Retirement-Readiness Checklist: 10 Steps to Prepare for the Next Chapter

Start by tracking your income and expenses for a couple of months. Next, figure out how much money you’ll need to support your chosen lifestyle in retirement. (The AARP Retirement Calculator can help.)

You’ll also want to do a checkup on your investments (Is your portfolio diverse? Are you paying a ton in fees?) and make sure your budget accounts for paying down debt.

A general rule of thumb is to aim for 80 percent of your preretirement salary to maintain your current lifestyle. Social Security typically replaces about 40 percent of the average retiree’s work earnings, so you’ll need to supplement your benefits with other income sources.

As we age, health care costs tend to take up a larger portion of our spending. People age 65 and older make up about 18 percent of the U.S. population but account for 38 percent of health care spending, according to tracking by KFF and the Petersen Center on Healthcare. To help cover these expenses, consider options such as taking on a part-time job, selling some of your things or downsizing to a smaller home.

Keep in mind that the 80 percent guideline doesn’t account for spending on extras like travel or hobbies, and that discretionary spending tends to be higher in the early years of retirement, when you are more likely to be healthy and still raring to go.

Step 5: Decide when to start Social Security

For many retirees, deciding when to draw Social Security is the single most important financial decision. Among beneficiaries 65 and older, 43 percent get at least half of their income from Social Security, and 20 percent rely on it for 90 percent or more of their income, according to AARP research.

The age at which you claim Social Security significantly affects your monthly payment. You can start as early as 62, but doing so permanently reduces your benefit by up to 30 percent. Waiting until full retirement age (FRA), which is 67 for people born in 1960 and later, gets you 100 percent of your benefit. If you delay beyond FRA, your benefit grows each month until age 70.

Financial advisers generally counsel delaying your claim to lock in a bigger benefit, especially if you’re in good health and can reasonably expect a lengthy retirement. The average life expectancy for an American who reaches age 65 is about 17.5 years for men and 20 years for women, according to Social Security actuarial data.

Step 6: Decide if you want (or need) to work

Whether due to financial necessity or lifestyle choice, work is increasingly part of Americans’ “retirement” plans. The share of people ages 65 to 74 who continue to work increased from 22 percent in 2004 to 27 percent in 2024 and is projected to reach nearly 30 percent by 2034, according to the federal Bureau of Labor Statistics.

Don’t wait until you retire to determine if work is part of your plan, and to what extent. Take time now to weigh the options: Full-time, part-time or freelance? Stick with your career, or try something new? Are you doing it mainly for the money or to maintain a sense of purpose?

Keep in mind, too, that if you plan to claim Social Security before full retirement age, you are subject to Social Security’s “earnings test,” which temporarily reduces your benefit payments if you earn over a certain amount from work. The sooner you get comfortable with your choices and what they could mean financially, the more secure you will be in your retirement planning.

Step 7: Network — online and offline

If you're planning to work in retirement — whether part-time, freelance or in a new field — building and maintaining relationships is key. Cultivate connections in your community and professional circles. Use LinkedIn or local groups to find opportunities for purpose-driven work, volunteering or even new hobbies. It’s OK to brag a little to those who might help you fulfill your retirement goals.

Spend an hour a day on LinkedIn, Reddit or Facebook connecting with people who share your skills and interests. Or start a Zoom group to discuss ideas with other soon-to-be retirees. The more socially active you are, online and offline, the more opportunities you will create for yourself.

As you network, be prepared to have clear, direct answers to questions like, “How can you use your talents and experience to contribute part-time to an organization or cause?”

Step 8: Find new ways to cut your expenses

Audit your subscriptions, insurance and everyday spending. That doesn’t mean all your extra cash has to go into retirement accounts — but it’s never a bad time to cut your expenses and sock away some of the savings. List out your bills and look for ways to trim them. Maybe you don’t need to subscribe to four streaming services or eat out three nights a week. Even losing one movie night a month can bring you closer to your retirement goals.

Step 9: Plan for the unexpected

Few of us head into retirement expecting the worst, but sometimes it happens. Now is the time to build a robust emergency fund and review your insurance policies (home, umbrella, disability) to make sure you’re adequately covered.

Take time to consider how you’d respond to, and pay for, everything from minor issues like a roof leak to serious ones like a grave illness. Discuss the big issues with those closest to you: What would you want or need done in case of a medical emergency? Do you have resources for long-term care (which isn’t covered by Medicare)? Consider how you’d pay for care and who could help if you need assistance with daily activities.

Put your estate plan in good order. Create or update your will, powers of attorney (financial and health) and advance directives. Check beneficiary designations on retirement accounts and life insurance — they control who inherits these assets and should align with your will. Be aware of post-SECURE Act rules for inherited IRAs: In most cases, heirs other than a spouse must withdraw the full balance within 10 years, which can a large tax bill on sizable accounts.

Step 10: Stick to the plan and revisit it

We’re creatures of habit, and it’s common to revert to old ways even when seeking a new course. That can make sticking to your retirement plan a challenge. But it’s definitely rewarding.

Don’t be afraid to ask questions and seek advice, including from professionals. These days, you don’t have to be a millionaire to work with a financial planner. They can help you stay the course when your emotions threaten to take control of your financial decisions.

Saving strategies for 2026

• Max out tax-advantaged accounts: Most workers age 50 and older can contribute up to $32,500 to a 401(k), 403(b) or 457 plan in 2026 — that’s the $24,500 base limit plus an $8,000 catch-up contribution. Those ages 60 to 63 have a higher catch-up limit — $11,250, bringing their maximum to $35,750.
• IRAs offer added flexibility, especially if you’re over 50 and want options beyond your workplace plan. IRA contribution limits in 2026 are $7,500 for savers under 50 and $8,600 for those age 50-plus.
• Leverage health savings accounts (HSAs). HSAs provide triple tax advantages. For 2026, the limits are $4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up if you’re 55 or older and not yet enrolled in Medicare. HSAs can fund future medical expenses tax-free, including medicare premiums and long-term care.
• Understand required minimum distributions (RMDs). Most people must begin RMDs at age 73. Your first withdrawal is due by April 1 of the year after you turn 73, and then annually by Dec. 31. Missing an RMD can trigger a 25 percent penalty on the amount you should have withdrawn. AARP offers a free RMD calculator to help you plan ahead.

The key takeaways were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.