Five Things to Do When Retirement Is One Year Away
Retirement often feels distant, and then, finally, suddenly, it’s here!
TL;DR:
If retirement is about a year away, focus on five decisions: mapping your spending (including bigger one‑time costs), deciding how and when Social Security fits into your plan—especially if you’re divorced—testing whether your withdrawals are sustainable, coordinating a tax‑aware order for your accounts, and setting aside near‑term cash so you aren’t forced to sell investments at the wrong time.
For years, the question may have been, “Am I saving enough?” Then, as retirement gets closer, new questions bubble up:
Can I actually afford to stop working?
Where will my income come from?
What happens if the market falls just after I retire?
When should I claim Social Security?
Which account should I use first?
Those are not simply investment questions. They are design questions.
Retirement requires you to shift from accumulating assets to using those assets to support your life. That transition deserves more than a retirement date and a portfolio balance. It requires a practical plan for turning what you have built into income, flexibility, and confidence.
When retirement is approximately one year away, these five decisions deserve your attention.
1. Build a Realistic Picture of Your Retirement Spending
Most people begin retirement planning by estimating what they spend today.
That is useful, but it is not enough.
Your retirement spending will not necessarily remain level from year to year. The first decade may include significant travel, home improvements, new vehicles, family celebrations, healthcare expenses, or financial help for children and grandchildren.
Start with your normal monthly expenses, but then look beyond them.
What large expenses are reasonably likely during the next five to ten years?
Will the roof need to be replaced, or maybe the family car?
Are you planning to move?
Will you carry a mortgage into retirement?
Do you expect to travel more during the early years?
Are there family commitments you already know are coming?
It’s ok to not know the answers right away. You do not need to predict every expense perfectly. It is more important to recognize that retirement spending is rarely one smooth, unchanging number.
A useful retirement plan should distinguish among:
- Essential living expenses
- Discretionary lifestyle spending
- Large, occasional purchases
- Healthcare costs
- Family support
- Taxes
This gives you something much more valuable than a budget. It gives you a view of which expenses must be funded and which expenses could be adjusted if circumstances change.
That flexibility may become one of the strongest parts of your retirement plan.
2. Decide How Social Security Fits Into a Well Designed Financial Plan
Retiring and claiming Social Security do not have to happen at the same time.
Some people should claim soon after they retire. Others may benefit from waiting. The appropriate decision depends on factors such as health, longevity, marital status, other income sources, and the amount of retirement assets available to support the delay.
For married couples, the decision should usually be evaluated jointly rather than as two separate claiming choices.
For a retiree after divorce, there may be choices between one’s own benefit record, and that of the ex-spouse.
The objective is not simply to maximize one person’s monthly payment. It is to consider the total benefits the household may receive over both lifetimes, including the income that may remain for the surviving spouse.
Delaying Social Security may increase future guaranteed income, but the income needed during the waiting period must come from somewhere else. That may mean drawing more heavily from investments during the early years of retirement.
This is sometimes called an income bridge. A well-designed bridge can be valuable, but it should be intentional. It should consider:
- The amount needed each year
- The investment accounts that will provide it
- The taxes created by those withdrawals
- Market conditions
- The effect on the surviving spouse
- The tradeoff between present portfolio withdrawals and higher future Social Security income
The right Social Security strategy is not automatically “claim as early as possible” or “wait as long as possible.” It is the strategy that works within the rest of your retirement plan.
If your retirement is getting close, maybe one to three years away, and especially if you're navigating retirement after divorce, download our "Three Years Out - A Retirement Readiness Checklist" to see these decisions, and the ones that come before them, organized in one place.
3. Test Whether Your Portfolio Withdrawals Are Sustainable
Once you understand your likely spending and Social Security income, you can estimate what your investments will need to provide.
Suppose your household expects to spend $180,000 per year and will receive $95,000 from Social Security and other reliable income sources. Your portfolio would need to provide the remaining $85,000, plus any applicable taxes.
That amount can then be compared with the value of your investable assets.
This is where withdrawal-rate discussions often begin. But a percentage alone does not determine whether a retirement plan is safe.
