Let's start with the stuff that catches people off guard.
Some of these rules are strange.
Some are expensive.
Most of them make perfect sense once somebody finally explains them.
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Social Security has a funding problem, but that does not mean your check goes to zero. Current projections show enough funding for full scheduled benefits into the 2030s. If nothing changed after the trust funds ran short, incoming payroll taxes would still cover most scheduled benefits.
A lot of people assume Social Security is tax-free. Depending on your other income, part of it can be taxable. Part-time wages, traditional IRA withdrawals, interest, dividends and other income may all matter.
It means up to 85% of the benefit can be included in taxable income. Your normal income-tax rates apply to that taxable income.
It does not mean the government takes 85% of your Social Security check.
Your own work history is not always the only benefit that matters. If your own retirement benefit is lower, you may qualify for additional spousal benefits based on your spouse's work record.
The "your spouse gets half" shortcut leaves out important rules.
The maximum regular spousal benefit is based on up to 50% of the worker's full-retirement-age amount, not necessarily half of the check the worker actually receives. The spouse's own benefit and claiming age also matter.
Waiting longer does not increase the ordinary spousal benefit above its normal maximum.
But delaying the higher earner's own benefit can increase the survivor benefit available after that person dies.
Before full retirement age, earning above the annual work limit can cause Social Security to temporarily withhold benefits.
For people born in 1960 or later, full retirement age is 67.
When you reach full retirement age, Social Security recalculates your monthly benefit and gives you credit for months when benefits were withheld.
It is not a lump-sum refund. Your monthly check going forward is adjusted.
For people born in 1960 or later, full retirement age is 67.
You can claim as early as 62, but the worker benefit can be about 30% lower.
Wait until 70 and the worker benefit is roughly 24% higher than the full-retirement-age amount.
Waiting past 70 does not make it grow further.
Most people do not pay a monthly premium for Part A, which mainly covers hospital care.
Part B has a monthly premium. Prescription coverage, supplemental coverage, deductibles and copays can add more.
If you miss the Part B enrollment window and do not qualify for a special enrollment period, your monthly Part B premium can increase.
The penalty is generally 10% for each full 12-month period you could have had Part B but did not, and in many cases it lasts as long as you have Part B.
COBRA feels like employer health insurance because it continues your old plan.
Medicare does not treat it the same as coverage from a job you or your spouse are still actively working at.
Your Medicare special-enrollment clock generally starts when active employment or the job-based coverage ends, not when COBRA eventually ends.
Part D covers prescription drugs.
If you go 63 days or more without Part D or other creditable prescription coverage after becoming eligible, you may owe a late-enrollment penalty.
"Creditable" simply means the other drug coverage is expected to pay about as much as standard Medicare drug coverage.
Higher-income retirees pay extra for Part B and Part D.
The surcharge is called IRMAA.
You do not need to memorize the acronym. The important part is that higher taxable income can increase Medicare costs.
A large Roth conversion, IRA withdrawal, investment gain or other income spike may increase Medicare premiums two years later.
Medicare may cover certain short-term skilled nursing or rehabilitation.
It generally does not pay for years of custodial care, meaning everyday help with bathing, dressing, eating or getting around.
Medicaid can cover long-term nursing-facility care for people who meet the financial and other eligibility rules.
Those rules vary by state.
It is not as simple as "Medicare will pay" or "you have to sell everything first."
If you lose job-based insurance before Medicare begins, ACA Marketplace coverage may bridge the gap.
Losing employer coverage also creates a special enrollment period.
ACA financial help is based partly on household income.
Money from a traditional IRA usually adds taxable income.
Qualified Roth withdrawals generally do not.
That makes early-retirement healthcare and retirement-account withdrawals a balancing act.
Once you are enrolled in Medicare, you generally cannot keep making HSA contributions for those Medicare-covered months.
Enrollment timing matters because Part A can sometimes be retroactive.
You may still use HSA money tax-free for qualified medical expenses.
After 65, nonmedical withdrawals no longer get the extra 20% penalty, although ordinary income tax still applies.
