The Glide Path

What Is a Glide Path?

A glide path is the gradual reduction of risk as you approach retirement. Think of it like a plane descending for landing - you don't drop from 30,000 feet to the runway in 10 seconds. You gradually reduce altitude (risk) to ensure a smooth touchdown.

The 1-3 Year Glide Path Strategy

Your goal is to reduce volatility and lock in income sustainability. Here's the year-by-year playbook.

Year 1 (3 Years to Retirement)

• Reduce T5 exposure to 5-10% max: If you had 20% in YieldMax/TSLY, trim it down. Book gains if you have them.
• Shift T4 to T3: Swap aggressive covered call ETFs (QQQI, GPIX) for stable BDCs/REITs (ARCC, O, EPD).
• Build cash to 15%: Increase T1 (SGOV, money market) to 15% of portfolio. This is your landing cushion.
• Test-drive no DRIP: Turn off dividend reinvestment. Live on the cash distributions to see if your budget works.

Year 2 (2 Years to Retirement)

• Lock in 50%+ defensive (T1-T2): Your portfolio should now be majority low-volatility income.
• Add inflation hedges: Consider I-Bonds (if not already maxed), TIPS, or commodity-linked assets.
• Prune underperformers: Any T3-T5 holdings that have cut dividends or shown NAV erosion > 10%/year - replace them.
• Finalize Social Security strategy: Run the numbers (see below) and decide your claim age.

Year 3 (1 Year to Retirement)

• Build cash to 20-24 months: Increase T1 to cover 2 years of expenses. This is your sequence risk shield.
• Final rebalance: Lock in your target allocation. No more major shifts after this.
• Open ACA marketplace account: If retiring before 65, research healthcare.gov plans and subsidies.
• Withdrawal strategy dry run: Practice taking monthly distributions from your accounts in the order you'll use in retirement.

Social Security Timing: The $200K Decision

When you claim Social Security is one of the biggest financial decisions you'll make. The difference between claiming at 62 vs. 70 can be $200,000+ in lifetime benefits for an average earner.

The Three Ages

The Break-Even Analysis

If your FRA benefit is $2,000/month:

• Claim at 62: $1,400/month = $16,800/year
• Claim at 67: $2,000/month = $24,000/year
• Claim at 70: $2,480/month = $29,760/year

Break-even point (62 vs. 70): Around age 80-81. If you live past 81, waiting until 70 wins. With average life expectancy at 85+ for healthy 65-year-olds, delaying is often optimal.

Spousal Claiming Strategies

If you're married, it gets more complex. Key rules:

• Spousal Benefit: Non-working spouse can claim 50% of working spouse's FRA benefit (not the age-70 boost).
• Survivor Benefit: Widow/widower gets 100% of deceased spouse's benefit (including delayed credits).
• Optimal Strategy: Lower earner claims at FRA (67), higher earner delays to 70. Maximizes survivor benefit if higher earner dies first.

Healthcare Bridge Planning (Pre-Medicare)

If you retire before 65, you're not eligible for Medicare. You have three options:

Option 1: ACA Marketplace (Healthcare.gov)

Cost: Varies wildly based on income and state. $500-$1,500/month per person.

Subsidies: Available if Modified Adjusted Gross Income (MAGI) is below 400% of federal poverty level (~$60,000 for single, $80,000 for couple in 2024).

Pro Tip: Control your MAGI by living off Roth withdrawals (not counted as income) or managing capital gains timing. A $60K MAGI couple could get a Silver plan for $200-$400/month with subsidies.

Option 2: COBRA (From Last Employer)

Cost: 102% of employer's group rate (you pay full premium + 2% admin fee). Often $800-$1,200/month per person.

Duration: 18 months max.

Best For: Short bridge if retiring at 63-64 and need to get to Medicare at 65.

Option 3: Spouse's Employer Plan

If your spouse is still working, join their plan. Often the cheapest option.

Building the 24-Month Cash Buffer

The most dangerous risk in early retirement is sequence of returns risk - suffering losses in the first few years when you're withdrawing principal. A 30% crash in Year 1 is devastating.

The Cash Buffer Strategy

Keep 24 months of expenses in T1 (cash equivalents). If the market crashes, you live off this buffer instead of selling dividend assets at depressed prices.

Example: $4,000/month expenses

• 24-month buffer: $96,000 in SGOV or money market
• If market drops 30%: Don't touch the dividend portfolio. Live off the $96K.
• When market recovers: Replenish the buffer by selling recovered positions.

What Goes in the Buffer?

• SGOV (0-3 month Treasuries): 5%+ yield, zero default risk, daily liquidity.
• TFLO (Floating Rate Treasuries): Tracks Fed funds rate, inflation hedge.
• High-yield savings (Ally, Marcus): 4-5% APY, FDIC insured, instant access.
• Money market funds (VUSXX, SPAXX): Check-writing, 5% yield, $1 NAV stability.

Action Items