6 Money Moves You Must Make in Your First Year of Retirement

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Congratulations! You have finally retired, but it’s important to remember that your first year of retirement is one of the most important financial transitions you’ll ever make. After decades of earning a steady paycheck, you need to quickly downshift to manage retirement income, taxes, budgeting and long-term planning in a whole new way.

To help you confidently navigate this new chapter, here are six essential money moves every retiree should make in their first year of retirement. These expert-recommended steps can help you create a stable financial foundation, stretch your savings further and enjoy retirement with peace of mind.

1. Start Tracking Your Expenses 

Hopefully you’ve already made a strict budget leading up to your retirement. However the first few months into living off your nest egg is the time to pay attention and really start really tracking your expenses.

The most important part of budgeting is understanding where your money is going each month, and where you can edit to accommodate your new fixed income. There may even be areas you can cut back and others where you want to splurge a little more.

2. Secure Healthcare Coverage 

You may have already sorted out your healthcare coverage, but if not, you need to figure that out sooner rather than later. For example, if you are not eligible for Medicare yet and your employer does not offer continued access to healthcare coverage, you will need to look into alternative options. 

Start exploring the Health Insurance Marketplace to get a jumpstart on navigating changing costs and coverage of Medicaid, and what long-term care will look like down the line. No matter which route you go, it’s important to get your healthcare coverage in order so you don’t deplete your savings with one emergency.

3. Make Sure Your Retirement Money Is Allocated Properly

Market swings can be extra daunting when you’re in retirement. Make sure your retirement investments are properly allocated and align with your time frame and risk level.

For example, you may prefer to hold a greater portion of less risky assets, like bonds and cash equivalents. If the market drops, they are less likely to drop with it as they are less volatile. However, this doesn’t mean you shouldn’t hold any stocks, as your savings may need to last you another 20 to 30 years in retirement. 

Yes, stocks are more volatile, but they also tend to have the highest return over time. Being too conservative may have you running the risk of depleting your retirement savings too soon. 

4. Plan Your Social Security Strategy

If you haven’t already figured it out, it’s time to nail down your Social Security strategy — and when you’ll start collecting benefits. Determining the best age to start taking Social Security generally comes down to how much you need each month and for how long you’ll need it. 

In 2026, if you delay claiming until age 70, the maximum Social Security benefit is around $5,200 a month. However, claiming at full retirement age (FRA) of 66 or 67 yields about $4,152, and age 62 gives roughly $2,969 monthly.

5. Understand Your Tax Responsibilities  

It’s important to understand how your taxes will be different in retirement than they were in your working years. Your 401(k) or other tax-deferred retirement accounts might make you feel like you have more money than you do, but never forget the tax man. 

The tax rate you pay on your traditional IRA and 401(k) withdrawals would be your ordinary income tax rate. If you have been saving in a Roth IRA, where your contributions were taxed up front, you won’t have to worry about taxes on that money in retirement, as long as you have held the account for at least five years.

It’s also important to understand taxes when you start collecting Social Security benefits. Keep in mind that these are adjusted annually with inflation, so it could bump you into a higher tax bracket years after you have been collecting for a while.

6. Consult With a Financial Advisor 

No one knows your retirement situation better than you, but often, no one can explain it to you in an actionable and clear way better than a financial advisor. Even though you should continue your financial education, especially in your first year of retirement, it doesn’t mean you shouldn’t seek out expert advice. Just because your earning years are over, doesn’t mean your learning years are too. 

Having a solid financial advisor can help you with the long-term investing and planning of your dream retirement. Understanding how to best utilize your money can push you to make important financial decisions, like when to start collecting Social Security or whether to convert your money to a pension. Everyone’s retirement situation is different, and a financial advisor will help you balance spending and saving responsibly while still getting the most out of your golden years. 

Nicole Spector contributed to the reporting for this article.

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