Traditional IRA and 401(k) money usually went in before income taxes were paid.
When taxable money comes back out, it generally counts as ordinary income.
With traditional retirement money, you usually get the tax break first and pay tax later.
With Roth money, you pay tax first and qualified withdrawals later are tax-free.
That is called a Roth conversion.
You choose to pay the tax on the converted amount now so that qualified withdrawals from the Roth later can be tax-free.
You can convert part of it.
Because conversions create taxable income, spreading them over several years can avoid creating one enormous tax year.
Your paycheck may disappear before Social Security and required withdrawals begin.
That can create lower-income years when you control how much traditional retirement money you choose to convert.
A Roth conversion adds taxable income.
A very large conversion can push some income into higher tax brackets and may increase other income-based costs.
If tax withholding comes out of the retirement account itself, less money reaches the Roth.
If you have enough cash elsewhere to cover the tax, more of the converted retirement money stays invested.
Traditional retirement withdrawals generally count as taxable income.
States tax that income differently.
For most Gen Xers born in 1960 or later, current law starts these required withdrawals at age 75.
RMD means Required Minimum Distribution.
It is the minimum amount tax rules require you to withdraw from certain retirement accounts each year once the rules apply to you.
If you need the money to live on, an RMD is simply retirement savings turning into retirement income.
The downside is loss of control. You may have taxable income even in a year when you would rather leave the money invested.
If you leave a job during or after the calendar year you turn 55, withdrawals from that employer's qualified plan may qualify for the Rule of 55 exception.
Regular income tax may still apply.
The Rule of 55 exception applies to qualifying employer plans, not IRAs.
That makes automatic rollover timing worth understanding before you move the account.
Those extra contributions are called catch-up contributions.
Under current rules, workers in those ages may qualify for a larger catch-up limit than the normal age-50+ amount.
Many non-spouse beneficiaries must empty an inherited retirement account within 10 years.
Traditional IRA withdrawals are generally taxable to the heir.
If you sell an investment for $20,000 that originally cost $15,000, the gain is $5,000.
Capital-gains tax generally applies to the gain, not the entire $20,000.
At lower taxable-income levels, some long-term capital gains may fall into the 0% federal capital-gains bracket.
The gain may still count as income for calculations that affect Social Security taxation or Medicare premiums.
Home-sale taxes generally depend on your gain, not the entire sale price.
Eligible homeowners may also exclude part of that gain.
A smaller or cheaper house does not guarantee lower total housing costs.
Giving up a 2% or 3% mortgage and replacing it with a much higher rate can change the entire downsizing calculation.
Housing, property tax, homeowners insurance, sales tax and other costs still matter.
If your current state taxes retirement income and the new state taxes it less, establishing legal residence before large taxable withdrawals or Roth conversions may change the total tax.
The survivor generally does not keep both full retirement checks.
Eventually, many surviving spouses move from married tax rules to single tax brackets and deductions.
The surviving spouse may inherit more pre-tax retirement money while eventually facing tighter single-person tax brackets and Medicare thresholds.
One gives you control of a pile of money.
The other gives you income for life.
A larger payment that ends at your death may leave a surviving spouse with less income than a smaller payment that includes survivor benefits.
Selling investments while prices are down leaves fewer shares invested for the recovery.
The order of good and bad market years matters once withdrawals begin.
If you can temporarily trim optional spending, you may avoid selling as much while investments are down.
Long-term care means help with activities such as bathing, dressing, eating or moving around.
It may happen at home, in assisted living or in a nursing home.
Medicare can cover certain medical and skilled-care situations.
It generally does not cover years of custodial long-term care.
Paying for daily help for several years can create a cost far beyond a normal household budget.
Some households insure part of the risk.
Others save specifically for it, keep assets available, use home equity as a backstop or combine several approaches.
Savings, a dedicated reserve, insurance, home equity and Medicaid when eligible may all play a role.
Exact eligibility and protected amounts vary by state and household situation.
Insurance transfers part of a financial risk to someone else.
The real comparison is the cost of transferring that risk versus keeping the risk yourself.