Retirement is an exciting milestone and a well-earned one! As your retirement date approaches, it’s natural to start thinking about what comes next. Whether you’re planning to travel, spend more time with family, try something new, or simply enjoy a slower pace, taking a few thoughtful steps now can help you feel more confident and in control of your transition to retirement.
The retirement planning checklist below highlights five key areas to focus on as you prepare for the next season of life. For additional tools, calculators, and educational resources, visit u.BPAS.com anytime.
1. Know When Your Benefits End
As you prepare for your final day of work, it’s important to understand how and when your workplace benefits will change. In many cases, benefits such as health insurance, dental, and vision coverage do not all end at the same time. Some may end on your last day of employment, while others may continue through the end of the month.
Confirming these details with your employer is an important first step. Knowing your exact coverage timeline can help you avoid unexpected gaps.
Health insurance, in particular, should be a top priority. Before your current coverage ends, consider scheduling any outstanding doctor appointments and refilling prescriptions. Taking care of these needs in advance can help reduce out-of-pocket costs later.
After your coverage ends, your options will depend on your age and eligibility.
- If you are under age 65, you may consider continuing your current coverage through COBRA, enrolling in a spouse’s employer plan, purchasing coverage through the Health Insurance Marketplace (healthcare.gov), or electing retiree medical benefits if offered by your employer.
- If you are age 65 or older, you will be eligible for Medicare and should enroll through Social Security. Many individuals also explore supplemental coverage options such as Medigap or Medicare Advantage plans to help manage additional costs.
- Veterans may also qualify for healthcare benefits through the VA.
In addition to medical coverage, it’s important to also review your other workplace benefits. Your dental and vision coverage may have limited time remaining, so scheduling appointments before your benefits expire can be beneficial and save you some out of pocket expenses. If you have employer-sponsored life insurance, you may have the option to convert your policy to an individual plan. It’s important to note that in doing so, your premium may be higher.
Finally, be sure to keep your employer’s contact information on file in case questions arise after your retirement date.
2. Use Your HSA and FSA Wisely
Healthcare reimbursement accounts can play an important role in your retirement transition, but it’s essential to understand how they work.
A Flexible Spending Account (FSA) typically operates under a “use it or lose it” rule. As your retirement date approaches, spend down these funds for eligible medical expenses, prescription refills, or over-the-counter healthcare items. (Shop FSA eligible items here) In most cases, any unused funds will be forfeited on your last day of employment. Check with your employer for your plan details.
A Health Savings Account (HSA), on the other hand, offers more long-term flexibility. Your HSA funds remain yours even after you retire, and any unused balance rolls over from year to year. Many individuals choose to use their HSA as a long-term savings tool to cover qualified healthcare expenses, including Medicare premiums, in retirement.
One important caveat: to avoid any tax penalties, you should stop contributing to your HSA at least six months prior to applying for Medicare. This is because Medicare Part A coverage is backdated up to six months. After you are enrolled in Medicare, you are no longer eligible to contribute to an HSA. However, you can continue to use the funds already in your account. Visit u.bpas.com for more information.
3. Review Your Budget
A retirement lifestyle often brings changes in both income and spending. Taking time to review your budget now can help you better understand what to expect and avoid surprises later.
Start by evaluating your monthly expenses, including housing, utilities, groceries, insurance premiums, and healthcare costs. Healthcare, in particular, may become a larger expense, especially if you retire before becoming eligible for Medicare.
It is also important to understand the timing of your income sources. Consider when you plan to begin collecting Social Security, when you will take distributions from your retirement accounts, and whether there may be a gap between your final paycheck and your first retirement income payment.
In addition, your lifestyle may shift in retirement. While some costs, such as commuting or work-related expenses, may decrease, others—such as travel, hobbies, or leisure activities may increase. Building a short-term savings cushion can help cover any unexpected expenses or timing gaps.
A thoughtful, realistic budget can go a long way in helping ensure your savings last throughout retirement.
4. Decide What to Do with Your Retirement Accounts
After years of saving, one of the most important decisions you will make is how to manage your retirement accounts. The choices you make can affect your taxes, fees, flexibility, and long-term financial outlook, so it’s important to explore your options, prepare for the transition and think ahead.
Step 1: Start by understanding your options
Workplace retirement plans and Individual Retirement Accounts (IRAs) offer a variety of distribution options. Before taking a withdrawal, consider the potential tax implications and review your choices carefully. Additional information is available at https://u.bpas.com/retirement-plan-withdrawal-options/. While there is no specific timeline for withdrawing assets, Required Minimum Distributions (RMDs) generally begin at age 73 for pre-tax accounts. If you have a pension, be sure to review your payout options, including lump sum versus monthly payments, survivor benefits, and your long-term income needs.
Step 2: Preparing for the transition
Before retiring, it’s also important to make sure you have enough savings set aside to cover at least three months of expenses. There may be a delay between your final paycheck and the start of Social Security, pension payments, or retirement plan distributions. Having sufficient funds in your checking or savings account can help provide peace of mind during this transition period.
While it may be tempting to take a large lump-sum distribution early in retirement—for example, to pay off debt or fund a major expense—keep in mind that withdrawals from pre-tax accounts are taxed as ordinary income. Taking a large distribution in the same year that you have employment income could push you into a higher tax bracket. Consulting with a tax professional can help you plan more effectively.
Step 3: Building a long-term distribution strategy
Long-term distribution planning is equally important. Questions such as how much to withdraw each year, which accounts to draw from first, and whether your savings will last require careful consideration. Retirement also involves an emotional shift from saving to spending, which can feel uncertain. Working with a financial advisor can help you create a sustainable strategy, evaluate different scenarios, and plan for both expected and unexpected expenses.
5. Plan for the Transition
While financial preparation is essential, retirement is also a significant lifestyle change. Thinking about how you will spend your time can help you transition more smoothly and maintain a sense of purpose. Consider what your daily routine might look like once you are no longer working. Many retirees find it helpful to establish new routines that provide structure to their days.
Staying socially connected is also important, whether through family, friends, community involvement, or volunteer opportunities. Retirement can be a great time to revisit personal goals or explore new interests. Whether it is traveling, learning a new skill, or pursuing a long-time hobby, having something to look forward to can make this new season of life even more fulfilling.
Retirement is one of life’s most meaningful milestones, and a little preparation can make a big difference in how you experience it. By taking the time to plan ahead, you can help ensure a smooth transition and shift your focus from work-life to relaxed-life — enjoying the future you have worked so hard to build.
For additional support, planning tools, and educational resources, visit u.BPAS.com and take the next step with confidence.