If you're retiring soon, you have a few months to prepare for life without regular paychecks.
Start by calculating your monthly expenses and identifying income sources to replace your salary. Social Security covers some costs, but you will need other sources like withdrawals from retirement savings accounts, cash savings, taxable investment accounts, and possibly gig work. Social Security applications take time to process, so your income may not arrive immediately after you leave your job.
Next, create a spending plan using your savings. A cash cushion covering one to two years of living expenses helps you stay invested in the stock market while covering gaps. If you have multiple retirement accounts, map out which ones to withdraw from first. Roth accounts offer tax-free withdrawals. Traditional IRAs and 401(k)s face required minimum distributions and taxes. Taxable brokerage accounts incur taxes on capital gains and dividends. A tax professional or financial advisor can help you build this plan. If you're still earning a paycheck, use the remaining time to max out your retirement contributions.
Finally, prepare for taxes and health care. Request that Social Security withhold taxes from each check to avoid surprises. Health care costs shock many retirees. Medicare enrollment begins three months before you turn 65, with an initial enrollment period lasting seven months. Missing Medicare deadlines can create coverage gaps or penalties. Consider Medicare, retiree health coverage, COBRA, a spouse's plan, or Affordable Care Act coverage. Account for premiums, deductibles, long-term care needs, and other health expenses before you retire.