Retirement can be an exciting milestone to achieve, but it also involves a lot of planning and preparation to ensure a smooth transition into this new phase of life. If you will retire this year, you may already be well into planning your ideal future — deciding how and where you’ll live, what hobbies and activities you’ll pursue, and determining how you’ll maintain your social network. But don’t forget these five key areas:

1 – Social Security

Have you determined when you will begin claiming your Social Security benefits? You can start receiving this retirement benefit as early as age 62, but depending on your personal situation, it may make more sense to wait until your full retirement age, or FRA. Waiting to claim until age 70 will lock in delayed retirement credits, which would increase your monthly benefit. While there’s no “ideal” age for claiming benefits, the Social Security Administration recommends weighing these factors before you claim:

  • Whether you intend to work in retirement;
  • Your life expectancy;
  • Your health insurance needs;
  • Your eligibility for Social Security benefits on someone else’s record;
  • Other income you can draw from if you decide to delay your claim;
  • Whether other family members may qualify for benefits on your record.

2 – Medicare and health insurance

Eligibility for Medicare begins at age 65, with the initial enrollment period occurring three months prior to your birthday month, extending to three months following your birthday month. Is it best to sign up for Medicare during this time? The answer depends on when you plan to retire. Generally, missing your initial enrollment period may expose you to a gap in your coverage or a penalty. However, you may qualify for a Special Enrollment Period. Also, since Medicare doesn’t cover everything, you will likely want to consider supplemental insurance.

If you are a higher-income earner, you may also face an Income-Related Monthly Adjustment Amount, or IRMAA. This is an additional amount you may need to pay for Medicare Part B and Part D, and is based on your modified adjusted gross income, or MAGI.

For retirees who don’t yet qualify for Medicare, other health insurance options include COBRA, which typically covers 18 months post-employment, a spouse or partner’s health plan, Affordable Care Act (ACA) plans, an employer or union retiree health plan, or working at a part-time job with a health insurance benefit.

3 – Know your numbers

Determine how much money you will need to support your desired lifestyle in retirement. This will likely involve creating a budget and considering factors such as your expected expenses, the amount you have saved in retirement accounts, and any other sources of income you may have. It’s also a good idea to consider potential unexpected expenses that could arise, such as medical bills. Be sure to plan ahead for taxes by calculating your estimated tax liabilities, understanding how your income and assets will be taxed, and determining your withholding or estimated payments. Because your spending level may change once you retire, it’s important to stay flexible so you can make adjustments.

4 – Optimize your investments

You can spend as much as 30 years or more in retirement. Making your plan as tax-efficient and sustainable as possible can help you avoid running out of money too soon. Consider consolidating some accounts to make it easier for you to manage. Then, review your asset allocation – and location – to ensure you have the right mix. You should also consider diversifying your tax buckets to avoid a large tax burden and to improve tax efficiency. Finally, if you plan to leave money to your heirs, consider working with your financial advisor to create an intergenerational plan to transfer your wealth after you die.

5 – Determine how to find fulfillment in retirement

Retirement can be a great opportunity to pursue hobbies and activities that you may not have had time for while working. Look for ways to stay physically and mentally active, whether it’s through exercise, volunteering, or learning a new skill. Maintaining social connections is also important for overall well-being, so make an effort to stay connected with friends and family. You may also want to consider joining clubs or organizations that align with your interests.

Want to learn more about how to plan for your retirement in 2023? Watch our on-demand webinar for more information on these five important retirement planning tips.

Author Joel Cundick Financial Advisor / Team Lead

Joel is frequently quoted in local and national media and has been a repeat guest on Federal News Radio. He teaches retirement preparation seminars to Federal employees through the National Institute of Transition Planning.

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