I went through this stage a few years ago and it definitely takes a while to readjust your fashion eye. In my case, it was hard to walk by a collection of gorgeous jackets because (1) I love jackets and (2) jackets had been a key element in my work wardrobe. It also was hard to spend money on everyday, casual clothes since I was used to treating this part of my wardrobe as an adjunct to my "real" clothes.
For what it's worth, here is what worked best for me: Start by updating your hair and eyewear--and don't be afraid to be a bit more adventurous. Then go to a good bra boutique and get your underpinnings updated. Unlike the transition to MOTG, transitioning to retirement usually happens at a much older age; in my opinion, refreshing the basics of hair, eyewear, and properly fitted undies gave me more bang for the buck than anything else.
When it comes to clothes, a good pair of jeans and boots is an excellent start. Depending on where you live, I'd also pay attention to outerwear since that is how most people will see you now. Outerwear jackets and coats play a bigger role in my wardrobe now. I also had to force myself to spend more money on everyday items; higher quality fabrics and cuts tend to work better on a more mature body, even if you are more or less the same size as you were in your thirties. And wear your "nice" things daily; you can cook dinner in a cashmere sweater as well as in a ratty sweatshirt if you throw on an apron. Anything I buy now has to pass the "But will I wear XXX around the house and running casual errands?" Because, outside of a few dressy outfits for special occasions, that is my life now.
Oh, and, while a few items from my old work wardrobe did get transitioned, most were eventually donated or consigned. While re-purposing work clothes seemed like a reasonable concept, in my case, the actual outfits just never seemed to work very well in reality. I think it was more fun to think of retirement as an opportunity to re-invent my style persona
