Retiring in 2022? 5 Ways to Start Off on the Right Foot

The decision to leave the workforce for good is a big one. Not only does retiring mean giving up your paycheck, but it also means changing your lifestyle and schedule. If you’re planning to retire in the new year, here are a few moves worth making right away.

1. Set up a budget

Without a budget, you might struggle to spend appropriately, given your new financial circumstances. Take some time to see what your new set of expenses look like and how your bills compare to the income you have available.

Going through that process could inspire you to make some changes that help your financial picture improve. For example, if you see that housing will really eat up a huge portion of your income, you may make the decision to sell your home and downsize to a less expensive one.

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2. Figure out what withdrawal rate works for your savings

Ideally, you’ll be entering retirement with a decent sum of money in an IRA or 401(k) plan. But it’s important to establish a withdrawal strategy so you don’t deplete your nest egg prematurely. Think about your investments, life expectancy, and income needs, and figure out what withdrawal rate gives you access to adequate income without going overboard.

3. Research your Medicare-plan options

Healthcare could end up being one of your most significant retirement expenses. If you’ll be enrolling in Medicare, take some time to review your options.

For some seniors, original Medicare, which consists of Parts A, B, and D, is the right choice. For others, a Medicare Advantage plan could be more cost-effective while offering better coverage.

4. Strategize about your Social Security filing

You’re allowed to sign up for Social Security as early as age 62. But you won’t get your complete monthly benefit based on your wage history until you reach full retirement age, which kicks in at 66, 67, or somewhere in between, depending on your year of birth.

You can also delay your filing past full retirement age and boost your benefit in the process. Think about how much money you need to get out of Social Security to land on the right filing age.

5. Determine what taxes you’ll owe

Taxes can be a huge burden during retirement, and many senior income sources are subject to them. Take a look at your income streams, and see which ones the IRS might get a piece of.

If you have savings in a traditional IRA or 401(k), you’ll be taxed on your withdrawals. And depending on your total income, a portion of your Social Security benefits may be taxed, as well. It’s better to figure out your tax situation early on so you can strategize around it or work with a professional to lower that burden.

The moves you make at the start of retirement could set the stage for many years of financial flexibility. If you’ll be retiring in the new year, aim to tackle these key tasks right away. Doing so could spare you a world of money-related worries down the line.

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