Deferred comp is probably already decided
Non-qualified deferred compensation usually pays out on a schedule fixed by an election you made years ago, and 409A makes that election effectively irreversible. It is on this list not because you can change it but because it lands in a tax year and you should know which one before you choose everything else. Why the 409A election cannot be changed · how it is taxed if you move.
The three age cliffs, in one place
| Cliff | What decides it | What it costs to miss |
|---|---|---|
| Rule of 55 | The calendar year of separation, not your birthday | 10% penalty on withdrawals you thought were free — or a rollover that forfeits it entirely |
| Retiree medical | Age and service measured at separation | A lifetime benefit, sometimes for months of service |
| Social Security withdrawal | 12 months from first entitlement, once per lifetime | A permanently reduced benefit you cannot undo twice |
The pages behind each step
Each step above has its own mechanics, and the traps live in the detail:
- How long you have to sign — the 21 or 45 days, the 7-day revocation that cannot be shortened, and the list of job titles and ages a group programme owes you.
- The retiree-medical cliff — why months of service can decide a lifetime benefit, and the one severance term worth asking about.
- The 401(k) loan offset — if you had a loan outstanding, the rollover deadline is probably later than 60 days, but only inside a 12-month window.
- What happens to your FSA — the run-out period buys filing time, not coverage time.
- Start the pension now or defer — whether your plan’s early reduction is subsidised is a number you can ask for.
And if the honest question underneath all of this is whether to stop rather than look again, that decision has its own page: retire now or keep job hunting — the three numbers that answer it, and the one direction the choice is reversible in.
When this is worth paying someone for
Steps 1 and 2 you can do alone with the dates in front of you. Steps 4 and 5 are where the money is, and where an ordering mistake is expensive and permanent. If a package election and a pension decision are both live in the same quarter, that is the version worth a second opinion — what to ask, and what an advisor does not do here.
Sources
Release and revocation windows: 29 U.S.C. §626(f)(1). COBRA election period: 29 U.S.C. §1165(a)(1). Social Security withdrawal: 20 CFR §404.640(b)(4). Rule of 55: IRC §72(t)(2)(A)(v). All read 7 August 2026. General information about statutory deadlines and plan mechanics, not legal or tax advice on your agreement. Your plan documents govern, and they may be more generous than the statutory floor.