Retirement planning checklist: income, health and timing

Good retirement planning comes down to four questions: when you will stop working, how you will cover health care until and after 65, where your monthly income will come from, and how you will protect it from the big risks. In Colorado there is a fifth: how much of that income the state will tax, because Colorado lets people 55 and older subtract part or all of their pension, annuity, IRA and taxable Social Security income (Colorado Department of Revenue, tax.colorado.gov/sites/tax/files/documents/ITT_Social_Security_Pensions_and_Annuities_Jan_2025.pdf). This checklist walks through each step in order and ends with a worked monthly budget for a hypothetical Brighton couple. A no-cost retirement planning review with Lisa covers the insurance side of these decisions; for tax and securities questions, work with your tax professional or a licensed financial adviser.

Five or more years before you retire

• Check the earnings record on your Social Security statement for mistakes; your benefit is based on your highest 35 years of earnings. We go through it with you at your review.
• Estimate your retirement budget in two columns: essentials (housing, food, insurance, health care, transportation) and wants (travel, gifts, hobbies).
• List every income source you expect: Social Security, pensions, retirement accounts, part-time work, rental income.
• Decide whether you might retire before 65, because health coverage becomes the biggest planning question if you do.
• Review life, disability and supplemental coverage while you are still working and insurable, and note which employer coverage ends when you leave.

Social Security timing

Claiming at 62 permanently reduces the benefit by about 30% when full retirement age is 67 (Social Security Administration). Waiting past full retirement age adds delayed retirement credits of 8% a year for people born in 1943 or later, up to age 70 (Social Security Administration).

Here is what that means in dollars, as an illustration. If the statement in your my Social Security account shows $2,100 a month at 67, claiming at 62 would pay about $1,470 (70% of $2,100), and waiting to 70 would pay about $2,604 (124% of $2,100, three years of 8% credits), before cost-of-living adjustments. The right age depends on your health, your other income and, for married couples, the survivor benefit: when one spouse dies, the survivor can generally receive the larger of the two benefits, so a delay by the higher earner can protect the spouse who outlives them.

If you worked for a government employer that did not withhold Social Security, the Social Security Fairness Act, signed in January 2025, ended the Windfall Elimination Provision and Government Pension Offset, which had reduced many of those benefits (Social Security Administration).

How Colorado taxes retirement income

Colorado's income tax rate was 4.4% for tax year 2025, the most recent filing booklet published (Colorado Department of Revenue, 2025 Individual Income Tax Booklet, tax.colorado.gov/sites/default/files/documents/Book104_2025.pdf). Retirement income gets a valuable break through the pension and annuity subtraction, which is figured separately for each spouse on a joint return (Colorado Department of Revenue, tax.colorado.gov/sites/tax/files/documents/ITT_Social_Security_Pensions_and_Annuities_Jan_2025.pdf).

• Age 55 to 64: generally up to $20,000 a year of qualifying pension, annuity, IRA and taxable Social Security income can be subtracted.
• Age 65 or older: generally up to $24,000 a year. In addition, for tax years beginning January 1, 2022 and after, people 65 or older can subtract all of the Social Security benefits included in federal taxable income.
• Age 55 to 64, from tax year 2025: the full taxable Social Security amount can be subtracted if federal adjusted gross income is no more than $75,000 for a single filer or $95,000 for a joint return; above those amounts, the $20,000 cap applies.
• Social Security you subtract reduces the room left under the $20,000 or $24,000 limit for other pension and annuity income. For someone 65 or older, the booklet allows $24,000 minus the Social Security amount claimed, or the actual pension and annuity income if smaller.
• Qualifying income includes pensions and annuities, taxable Social Security, certain IRA distributions and some disability payments; premature IRA distributions (generally before 59 and a half without an exception) do not qualify. Payments from privately purchased annuities that have fully matured also qualify.
• Under 55, the subtraction is generally available only for pension or annuity income received as a death benefit, limited to $20,000.

A worked Colorado example: the subtraction for a couple

Hypothetical Colorado household, not a real client. A Brighton couple, both 66, file jointly for tax year 2025. Their tax preparer's federal worksheet shows $12,000 of Spouse A's Social Security and $7,000 of Spouse B's is federally taxable. Spouse A also withdraws $9,600 from a traditional IRA ($800 a month). Spouse B receives a $10,800 pension ($900 a month).

Spouse A, 65 or older: the $12,000 of taxable Social Security comes off in full. The room left for other retirement income is $24,000 minus $12,000, or $12,000, which covers all $9,600 of IRA withdrawals. Spouse A subtracts $21,600. Spouse B, 65 or older: the $7,000 of taxable Social Security comes off in full, leaving $17,000 of room, which covers the whole $10,800 pension. Spouse B subtracts $17,800.

