Core Insights - The transition into retirement is often marked by financial anxiety, particularly regarding spending in the first year [1][2] - The first year of retirement can be significantly more expensive than subsequent years, with retirees potentially spending 10% of their liquid assets compared to the typical 4% [3] Expenditures in Year One - **Healthcare Costs**: Households aged 65 and older spent over $8,000 annually on healthcare in 2023, which is higher than the $7,100 spent by those under 65 [6] - **Relocation Costs**: Downsizing or relocating can incur substantial upfront costs, including repairs, closing costs, and moving expenses, despite potential long-term savings [6] - **Vacations and Bucket-List Items**: Many retirees opt for significant trips or experiences, which can add tens of thousands to their first-year spending if not budgeted [6] - **Debt Management**: Many retirees enter retirement with an average debt of $18,474, which they often aim to pay off in the first year [6] - **Work-Related Expenses**: Costs associated with commuting and work-related expenses significantly decrease, with pre-retirees spending nearly $14,500 annually on transportation compared to $9,000 for those 65 and older [6] Savings in Year One - **Elimination of Retirement Contributions**: Retirees no longer make 401(k) contributions, which can free up 7% to 10% of their pre-retirement income [6] - **Reduced Work Expenses**: Expenses related to work, such as commuting and lunches, shrink significantly in the first year of retirement [6]