Retirement Financial Checklist: What to Do in Your First Year

Before You Retire: Timing Your Social Security Claim

The age you claim Social Security has a permanent effect on your monthly benefit. Claiming at your full retirement age (67 for most people retiring in the coming years) gets you 100% of your calculated benefit; claiming as early as 62 permanently reduces it, often by 25-30%, while delaying past full retirement age up to 70 increases it by roughly 8% per year of delay. There's no universal right answer, the decision depends on your health, other income sources, whether you're still working, and whether a spouse's benefit is also part of the picture, but understanding the mechanics before you claim matters more than almost any other single retirement decision, since it's difficult to fully undo once made.

For 2026, Social Security benefits received a 2.8% cost-of-living adjustment, raising the average retired worker's monthly benefit by roughly $56. If you're still working part-time while claiming benefits before your full retirement age, be aware that earnings above a certain annual threshold can temporarily reduce your benefit, though that reduction is credited back later through a higher benefit once you reach full retirement age.

If you're married, coordination matters even more. Spousal and survivor benefits are affected by each partner's claiming decision, and in many cases the higher earner delaying their own claim, even if the lower earner claims earlier, produces a better combined outcome over both spouses' lifetimes, particularly because the survivor eventually inherits the higher of the two benefits. This is a decision worth modeling carefully as a couple, not just individually.

Enrolling in Medicare on Time

Missing your Medicare enrollment window (generally the seven-month period around your 65th birthday, unless you have qualifying employer coverage) can trigger permanent late-enrollment penalties added to your premiums for as long as you have Medicare. If you're retiring at or after 65, confirm your enrollment is active before your employer coverage ends, since there's typically no automatic overlap protecting you from a coverage gap.

If you're retiring before 65, you'll need a bridge strategy for health coverage until Medicare eligibility begins, COBRA continuation of your employer plan, a marketplace plan, or a spouse's employer coverage are the most common options, each with very different costs worth comparing carefully before your last day of employer coverage arrives.

Also budget for Medicare's income-related monthly adjustment amount (IRMAA), a premium surcharge on Parts B and D for higher-income retirees, calculated using your tax return from two years earlier. This creates a planning wrinkle worth anticipating: a large one-time income event, like a big retirement account withdrawal, can trigger higher Medicare premiums two years later, even if your income drops back down in the years between.

Understanding Required Minimum Distributions

Once you reach a certain age, the IRS requires you to start withdrawing a minimum amount annually from traditional IRAs and 401(k)s, whether or not you actually need the money. For 2026, the required starting age is 73 for people born between 1951 and 1959, and 75 for those born in 1960 or later. Roth IRAs are not subject to RMDs during the original owner's lifetime, which is one of several reasons some retirees prioritize Roth conversions in earlier, lower-income retirement years.

The gap between when you retire and when RMDs begin, sometimes called the "retirement red zone" or a low-income window, can be a valuable opportunity to convert some traditional retirement savings to a Roth account at a lower tax rate than you might face once RMDs and Social Security are both layered onto your income. This isn't the right strategy for everyone, but it's worth exploring with a tax professional if you have several years between retiring and reaching your RMD age.

Missing an RMD is expensive: the penalty is 25% of the amount that should have been withdrawn, reduced to 10% if corrected within two years. Your very first RMD can be delayed until April 1 of the year after you turn 73, but doing so means taking two RMDs in that following year, which can push you into a higher tax bracket, worth modeling out with a tax professional before deciding whether to delay.

Building Your Retirement Income Withdrawal Order

Once you're actually drawing down savings, the order in which you tap different account types (taxable brokerage accounts, tax-deferred accounts like traditional IRAs, and tax-free Roth accounts) has a meaningful effect on your total lifetime tax bill. A common general approach draws from taxable accounts first, tax-deferred accounts next, and Roth accounts last, letting tax-advantaged growth continue as long as possible, but required minimum distributions, tax bracket management, and Social Security taxation interact with this general rule in ways that often make a more customized approach worthwhile.

A financial planner who specializes in retirement income can model several withdrawal sequences against your specific accounts and goals, often identifying a strategy that saves meaningfully more in lifetime taxes than a generic rule of thumb would produce. Given how much is at stake over a retirement that could span two or three decades, this is an area where professional guidance tends to pay for itself many times over.

Watch the Layering Effect on Your Taxes

A single large withdrawal or distribution doesn't just get taxed on its own, it can push more of your Social Security benefit into taxable territory and trigger higher Medicare premiums two years later, compounding the total cost beyond the income tax alone. This layering effect is one of the most commonly underestimated aspects of retirement income planning, and it's a strong argument for spreading large one-time withdrawals or Roth conversions across multiple years rather than taking them all at once, where your specific situation allows for that flexibility.

Building a Retirement Budget That Reflects Reality

Many retirees find spending doesn't decline as smoothly as expected, particularly in the first few years, when travel, hobbies, and home projects deferred during working years often increase spending before it eventually tapers. Build a first-year retirement budget based on your actual expected spending, not simply a percentage of your prior working income, and revisit it after a few months of real data rather than assuming your initial estimate was correct.

It's also worth budgeting explicitly for healthcare costs beyond standard Medicare premiums, out-of-pocket expenses, supplemental Medigap or Medicare Advantage premiums, dental and vision care (which Medicare generally doesn't cover), and prescription costs can add up to a substantial line item that's easy to underestimate when transitioning away from employer-sponsored health coverage.

First-Year Retirement Checklist

Confirm your Social Security claiming strategy and submit your application (generally recommended a few months before your intended start date)

Enroll in Medicare during your enrollment window if you're 65 or older and don't have qualifying employer coverage

Update tax withholding or set up estimated tax payments, since taxes are no longer automatically withheld from a paycheck

Review and, if needed, roll over old employer retirement accounts into an IRA for simpler management

Update your budget to reflect actual retirement income and spending, checking in after the first few months

Revisit your estate plan and beneficiary designations, since retirement often coincides with other life changes worth reflecting in these documents

Frequently Asked Questions