10 Steps to Take as You Prepare for Retirement

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 pre-retirement 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, rising from about 8 percent of total spending in midlife to over 15 percent in adults 75 and older, according to data from the Bureau of Labor Statistics (BLS). To help cover these expenses, consider options like 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, about 39% of men and 44% of women get at least half of their income from Social Security. About 12% of men and 15% of women rely on it for 90% or more, according to a 2025 Social Security Administration fact sheet.
• The age you claim affects your monthly benefit; the younger you claim, the less you’ll have later on. You can start as early as 62, but doing so results in a permanent reduction. Waiting until your full retirement age (FRA), between 66 and 67 depending on your birth year, gets you 100 percent of your benefit. If you delay beyond FRA, your benefit grows each month until age 70. In most cases, whether you are married, single, widowed or divorced, it usually pays off to wait if you can afford to.
• If you keep working before FRA, be aware of the annual earnings test: Social Security withholds $1 for every $2 you earn above the limit ($23,400 in 2025). In the year you reach FRA, the limit is higher ($62,160 in 2025), and the deduction is less severe—$1 withheld for every $3 earned above the limit. After FRA, there’s no limit on earnings.

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

Working part time or consulting can provide purpose and help your plan. People 65 and older are the fastest-growing age group in the labor force, with the number of people 75 and older expected to surge by 96.5 percent by 2030, according to the BLS. For many older workers, it’s a classic cost-benefit equation: Unless you are financially set for life, you will have to either stretch limited money or stay in the workforce in some capacity to help pay for your retirement dreams.

So, as you work out your retirement goals, take into consideration whether, and how much, you’ll need to work.

Don’t wait until you retire to make the decision. Take time now to weigh the pros and cons of continuing to work: Full-time, part-time or freelance? Stick with your career or try something new? 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 X, LinkedIn 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.

Prepare for the unexpected now and you won’t get caught off guard later. 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. How much would it cost to make major home repairs? What would you want or need done in case of a medical emergency? Do you have resources for caregiving?

Next, take stock of your protection. Do you have enough homeowner’s insurance to cover a major calamity? Is your health insurance or long-term care insurance adequate? If your coverage is lacking, now is the time to increase it.

For health shocks, understand that long-term services and supports (LTSS) can be costly and are not fully 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 and beneficiaries 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 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 are taking control of your financial decisions.

Saving strategies for 2025

• Max out tax-advantaged accounts: If you’re 50 or older, you can contribute up to $31,000 to a 401(k), 403(b), or 457 plan in 2025 — that’s the $23,500 base limit plus a $7,500 catch-up. If you’re 60 to 63, you may qualify for an additional $11,250 “special catch-up,” bringing your total to $34,750.
• IRAs offer added flexibility, especially if you’re over 50 and want an option beyond your workplace plan. IRA limits are $7,000 per person, with a $1,000 catch-up for those age 50 and older — for $8,000 total per person or $16,000 for a couple.
• Leverage Health Savings Accounts (HSAs). HSAs provide triple tax advantages. For 2025, the limits are $4,300 for self-only coverage and $8,550 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 December 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.

Retirement prep FAQs

What is the first thing to do before retiring?

Start by defining your retirement goals (how you want to spend your time) and mapping out your essential expenses; then check your income sources (savings, pensions, Social Security) against that plan.

What is the “$1,000 per month” retirement rule?

It’s an informal rule of thumb: roughly $240,000 in invested savings per $1,000 of desired monthly income (assuming a 5 percent annual withdrawal rate). It’s not an official government guideline, just a rough benchmark — use it only as a starting point and build a personalized plan.

What’s a good monthly retirement income?

There’s no one-size-fits-all answer. Calculate your essential and discretionary expenses, factor in taxes and health costs, and remember that Social Security replaces only part of the average worker’s earnings. The rest must come from your savings, investments, pensions, work income or other sources.

What are the key steps in planning for retirement?

Set clear goals, inventory all your assets and debts, project your expenses and income, optimize your savings/investing strategy (and maximize any employer plans), choose a smart Social Security claiming age, plan for health care (bridge to Medicare and Medicare itself), make sure estate and beneficiary documents are up to date, and review your plan annually.