For those approaching their last day of work, the months ahead are critical. If retirement is coming up soon, there are only a few months left to put yourself in a better position to cover living expenses after your paychecks go away. This is no time to coast—it's time to act strategically on three essential moves that could determine whether your retirement runs smoothly or hits unexpected financial turbulence.
First, get brutally honest about your monthly expenses. You need to understand how much you have to spend each month to maintain your lifestyle—or the lifestyle you wish to have in retirement, which could include more travel and new hobbies. Here's the hard truth: Social Security benefits can cover some of those costs, but that program isn't designed to cover all of your expenses. You will need other income sources like retirement savings accounts withdrawals, cash savings, taxable investment accounts and possibly some gig work to fully replace your paychecks. Don't assume money will appear when you need it—if you apply for Social Security after retiring, it will need some time to process.
Second, build a cash cushion before your final paycheck arrives. While retirees often have some guaranteed income sources that can make monthly expenses easier to cover, you will need monthly cash flow that can make up the difference if there are any gaps. A cash cushion that can cover up to a year or two of living expenses helps and makes it easier to stay invested in the stock market. This isn't hoarding—it's smart planning that prevents panic selling during market downturns.
Third, map out your withdrawal strategy now. If you have multiple retirement accounts—such as traditional, Roth and taxable brokerage accounts—you will have to map out which ones you withdraw from first. Roth accounts offer tax-free withdrawals, while traditional individual retirement accounts (IRAs) and 401(k)s will eventually have required minimum distributions. Taxable brokerage accounts incur taxes for capital gains and dividends. A tax professional or financial advisor can help you create a plan so you know how to access funds from each of those accounts. If you are still on a payroll, you have a few more months to boost your savings and max out your retirement account contributions.
Finally, don't ignore taxes and healthcare. Taxes can catch some people by surprise, though you can minimize tax surprises by requesting that Social Security withhold a portion of each check for taxes. Health care costs are often another big shock for retirees who run into health issues. It's important to plan for these expenses and determine what health insurance you can use. The combination of these three moves—expense planning, cash reserves, and strategic withdrawals—transforms retirement from a financial gamble into a manageable transition.