Ready to Retire? Here Are Four Tips for the Transition
Before you take the retirement plunge, you might want to make sure each of these things is addressed so you can focus on enjoying your golden years.
![An older couple smile at each other while preparing a meal together.](https://cdn.mos.cms.futurecdn.net/VM7jcR95sHVa47Qzp3DfZm-415-80.jpg)
You’ve worked hard for decades planning for your retirement, and now you’re ready to enjoy the results of that hard work. Making this transition can come with its adjustments, both to your lifestyle and your day-to-day finances.
Here are four tips for making the transition from full-time work to retirement:
1. Understand spending changes.
In retirement, your spending typically has the largest impact on how much money you are able to save. This is why it’s important to plan ahead and create a retirement spending strategy in advance. If you work with a financial adviser, they can help you think through your potential options as you’re going through this important transition and build a strategy that is custom-tailored to your unique needs. You should also consider working with a tax professional to help you understand your different accounts and strategically plan for your various account withdrawals.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Contrary to what most people might expect, spending tends to increase in the initial months of retirement. With your entire day free, you may find yourself spending more money during the day than you did when you were working. Don’t panic: Once you adjust to your new routine, your spending may settle down.
2. Thoughtfully time your Social Security benefits.
There are a lot of questions around when to start taking Social Security benefits. The optimal timing will depend on the person and their specific situation.
Sixty-two is the earliest permissible age to start taking Social Security benefits. Keep in mind that your benefits are reduced if you begin taking them before you reach your full retirement age, which is between 66 and 67 depending on your year of birth. If your benefits are reduced, this reduction is permanent and will impact your benefits for the rest of your lifetime. If you delay taking your benefits, you can receive an 8% annual credit for every year that you delay through age 70. So if your full retirement age is 67, and you delay taking Social Security benefits until 68, you would receive 108% of your basic benefit. If you delay until you’re 69, it would be 116%, and so on.
When deciding whether to delay your benefits, you should consider your longevity and the impact on spousal benefits if you are married. For some people, it can make sense to file for benefits before reaching their full retirement age if their benefit as a spouse is higher than their own benefit. For others, it might make sense to delay if they are able to.
It’s important to understand your options and the resulting consequences. For example, filing for Social Security benefits can also trigger your qualification for other benefits, such as Medicare. If you apply for benefits before you are 65, you will automatically be enrolled in Medicare once you turn 65 — even if you have other insurance and may not want Medicare coverage.
3. Assess the costs of Medicare and long-term care.
If you aren’t covered by private insurance, you should understand what is covered by Medicare, how Part D (drug coverage) works and how Part D interacts with Social Security. And if you don’t already have long-term care insurance, look into coverage options and pay close attention to the terms and costs of any policy you consider. You should also speak with a professional about the relative costs and benefits between Medicare Advantage or Original Medicare with Medigap (supplemental insurance).
4. Review your portfolio.
The months leading up to retirement can be a good time to review your portfolio allocation, especially if you expect to live off of your portfolio’s earnings. If you’re close to reaching the age to start taking required minimum distributions (RMDs) from your retirement accounts, you should think about whether you want to implement a different allocation for your taxable accounts and tax-deferred assets.
Some factors to consider:
- When you plan to start taking distributions from your retirement assets and how long you plan to take them
- If you anticipate your marginal tax rate will be higher or lower further into retirement
- Whether you can use qualified charitable distributions (QCDs) to fulfill your required distributions
- If you have enough income and assets to fund your expenses before drawing from your tax-deferred accounts
Entering retirement is a significant life milestone, and it can come with its adjustments. Planning ahead, and keeping these key considerations in mind, can help make the transition easier.
JPMorgan Chase & Co., its affiliates, and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.
J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Adam leads J.P. Morgan Wealth Management's Wealth Planning and Advice team, which is responsible for wealth planning, thought leadership and strategic planning for individual clients. This national team of former practicing lawyers provides experience in estate and tax planning strategies, retirement planning, restricted and control stock and stock option management, business succession planning, pre- and post-transactional planning, concentrated position management and other personal planning strategies. The team provides internal training to the J.P. Morgan Wealth Management sales force on these topics and also creates content for distribution to the public.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published