A sustainable withdrawal strategy depends on many variables:
- Your retirement age
- Your expected planning horizon
- Your asset allocation
- Inflation
- Taxes
- Market returns
- Large future expenses
- Whether your spending can adjust
- Whether you want to leave an inheritance
- Whether other income begins later
A retirement plan built around rigid spending may require a more conservative starting point than a plan in which discretionary spending can rise and fall.
That does not mean retirees must live nervously or cut spending every time the market declines. It means the plan should identify, in advance, which expenses are flexible and what adjustments would be reasonable under different conditions.
Retirement planning is not about finding one magical withdrawal percentage.
It is about creating a system that can respond intelligently as life and markets change.
4. Create a Tax-Aware Withdrawal Sequence
Knowing how much you need from your portfolio is only part of the decision.
You must also decide where that money will come from.
Many retirees own several types of accounts:
- Bank and brokerage accounts
- Traditional IRAs
- Employer retirement plans
- Roth IRAs
- Annuities
- Health savings accounts
- Business interests or real estate
Each account may receive different tax treatment.
A common rule of thumb is to spend taxable assets first, tax-deferred retirement accounts second, and Roth accounts last. That may be appropriate in some situations, but it should not be treated as an automatic formula.
For example, the years immediately after retirement may provide an opportunity to withdraw money from traditional retirement accounts or complete partial Roth conversions at comparatively favorable tax rates.
That opportunity can disappear once Social Security, pensions, required minimum distributions, or other income begins.
The order in which assets are used can affect:
- Lifetime income taxes
- Medicare premiums
- Required minimum distributions
- Taxation of Social Security benefits
- The value of future Roth assets
- The assets eventually inherited by beneficiaries
A strong withdrawal plan should therefore be coordinated with a forward-looking tax strategy.
The goal is not always to pay the least tax this year. Sometimes paying a manageable amount of tax today can reduce a larger tax problem later.
5. Set Aside the Money You Will Need Soon
One of the greatest risks facing a new retiree is being forced to sell investments after a significant market decline. This is known as sequence-of-returns risk.
A retiree who is still contributing to a portfolio can often wait for markets to recover. A retiree who must make regular withdrawals may not have that luxury.
For that reason, someone nearing retirement may want to begin setting aside enough conservative assets to cover near-term portfolio withdrawals.
That does not necessarily mean placing several years of total living expenses in a checking account. Social Security, pension income, and other reliable cash flow may already cover part of the household’s needs.
The cash reserve should be based on the portion that must actually come from investments.
For example, if your household spends $100,000 per year but receives $65,000 from Social Security and pensions, the portfolio is responsible for approximately $35,000 before taxes and irregular expenses.
It is that number, not the full $100,000, that should be the starting point for determining an appropriate reserve.
Depending on the broader plan, near-term spending may be held in:
- Bank savings
- Money market funds
- Treasury bills
- Short-term bonds
- A carefully structured bond ladder
The purpose is not to eliminate all investment risk. It is to reduce the chance that short-term spending needs will force long-term assets to be sold at the wrong time.
Retirement Is a Transition, Not a Finish Line
The year before retirement is not simply the final year of saving. It is the year in which your financial life begins to change direction.
You are moving from a system supported primarily by employment income to one supported by Social Security, pensions, investments, and deliberate decisions about spending and taxes.
It is our experience that there is no single retirement formula that works for every household.
Two people with the same portfolio balance may need entirely different plans because their spending, taxes, family obligations, health, risk tolerance, and vision for retirement are different.
The important question is not merely, “Do I have enough?”
It is:
Have I designed a reliable way to use what I have built?
At Derryrush Wealth, we believe retirement planning should help you see the road ahead more clearly. The future will never be completely predictable, but your next decisions do not have to be accidental.
A thoughtful plan can help you step into retirement with greater confidence, flexibility, and peace.
If retirement is coming soon—or you’re figuring out retirement after divorce—you don’t have to work through these decisions alone. You have two options:
· Download our “Retirement Readiness Checklist." It walks through spending, Social Security, withdrawals, taxes, and cash reserves in one organized document.
· Schedule a consultation with Derryrush Wealth Management to review your retirement design and see how these decisions fit your situation.
Derryrush Wealth Management LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.