Retirement Advice: 5 Things to Consider Before Retiring

The most recent Employee Benefit Research Institute data reports that two-thirds of workers surveyed feel confident they’ll have enough money to live comfortably in retirement. However, only 24% of working people surveyed felt “very confident” in their ability to do so.

This article, likewise, covers significant financial decisions you’ll need to make—before retirement—to feel more assured about your golden years.

1. Plan for healthcare after you stop working

According to a recent Fidelity report, a 65-year-old retiring this year would need to spend an average of $165,000 in after-tax savings to cover medical expenses during retirement: a number that’s doubled since 2002 and expected to continue increasing. Steps you can take to help cover some of these costs include…

Creating a bridge to Medicare

If you retire before becoming eligible for Medicare (typically at age 65 for most people) and lack coverage through another group plan, you’ll need to bridge this gap. Unfortunately, such options don’t come cheap—especially if you don’t qualify for premium tax credits via Affordable Care Act insurance exchanges. One option to consider is COBRA coverage, which gives workers and their families who lose health insurance the right to continue group benefits. COBRA coverage is only temporary, however, and typically limited to 18 months.

Filling in Medicare gaps

Medicare Parts A and B, known as "Original Medicare," don’t cover all healthcare-related expenses. In fact, the program has significant gaps that require planning to prevent healthcare costs from derailing your retirement plans. That’s where Medicare Advantage, Medigap plans, and long-term-care options (to be discussed shortly) come into play, helping in this respect.

Considering health savings accounts (HSAs)

A health savings account (HSA) allows you to pay for qualified out-of-pocket healthcare expenses including deductibles and copays. Eligible expenses often loop in a wide range of costs such as Medicare premiums, long-term care costs, and dental and vision care for yourself, your spouse, and/or eligible dependents. Although not everyone qualifies for an HSA, it’s often an attractive investment option for future medical expenses and sometimes used as a de facto retirement account since contributions can roll over from year to year and be used later in life when you may face higher medical costs as a retiree.

Planning for long-term care expenses

It’s important to consider long-term care expenses not covered by Medicare and other public programs. Even if you qualify for Medicaid, you may be restricted to only facilities that accept program payments. According to the U.S. Department of Health and Human Services, a person celebrating a 65th birthday today has nearly a 70% chance of needing some form of long-term care (LTC) services in his or her remaining years. Women are at higher risk and expected to need 3.7 years of care compared to 2.2 years for men, with an estimated 20% of current 65-year-olds requiring care for more than 5 years.

Costs associated with long-term care add up quickly. According to Genworth, a national insurance company, annual median home health aide costs ring in at approximately $80,000. A semi-private nursing home room, meanwhile, costs over $111,000 per year. Given this data, long-term care expenses will likely impact your retirement—so you’ll need to plan accordingly but do thankfully have a few options to cover long-term care costs.

2. Decide what to do with your home

Housing represents, by far, the largest expense for retiree households. If you need additional funds for retirement, downsizing your home is often an effective way to unlock any equity you’ve built—especially true if you’re moving to an area with a lower cost of living. Should you pursue this route, consider taking the following steps to align your profit expectations with reality…

Don’t overestimate your home’s worth

It's important to accurately estimate your home's current value to avoid overestimating its worth. There are several ways to do this.

While online estimators often provide quick results, their accuracy is often lacking. For example, Zillow acknowledges a median error rate of over 7% for off-market homes—meaning their estimates will likely either overvalue or undervalue yours, this margin of error particularly significant in areas outside of large cities where the turnover rate is lower.

Fortunately, local real estate agents can deliver more accurate appraisals because they consider assessed values, comparative sales, and unique home features and upgrades that online algorithms often miss. You can also consult your realtor for tips on how to maximize your home's value, but the best option is often to hire a professional appraiser. Although this may cost a few hundred dollars, an appraiser will thoroughly evaluate each and every property feature impacting its value.

Consider repairs and closing costs

A buyer can request modifications or repairs following a home inspection; aside from cosmetic changes or upgrades, the seller may be responsible for addressing issues such as pest damage or those associated with the electrical system, plumbing, roof, or foundation. Closing costs, meanwhile, can range from 2% to 5% of the home's sale price and may include mortgage balance payments, property transfer taxes, recording fees, and attorney fees. Sellers must also cover real estate commissions at closing, amounting to as much as 6% of the home's sale price.

Don’t forget about taxes

It’s also important to evaluate any potential tax implications associated with the sale of your home, knowing that Uncle Sam allows most couples to exclude up to $500,000 in gains from their taxable income (depending on how long they’ve lived in the home).

3. Determine when to collect Social Security

For many retirees, Social Security comprises a significant source of their income if not acting as their primary source. In fact, among Social Security beneficiaries age 65 and older, 39% of men and 44% of women receive 50% or more of their income from these payments. Be sure to familiarize yourself with the following aspects of the program.

Delaying benefits to boost payments

While you can start collecting Social Security benefits as early as age 62, waiting until you reach your full retirement age (the age at which you’re entitled to your full benefits) will result in a higher monthly amount—with benefits increasing by about 7% for each year you delay claiming them until reaching your full retirement age. If you choose to wait even longer, your benefits will increase by approximately 8% for each year between your full retirement age and age 70.

Maximizing Social Security earnings

Though calculated using a complex formula, Social Security benefits are generally based on your highest 35 years of covered earnings (wages on which you’ve paid Social Security or payroll (FICA) taxes) and the age at which you begin receiving benefits. As of 2025, the maximum monthly payout is $5,108. If you lack a complete 35-year work history, Social Security will still account for non-work years by entering a zero for each year with no reported earnings. It’s important to raise your lifetime income average to maximize your benefits, which you can do by replacing years of zero or low income with higher earnings until you begin collecting benefits—a strategy that will help ensure you receive the maximum amount owed to you.  

