5 Things to Do Now to Retire in One Year or Less

Checklist To Retire in One Year or Less

1. Map out a budget for the first 10 years of retirement.
2. Formulate a Social Security strategy.
3. Make sure your anticipated withdrawal rate is safe.
4. Determine a sequence with which you’ll tap your retirement assets.
5. Begin building out “Bucket 1” with enough cash to cover you for one to two years’ worth of portfolio spending.

Susan Dziubinski: Hi, I’m Susan Dziubinski, and welcome to the final episode in a new miniseries for Morningstar called Your Retirement Countdown. In this four-part series, we’re sitting down with Christine Benz, who’s Morningstar’s director of personal finance and retirement planning. We’re talking about some of the key things you need to do to retire comfortably based on how far away your retirement date is, whether that’s 25 years away, 10 years away, or five years away. In today’s episode, we’ll focus on what to do if your retirement is one year or less away. You don’t have to take any notes because we’ll give you a checklist of to-dos at the end of our interview. Christine, great to see you again.

Christine Benz: Susan, it’s great to see you.

Planning Your Retirement Budget

Dziubinski: All right. This is an exciting time for people right on the precipice of retirement. At the top of the to-do list for these folks is to map out their spending for the next 10 years. Sounds kind of overwhelming. How do you go about doing that?

Benz: Yeah. I wouldn’t say you need to get super precise about this, but there are some things that you can forecast. If you know that your roof is going to have to be replaced within the next decade or your car is nearing the end of its useful life, or you think that you may have to help pay for a wedding or whatever the things in your crystal ball might be for the next 10 years, spend some time looking at those line items and then also look at your household budget and think about how it might change in retirement. Are you pondering a lot of travel in the first 10 years of retirement, or are you planning to relocate to a less expensive part of the country? Some of those things might be meaningful in terms of your ongoing budget, so you want to spend a little bit of time looking at how those budgetary items might change. If you can get your arms around your spending, that does read down to the benefit of your plan.

Formulating Your Social Security Strategy

Dziubinski: OK. Second to-do if you’re going to retire in a year or less is formulating your Social Security strategy. What’s that involve?

Benz: Right. You’re looking at when you will claim Social Security. A lot of people think, OK, I’m retired. It’s time to file. In some cases, that’s the right answer. A great example would be the single person who maybe has some sort of health issue that they’re contending with, where they think their life expectancy will be shorter than average. In that case, it might be perfectly appropriate to file earlier. For a lot of people, if they have average or longer-than-average life expectancy, delayed filing can make sense. If you’re part of a married couple, you want to approach this decision-making together. The name of the game is for the couple to enlarge their benefits over their respective lifetimes, so you want to think through when you will file. If you do decide to delay in order to enlarge your potential benefits, you will want to think about some kind of bridging strategy because that will necessitate higher portfolios earlier. For some folks, what they think about is what’s called a laddered portfolio of bonds that they will use to effectively simulate Social Security in those early years of retirement. You do want to put a finer point on when you will file for Social Security because it will be an important component of what you do with your investment portfolio.

Finding Your Safe Withdrawal Rate

Dziubinski: Let’s talk a little bit about that and specifically whether your planned withdrawal rate from your investment portfolio is safe. How can people make that judgment?

Benz: Right. If you’ve run through the first two to-dos, you’re well situated to make a judgment about your withdrawal rate. You’ve looked at your spending, your anticipated spending. You’ve looked at whether or not you’ll be getting Social Security. If you subtract any nonportfolio income sources from your spending, the amount that’s left over is your anticipated portfolio spending. You want to think about whether that looks like a safe withdrawal rate. We’ve done a lot of research on that topic here at Morningstar on safe withdrawal rates. When we did our research at the end of 2025, we came up with a 3.9% starting safe withdrawal rate, assuming a 30-year time horizon. Importantly, that 3.9% corresponds with a really robotlike spending system. It’s saying, “I’m going to take 3.9% of my balance, and then I’m never going to revisit that spending pattern.” That’s not how most people spend. Most people are willing to adjust their spending. What we found is that for people who make spending adjustments and are willing to take less when the market’s down and take more when their portfolio has behaved better, they can spend a little closer to 6% as a starting withdrawal. Give some thought to what type of system makes sense in your situation. There are a lot of variables in the mix. If you can accommodate the flexibility, I would really say it’s a best practice, but think about your situation. Use that to guide what sort of spending system that you’re using.