Together they subtract $39,400 from Colorado taxable income. At the 4.4% tax year 2025 rate, that is $1,733.60 of Colorado income tax they do not owe on that income ($39,400 x 4.4%), using the rules in the Department of Revenue publication and booklet (tax.colorado.gov/sites/tax/files/documents/ITT_Social_Security_Pensions_and_Annuities_Jan_2025.pdf; tax.colorado.gov/sites/default/files/documents/Book104_2025.pdf). Federal tax is a separate calculation for their tax professional.

Health coverage: before 65 and at 65

• Retiring before 65? Plan for COBRA or a Colorado marketplace plan, and manage your income around the 400% of poverty level line for tax credits. The early retiree guide explains how.
• Your Medicare Initial Enrollment Period is the seven months around your 65th birthday month. If you are working with employer coverage, the rules for delaying Part B are different; see the working past 65 guide.
• If you have an HSA, plan to stop contributions about six months before you enroll in Medicare.
• Budget for Medicare costs: the 2026 standard Part B premium is $202.90 a month and the Part B deductible is $283 (CMS, cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles). Higher incomes pay more (IRMAA), based on the tax return from two years earlier; for 2026, joint filers with modified adjusted gross income above $218,000 pay a higher Part B premium (CMS, cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles). CMS usually announces the 2027 amounts around November 2026.
• Remember what Medicare does not cover: most dental, routine vision, hearing aids and long-term custodial care.

A worked monthly retirement budget

Hypothetical Colorado household, not a real client. The same Brighton couple, both 66 and on Medicare, list their monthly income and spending. Their Social Security amounts come from their own my Social Security statements, and their spending lines are their own estimates; the only published figure used is the 2026 Part B premium of $202.90 each (CMS, cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles).

The test is simple: do income sources that last for life (Social Security and the pension) cover the essentials? Here they total $4,250 a month against $3,855.80 of essentials, leaving $394.20 of margin. The IRA withdrawals then pay for travel, gifts and taxes. If the IRA withdrawals had to cover essentials, the couple would be more exposed to a bad market year or a long life, and that is when Lisa talks through ways to add lifetime income or trim fixed costs.

Turning savings into income

• Separate essential expenses from discretionary ones. Many people like essential expenses covered by income that lasts for life, such as Social Security, a pension or an annuity payout.
• Know your required minimum distributions. Owners of traditional, SEP and SIMPLE IRAs generally must begin RMDs at 73, and the first one is due by April 1 of the following year (IRS, irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs). For people born on or after January 1, 1960, the applicable age is 75 under the final regulations (IRS Internal Revenue Bulletin 2024-33, irs.gov/irb/2024-33_IRB).
• Keep an emergency reserve so a bad month does not force you to sell at the wrong time or take a large taxable withdrawal.
• Think about taxes across accounts: traditional, Roth and taxable accounts are taxed differently, which affects Medicare IRMAA, marketplace tax credits and how much of the Colorado subtraction you use.

Protecting what you have built

What Lisa checks for you

• Your key dates on one page: Medicare Initial Enrollment Period, any employer coverage end date, your planned Social Security age and your RMD year.
• How you will be covered between leaving work and 65, if that gap exists, and how your retirement income affects marketplace tax credits.
• Which Medicare path fits your doctors, prescriptions and travel, and what it will cost in the first full year, including Part B.
• Whether lifetime income covers essentials, and if not, whether an annuity payout is worth discussing as one option.
• Which risks you are carrying yourself (a hospital stay, help at home, funeral costs) and whether a policy for any of them fits the budget.
• Beneficiaries on life insurance and annuities, so they match your current wishes.

Questions to ask yourself and your advisers

• If one of us dies first, which Social Security check stops, and does the survivor still cover the essentials?
• Which of our accounts would we draw from first, and how does that affect IRMAA and the Colorado subtraction?
• Is our federal adjusted gross income near the $75,000 or $95,000 Colorado Social Security thresholds if either of us is under 65?
• What health coverage will we have the day after the last paycheck?
• Where are our will, powers of attorney and policies, and who knows where to find them?

Every year after you retire

• Review your Medicare plan during the October 15 to December 7 Annual Enrollment Period, because costs, networks and drug lists change every year.
• Revisit your budget and withdrawal amounts after the Social Security cost-of-living adjustment is announced.
• Check beneficiaries on life insurance, annuities and retirement accounts.
• Keep your important documents (will, powers of attorney, policies) in one known place.

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The bottom line

You do not have to solve retirement in one sitting. Start with the dates (your Social Security age, your Medicare month, your RMD year), check how Colorado will tax your income, then match each income source to a need and cover the risks you cannot afford to carry yourself. Lisa's no-cost retirement planning review covers the health insurance, Medicare and insurance protection pieces. Send Lisa a message or call (303) 887-8584.