Prepare for retirement in your final working decade with a plan covering Social Security claiming strategy, Medicare enrollment, withdrawal sequencing, and legacy planning.
Create a my Social Security account and review your earnings record
Check your record for missing or incorrect years. Even one missing high-earning year can reduce your monthly benefit by $50-100. Report errors to SSA with W-2s as proof.
Calculate benefits at age 62, full retirement age, and 70
Claiming at 62 permanently reduces your benefit by 25-30%. Delaying past full retirement age increases it by 8% per year until age 70. For someone with a $2,000 FRA benefit, that is $2,640 at 70.
Evaluate spousal and survivor benefit options
A spouse can claim up to 50% of the higher earner's FRA benefit. Survivor benefits equal 100% of the deceased spouse's benefit. These rules affect when each spouse should claim.
Understand the earnings test if claiming before full retirement age
If you claim early and still work, $1 in benefits is withheld for every $2 earned above $22,320 per year (2024 limit). After full retirement age, there is no earnings penalty.
Medicare and Healthcare Planning
Enroll in Medicare during your initial enrollment period
The initial enrollment period is 7 months centered on your 65th birthday month. Missing it triggers a 10% Part B penalty for each 12-month period you were eligible but did not enroll.
Compare Original Medicare vs Medicare Advantage plans
Original Medicare covers about 80% of approved costs and requires a Medigap supplement ($150-300/month). Medicare Advantage has lower premiums but restricts you to network providers.
Plan for healthcare costs between retirement and age 65
If you retire before 65, you need bridge coverage. COBRA lasts 18 months. Marketplace plans with subsidies are available if your income qualifies. Budget $500-1,500 per month per person.
Estimate total retirement healthcare costs
The average 65-year-old couple needs approximately $315,000 for healthcare in retirement (excluding long-term care). Long-term care insurance premiums are lowest when purchased in your mid-50s.
Withdrawal Strategy and Tax Management
Determine your withdrawal sequence across account types
A common approach is to draw from taxable accounts first, then tax-deferred (401k/IRA), then Roth last. This lets Roth accounts grow tax-free longest. Your specific tax situation may warrant a different order.
Calculate your sustainable withdrawal rate
The 4% rule suggests withdrawing 4% of your portfolio in year one, then adjusting for inflation. A $1 million portfolio supports about $40,000 per year. Reduce to 3.5% if you retire before 60.
Plan for required minimum distributions starting at age 73
RMDs apply to traditional 401(k) and IRA accounts. The penalty for missing an RMD is 25% of the amount not withdrawn (reduced from 50% by SECURE 2.0). Roth IRAs have no RMDs for the original owner.
Consider Roth conversions in lower-income years before RMDs begin
Converting traditional IRA funds to Roth between retirement and age 73 can reduce future RMDs and tax bills. Convert enough each year to fill your current tax bracket without jumping to the next.
Manage tax bracket exposure year by year
In 2024, the 12% bracket ends at $47,150 for single filers and $94,300 for married filing jointly. Keeping income below these thresholds can save thousands in taxes on Social Security benefits and capital gains.
Income Source Inventory
List all guaranteed income sources and monthly amounts
Include Social Security, pensions, annuities, and rental income. Total these and compare to your monthly expenses. The gap is what your investment portfolio must cover.
Review pension options (lump sum vs annuity)
A lump sum gives you control but requires investment discipline. An annuity provides guaranteed income for life. Compare the annuity payout to what you could safely withdraw from the lump sum at 4%.
Consolidate retirement accounts for easier management
Roll old 401(k) accounts into a single IRA. Fewer accounts means simpler RMD calculations, lower fees, and easier rebalancing. Keep one Roth IRA separate for tax-free growth.
Housing and Lifestyle Evaluation
Evaluate whether to downsize or pay off your mortgage
If your home equity exceeds $300,000 and your annual costs (taxes, insurance, maintenance) top $15,000, downsizing can free up significant capital. Factor in moving costs of $8,000-15,000.
Create a detailed retirement budget with fixed and variable expenses
Most retirees spend 70-80% of their pre-retirement income. Housing, healthcare, and food account for about 60% of a typical retiree budget. Travel and leisure spending often peaks in the first 5 years.
Research state tax implications if considering relocation
Nine states have no income tax. Some states exempt Social Security and pension income from taxes. Property taxes vary dramatically, from $500/year in parts of Alabama to $10,000+ in New Jersey.
Legacy and Estate Planning
Update your will and trust documents
Review your will every 3-5 years and after any major life event. An outdated will can lead to assets going to unintended heirs. Attorney fees for updates typically run $200-500.
Review beneficiary designations on all retirement accounts and insurance
Beneficiary designations override your will. After the SECURE Act, most non-spouse beneficiaries must withdraw inherited IRA funds within 10 years, which affects how much your heirs actually receive.
Consider annual gifting to reduce your taxable estate
You can gift $18,000 per recipient per year without filing a gift tax return. A married couple can gift $36,000 per recipient. This removes assets and future growth from your estate.
Frequently Asked Questions
How much money do I need to retire comfortably?
The widely cited guideline is 25 times your annual expenses (the inverse of the 4% withdrawal rule). If you spend $60,000/year, you need approximately $1.5 million in invested assets. However, this number varies based on healthcare costs (averaging $315,000 per couple in retirement), Social Security income, pension income, and whether you own your home outright. Consult a financial advisor to model your specific scenario including inflation assumptions.
When should I start taking Social Security?
You can claim as early as 62 (with a 25-30% permanent reduction) or delay until 70 (earning 8% per year in delayed retirement credits after full retirement age). The break-even point is typically age 78-82; if you expect to live past that, delaying pays more over your lifetime. Married couples should coordinate strategies, as the higher earner delaying to 70 maximizes the survivor benefit for the remaining spouse.
What is the Medicare enrollment timeline?
Initial enrollment runs from 3 months before to 3 months after the month you turn 65. Missing this window triggers a 10% Part B premium penalty for each 12-month period you were eligible but not enrolled, lasting for life. If you are still working with employer coverage at 65, you get an 8-month Special Enrollment Period after that coverage ends. Part D prescription coverage has a separate penalty of 1% of the national base premium per uncovered month.
How do I minimize taxes on retirement withdrawals?
The most effective strategy is withdrawing from a mix of pre-tax (Traditional 401k/IRA), tax-free (Roth), and taxable brokerage accounts to stay within lower tax brackets each year. In early retirement before Social Security and RMDs begin, you may be in a historically low tax bracket, making Roth conversions valuable. Tax-efficient withdrawal sequencing can save $100,000+ over a 30-year retirement. Work with a tax-aware financial planner for a personalized drawdown strategy.