Sequencing Your Retirement Withdrawals

Dziubinski: Next, you need to determine which accounts you’re going to be taking withdrawals from and in what sequence. Why is this sort of sequencing and where you’re going to get the cash from important, and how can people make better decisions about that?

Benz: Right. This close to retirement, the rubber is really hitting the road in terms of the withdrawals. There’s no one-size-fits-all answer, but a general framework that can make sense is to start with those taxable nonretirement accounts. Those are often your most tax-efficient source of funds, or I should say, if you hold them, they’re going to be less tax-efficient for you on an ongoing basis. You get less tax sheltering than you do with those retirement accounts. Those are the ones to look to first, especially if you have some cash reserves in those taxable accounts. Those would be your first source of funds in retirement. If you’ve exhausted those taxable assets, then your tax-deferred traditional retirement accounts, whether company retirement plans or IRAs, tend to be your next most tax-efficient source of funds. You want to hold any Roth assets as long as you possibly can because the tax-sheltering benefits of those and the opportunity for tax-free withdrawals make them very effective assets to hang onto later.

This is also a great life stage to take a look at when you actually retire—so, when you stop earning income—whether you’d want to ponder any Roth conversions. You have those traditional tax-deferred assets. A lot of people retiring soon probably have the bulk of their accounts in those traditional tax-deferred assets. Get some tax advice on whether, postretirement, it might be a fruitful time to consider doing some conversions of those traditional assets to Roth because you’re going to be, in many cases, in a low tax bracket relative to where you will be when you’re working or when you need to take those required minimum distributions. That can be a really lovely life stage to ponder those Roth conversions.

Building Your Cash Bucket

Dziubinski: All right. The last to do, you mentioned cash, Christine. With one year or less to retirement, you say that you need to really start building up that cash position. How much is enough when it comes to that on the precipice of retirement? Where would you recommend that investors keep that cash?

Benz: Right. People have often heard me talk about the Bucket approach. Here’s where it does make sense to start building out that Bucket 1. You don’t want to do it when you’re five years until retirement because there’s an opportunity cost with those cash holdings, especially with inflation nipping away at the purchasing power of the income that you’re able to earn. But I think, holding one to two years’ worth of cash investments, you might start earmarking assets for that cash bucket if you’re within a year of retirement. And then building it to be one to two years of your anticipated portfolio withdrawals is a great strategy. You’d want to think about having it in those first accounts that you would tap in retirement. I would also shout out for adding a component of Treasury Inflation-Protected Securities to the portfolio at this time. You don’t want to do that within your taxable account. You’d want to think about doing that in your tax-sheltered accounts. When you do get into that withdrawal mode, it does make sense to insulate any fixed-income assets that you have from inflation. You’d want to be earmarking a percentage of that fixed-income portfolio for TIPS bonds. I bonds are available to all taxpayers as well. So, look at cash and look at TIPS at this life stage.

Dziubinski: Well, Christine, sounds like a great checklist for those who are nearing retirement in that one-year mark. Thanks for your time today.

Benz: Thank you so much, Susan.

Dziubinski: To recap, here’s your checklist if you want to retire in a year. First, map out a budget for the first 10 years of retirement. Second, formulate a Social Security strategy. Next, make sure your anticipated withdrawal rate is safe. Fourth, determine a sequence with which you’ll tap your retirement assets. And last, begin building out Bucket 1, which is enough cash to cover you for one to two years’ worth of portfolio spending. Now, if you’d like to get more insights about your retirement from Christine, sign up for her free weekly newsletter, Improving Your Finances. You’ll find a sign-up link below. Thanks for tuning in.

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