6 Money Moves You Must Make in Your First Year of Retirement

Congratulations! You’re finally retired, but it’s important to remember that your first year of retirement is one of the most important financial transitions of your life. After decades of earning a steady paycheck, you need to quickly step down and manage your retirement income, taxes, budgeting, and long-term planning in a whole new way.

To help you navigate this new chapter with confidence, here are six essential money moves every retiree should make during their first year of retirement. These expert-recommended steps can help you build a stable financial foundation, further grow your savings, and enjoy retirement with peace of mind.

Hopefully, you have a strict budget in place before you retire. However, the first few months of living on savings is the time to pay attention and really start tracking your expenses.

The most important part of budgeting is understanding where your money is going each month and where you can make edits to fit your new regular income. There may even be areas where you can cut back and others where you want to spend a little more.

CHECK: The minimum retirement savings you actually need, experts say

Good for You: 5 Smart Ways for Retirees to Make Up to $1,000 a Month from Home

You may already have your health insurance coverage figured out, but if not, you need to address it sooner rather than later. For example, if you are not yet eligible for Medicare and your employer does not provide ongoing health insurance, you will need to look for other options.

Start exploring the health insurance marketplace to get a jump start on changes in Medicaid costs and coverage, as well as future developments in long-term care. No matter which path you go, it’s important to make sure your health insurance is in order so you don’t have a single emergency wipe out your savings.

Market fluctuations can be even more daunting when you retire. Make sure your retirement investments are allocated correctly and fit your time frame and risk level.

For example, you might prefer to hold more of less risky assets, such as bonds and cash equivalents. If the market falls, they are less likely to fall with it because they are less volatile. However, that doesn’t mean you shouldn’t hold any stocks, as your savings may need to last another 20 to 30 years after you retire.

Yes, stocks are more volatile, but they also tend to have the highest returns over time. Being too conservative could put you at risk of depleting your retirement savings prematurely.

If you haven’t figured it out yet, it’s time to figure out your Social Security strategy — and when you’ll start collecting benefits. Determining the best age to start collecting Social Security often depends on how much you need each month and for how long.

In 2026, if you delay taking Social Security benefits until age 70, your maximum monthly Social Security benefit will be about $5,200. However, drawing a pension at full retirement age (FRA) at age 66 or 67 will result in approximately $4,152 per month, and at age 62, approximately $2,969 per month.

It’s important to understand how your taxes differ when you retire versus when you work. Your 401(k) or other tax-deferred retirement account may make you feel like you have more money than you actually have, but never forget the taxman.

The tax rate you pay on traditional IRA and 401(k) withdrawals will be your ordinary income tax rate. If you’ve been saving in a Roth IRA, where your contributions are taxed up front, you don’t have to worry about taxes on that money in retirement as long as you hold the account for at least five years.

It’s also important to understand taxes when you start receiving Social Security benefits. Keep in mind that these fees are adjusted for inflation every year, so it could put you into a higher tax bracket a few years after you imposed it.

No one understands your retirement situation better than you, but often no one is better able to explain it to you in an actionable and clear way than a financial advisor. While you should continue your financial education, especially during your first years of retirement, that doesn’t mean you shouldn’t seek expert advice. Just because your earning years are over, doesn’t mean your learning years are over, too.

Having a reliable financial advisor can help you invest for the long term and plan for your dream retirement. Knowing how to best use your money can empower you to make important financial decisions, such as when to start collecting Social Security or whether to convert your money to a pension. Everyone’s retirement situation is different, and a financial advisor will help you balance spending and saving responsibly while still making the most of your golden years.

Nicole Spector contributed reporting to this article.

More from GOBankingRates

This article originally appeared on GOBankingRates.com: 6 Money Transfers You Must Make in Your First Year of Retirement