Christine Benz: Susan, it\u2019s great to see you.<\/p>\n
Planning Your Retirement Budget<\/p>\n
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?<\/p>\n
Benz: Yeah. I wouldn\u2019t 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.<\/p>\n
Formulating Your Social Security Strategy<\/p>\n
Dziubinski: OK. Second to-do if you\u2019re going to retire in a year or less is formulating your Social Security strategy<\/a>. What\u2019s that involve?<\/p>\n Benz: Right. You\u2019re looking at when you will claim Social Security. A lot of people think, OK, I\u2019m retired. It\u2019s time to file. In some cases, that\u2019s the right answer. A great example would be the single person who maybe has some sort of health issue that they\u2019re 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\u2019re 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\u2019s 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.<\/p>\n Finding Your Safe Withdrawal Rate<\/p>\n Dziubinski: Let\u2019s 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?<\/p>\n Benz: Right. If you\u2019ve run through the first two to-dos, you\u2019re well situated to make a judgment about your withdrawal rate. You\u2019ve looked at your spending, your anticipated spending. You\u2019ve looked at whether or not you\u2019ll be getting Social Security. If you subtract any nonportfolio income sources from your spending, the amount that\u2019s left over is your anticipated portfolio spending. You want to think about whether that looks like a safe withdrawal rate. We\u2019ve done a lot of research on that topic here at Morningstar on safe withdrawal rates<\/a>. 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\u2019s saying, \u201cI\u2019m going to take 3.9% of my balance, and then I\u2019m never going to revisit that spending pattern.\u201d That\u2019s 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\u2019s 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\u2019s a best practice, but think about your situation. Use that to guide what sort of spending system that you\u2019re using.<\/p>\n Sequencing Your Retirement Withdrawals<\/p>\n Dziubinski: Next, you need to determine which accounts you\u2019re going to be taking withdrawals from and in what sequence<\/a>. Why is this sort of sequencing and where you\u2019re going to get the cash from important, and how can people make better decisions about that?<\/p>\n Benz: Right. This close to retirement, the rubber is really hitting the road in terms of the withdrawals. There\u2019s 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\u2019re 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\u2019ve 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.<\/p>\n This is also a great life stage to take a look at when you actually retire\u2014so, when you stop earning income\u2014whether you\u2019d 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\u2019re going to be, in many cases, in a low tax bracket relative to where you will be when you\u2019re working or when you need to take those required minimum distributions. That can be a really lovely life stage to ponder those Roth conversions.<\/p>\n Building Your Cash Bucket<\/p>\n 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<\/a>. How much is enough when it comes to that on the precipice of retirement? Where would you recommend that investors keep that cash?<\/p>\n Benz: Right. People have often heard me talk about the Bucket approach. Here\u2019s where it does make sense to start building out that Bucket 1. You don\u2019t want to do it when you\u2019re five years until retirement because there\u2019s an opportunity cost with those cash holdings, especially with inflation nipping away at the purchasing power of the income that you\u2019re able to earn. But I think, holding one to two years\u2019 worth of cash investments, you might start earmarking assets for that cash bucket if you\u2019re 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\u2019d 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<\/a> to the portfolio at this time. You don\u2019t want to do that within your taxable account. You\u2019d 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\u2019d 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.<\/p>\n Dziubinski: Well, Christine, sounds like a great checklist for those who are nearing retirement in that one-year mark. Thanks for your time today.<\/p>\n Benz: Thank you so much, Susan.<\/p>\n Dziubinski: To recap, here\u2019s 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\u2019ll tap your retirement assets. And last, begin building out Bucket 1, which is enough cash to cover you for one to two years\u2019 worth of portfolio spending. Now, if you\u2019d like to get more insights about your retirement from Christine, sign up for her free weekly newsletter, Improving Your Finances. You\u2019ll find a sign-up link below. Thanks for tuning in.<\/p>\n Register for Christine’s Newsletter ![\"Photo](\"https:\/\/www.newsbeep.com\/il\/wp-content\/uploads\/2026\/07\/77LIXXKTQBAHDJHO67BYR4CZLE.png\")
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