Retirement Retirement Planning

9 Essential Money Moves To Make in Your First Year of Retirement

Set yourself up for a successful retirement by taking these key steps.

By Adam Palasciano

Edited by Chris Kissell

Updated Jan. 22, 2025

Retirement marks a major life transition. While it's exciting to leave the daily grind behind, walking away from work also requires important financial decisions.

Getting started on the right financial footing will give you a better chance of avoiding common pitfalls.

Here are nine essential actions to help guide you through the process of crafting your retirement plan during your first year away from the job.

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Speak with a financial advisor

Retirement brings new financial considerations that differ from those of your working years. Speaking with a financial advisor early in retirement can help you assess your current situation, set realistic goals, and determine how to make savings last.

An advisor can help you decide the right time to start withdrawing from retirement accounts and offer personalized advice on managing income, taxes, and investments.

Having an expert by your side ensures you will have a plan tailored to your specific needs.

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Create a retirement budget

One of the first steps in planning for retirement is establishing a clear budget. Your spending patterns may change now that you are no longer working, and understanding how much you will need to cover basic expenses — such as housing, utilities, and health care — is key.

A budget can also help you determine how much discretionary income you have for travel, hobbies, or other activities. Factor in inflation and rising health care costs so that your budget will work for years to come.

Decide when to file for Social Security

Choosing the right time to file for Social Security can significantly impact your overall retirement income.

While you can start collecting benefits as early as age 62, waiting until full retirement age — typically 67 — can increase your monthly benefit amount dramatically.

Wait until age 70, and your monthly benefit will be even bigger. After that age, there is no advantage to waiting any longer.

During your first year of retirement, consider your health, life expectancy, and financial needs and decide when to file for Social Security.

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Revisit your investment asset allocation

As you enter retirement, your investment strategy should evolve to reflect new financial priorities and realities.

Most retirees shift toward a more conservative asset allocation, reducing the risk of significant losses. However, it's important not to abandon growth investments entirely, as you still need the portfolio to last throughout your retirement years.

Revisit your asset allocation with a financial professional to make sure it aligns with long-term goals and income needs.

Know how you will pull cash from your retirement accounts

How you withdraw money from retirement accounts can affect how much you pay in taxes and your overall sense of income security.

During the first year of retirement, create a clear withdrawal strategy. Every situation is different, and understanding the tax implications of withdrawing from an IRA, 401(k), and other retirement accounts is critical.

File for Medicare or explore other health insurance options

Health care is one of the biggest expenses in retirement, so it's crucial to get your insurance situation right.

If you are turning 65, enrolling in Medicare is a key step. If you retire before 65, you will need to find an alternative health insurance plan until Medicare kicks in.

Make sure to compare coverage options and understand what works best for your situation.

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Make sure you have a solid emergency fund

Retirement doesn't eliminate the need for an emergency fund. Unexpected expenses — such as medical bills, home repairs, or car fixes — can still arise.

Having a financial cushion will help you avoid dipping into retirement accounts too soon. Ideally, the emergency fund should cover at least three to six months of living expenses.

Decide whether to work part time

For many retirees, working part time offers both financial and personal benefits. You can both supplement your income and stay socially engaged at the same time.

Working part-time may also delay withdrawals from retirement accounts and help you put off filing for Social Security so you can get a bigger monthly benefit later in life.

Look for ways to cut costs

During your first year of retirement, it's wise to review expenses and see where you can cut back without compromising quality of life.

Downsizing your home, refinancing the mortgage, or committing to crush your debt are all ways to free up extra cash. Reducing unnecessary subscriptions, memberships, and other non-essential expenses can also add up over time.

By cutting costs where possible, you can stretch retirement savings further and enjoy more financial flexibility in the years to come.

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Bottom line

Your first year of retirement is a crucial time to set the financial foundation for the rest of your life.

By speaking with a financial advisor, creating a budget, and understanding how to manage income sources, you can position yourself for a comfortable and stress-free retirement.

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