Collecting while working

While working is sometimes a smart way to pass the time as a retiree—giving you a sense of purpose and structure and generating additional income—collecting a paycheck can indeed impact your Social Security benefits. The good news is that you can work and collect Social Security benefits simultaneously, but keep in mind that working prior to your full retirement age can temporarily reduce the dollar amount of your monthly Social Security check if you earn more than the yearly earnings limit set by the Social Security Administration.

Based on 2026 limits, the SSA will deduct $1 from your Social Security benefit payments for every $2 you earn above the annual earnings limit if you fall under full retirement age for the entire year. Moreover, they’ll deduct $1 for every $3 you earn above the limit if you work during the year you reach full retirement age. If you’re still working when you reach full retirement age, your earnings no longer reduce your benefits no matter how much you earn. Note that you won’t actually lose your benefits in any of these scenarios; they’re technically just deferred and then credited per monthly benefit amount tweaks in the month you reach your full retirement age.

4. Ensure you won’t outlive your retirement savings

Throughout most of your life, you’ve naturally spent money based on your income. Making the psychological adjustment to instead spend based on your savings during retirement is, in turn, challenging. Creating a plan before you retire will give you a clearer understanding of how much you can afford to spend during your golden years. As a reference point, the latest Bureau of Labor Statistics data indicates that the average retiree household—led by someone aged 65 or older—spends an average of $60,087 per year! In 2016, meanwhile, annual spending rang in at only $45,756; this number will therefore only increase the further you are from retirement, making it crucial to prepare accordingly per the following tips…

Develop a tax-efficient withdrawal strategy

Withdrawing your funds in a tax-efficient manner—selecting which accounts to draw from and when—can help preserve more of your wealth and potentially enhance your retirement lifestyle. While you can consider several tax-efficient withdrawal strategies, know that a one-size-fits-all “best” strategy unfortunately doesn’t exist; the right option for you will depend on a variety of factors and perhaps involve a combination of several strategies.

Reduce downside risk with your investments

It’s important to adopt a more conservative investing strategy as you approach retirement—especially after you turn 60—which typically involves reducing exposure to stocks as they’re known for their volatility. Should a significant and prolonged decline hit the stock market, you may not have the luxury of awaiting a recovery to recoup any losses (thus putting your financial stability at risk with a much smaller nest egg available to pull funds from in retirement).

While everyone's financial situation is unique, a common guideline is to subtract your age from 100 (or 110 for a more conservative approach) when deciding how to allocate your investments; the resulting number represents the percentage of stocks in your portfolio, with the remaining portion comprised of bonds and certificates of deposit (CDs).

Understand RMDs

As you approach retirement, you'll likely hear more about required minimum distributions (RMDs): the minimum amount you must withdraw from certain tax-deferred retirement accounts beginning at age 73 (increasing to age 75 in 2033). These rules apply to all employer-sponsored retirement plans including 401(k), 403(b), profit-sharing, and 457(b) plans as well as traditional IRAs and IRA-based plans (e.g., SEPs, SARSEPs, and SIMPLE IRAs) and Roth IRA beneficiaries.

If your contributions to these accounts were tax-deductible, your RMDs are taxed as ordinary income in the year you take distributions—subjecting them to the same tax rate as your wages, interest income, and short-term capital gains. Those unfamiliar with RMDs can thus find themselves with less money during retirement than their more informed peers, with the additional income perhaps also triggering Medicare surcharges assessed after you hit specific gross income thresholds.

Consider an annuity

When planning for retirement and if you're particularly concerned about running out of money, you might want to consider an annuity—which can provide a guaranteed income stream for life as a reassuring option. Keep in mind, however, that annuities aren't suitable for everyone and should usually only be considered after you’ve maximized contributions to all other retirement accounts.

5. Identify if you’re on track for retirement

As you can see, there’s so much to consider prior to retirement; we recommend working with a financial advisor who can take a deep dive into your finances and investments to identify how likely you are to reach your goals in this respect. If you aren’t in fact on track, he/she can provide actionable steps to get you where you need to be (something a calculator can’t do). Working with an advisor will also give you more confidence in your calculations and corresponding plan.

You can also check out our dedicated “Am I on Track?” service, which will collect your financials and gather insights about your own unique retirement goals and then churn out an actual score (from 0 to 100) indicating how likely you are to reach them. Not on track? We’ll outline actionable steps to steer you in the right direction.

In sum: things to consider before retiring

If retirement is on your horizon, you’ll need to make several corresponding decisions—none of which should be taken lightly as they’ll likely affect your finances for years to come.

Have questions about retirement? Schedule a FREE discovery call with one of our CFP® professionals to get them answered.

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Vision Retirement is an independent registered advisor (RIA) firm headquartered in Ridgewood, New Jersey. Launched in 2006 to better help people prepare for retirement and feel more confident in their decision-making, our firm’s mission is to provide clients with clarity and guidance so they can enjoy a comfortable and stress-free retirement. Schedule a no-obligation consultation with one of our financial advisors today!

Disclosures:
This document is a summary only and is not intended to provide specific advice or recommendations for any individual or business.

Fixed and variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Withdrawals made prior to age 59½ are subject to a 10% IRS penalty tax, and surrender charges may apply. Variable annuities are subject to market risk and may lose value. Riders are additional guarantee options available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and policyholders should review their contract carefully before purchasing. All guarantees are based on the claims-paying ability of the issuing insurance company.