Module 4 • 0-1 Year Out

Making the Switch

The final countdown. Lock in your portfolio, set your withdrawal strategy, and complete the pre-retirement checklist.

What You'll Learn

  • Final portfolio adjustments: when to lock and when to keep flexibility
  • Withdrawal strategy: which accounts to tap first for tax efficiency
  • Emergency fund sizing: 12 vs. 24 vs. 36 months
  • Pre-retirement checklist: the 20 tasks you must complete

Final Portfolio Adjustments

You're 6-12 months from retirement. Your portfolio should be 90% locked. But there are a few last-minute optimizations.

Lock These Positions

  • T1 Cash Buffer: 24 months of expenses in SGOV/money market. Do not touch this.
  • T2 Dividend Growth: SCHD, VIG, individual aristocrats. Your stability backbone.
  • Core T3 Income: JEPI, O, ARCC - your reliable monthly checks.

Keep Flexibility Here

  • T4-T5 Tactical Positions: If you have 10-15% in covered calls or synthetics, you can still trim if valuations get crazy.
  • Growth Residual: If you kept 10-20% in VOO/QQQ for upside optionality, fine. But no new buying.

Don't Chase Last-Minute Yield

You're 9 months from retirement. You see a new YieldMax ETF with 60% yield. RESIST. This is the worst time to take new risk. You don't have time to recover from a 30% NAV drop. Stay boring.

Withdrawal Strategy: The Order Matters

Which accounts you withdraw from first has massive tax implications. The wrong order can cost $50K+ over retirement.

The Optimal Withdrawal Order

This is the default strategy recommended by most financial advisors. Adjust based on your specific tax situation.

Step 1: Taxable Brokerage (Years 60-65)

Why First: Most tax-efficient. Long-term cap gains are 0-15% for most retirees. Dividend income is qualified.

Live off dividends + sell shares as needed. Preserve tax-advantaged space for later.

Step 2: Traditional IRA/401(k) (Years 65-73)

Why Second: Taxed as ordinary income, but you're in a lower bracket now. Take what you need before RMDs force you.

Convert some to Roth each year (up to 12% or 22% bracket limit) to reduce future RMDs.

Step 3: Roth IRA (Years 73+)

Why Last: Tax-free growth, no RMDs. This is your longevity insurance. Let it compound as long as possible.

Leave Roth to heirs if you don't need it. They inherit tax-free.

Special Cases: When to Adjust

  • High medical year: Itemizing deductions? Take Traditional IRA withdrawals to max out medical deduction (7.5% AGI threshold).
  • Zero tax bracket: Single filer with <$30K income? Take Traditional IRA withdrawals up to standard deduction limit ($14,600 in 2024). Pays $0 tax.
  • ACA subsidy cliff: If MAGI hits 400% FPL (~$60K couple), you lose ALL subsidies. Live off Roth to stay under.
  • Big expense year: Buying a car or remodeling? Tap taxable to avoid spiking tax bracket.

Emergency Fund Sizing

You already have a 24-month cash buffer (from Module 3). But do you need MORE for true emergencies?

The Three Tiers of Emergency Funds

1

Cash Buffer (24 Months)

Purpose: Sequence risk protection. Already covered in Module 3.

2

Emergency Fund (6-12 Months)

Purpose: Major unexpected expenses (roof, car, medical). Keep in high-yield savings separate from buffer.

3

Reserve Fund (12-24 Months)

Purpose: Catastrophic scenarios (long-term care, prolonged illness). Optional but recommended for 70+ retirees.

DivAgent Recommendation

For most pre-retirees with $500K+ portfolios:

  • Cash Buffer: 24 months in T1 (SGOV, money market)
  • Emergency Fund: 12 months in high-yield savings (Ally, Marcus)
  • Total Safe Money: 36 months = 3 years of expenses untouchable

Yes, that's 30-40% of your portfolio. But sleep insurance is worth it. You'll never panic-sell T4-T5 positions in a crash if you have 3 years of cash.

Tax Optimization for Year 1

Your first year of retirement is a tax planning goldmine. You worked half the year, then retired. Lower income = lower bracket = opportunity.

Year 1 Tax Strategies

  • Roth Conversions: Convert $50-100K from Traditional IRA to Roth. You're in 12% bracket now; you'd be in 22-24% if you waited.
  • Capital Gains Harvesting: Realize long-term gains up to 0% bracket limit ($94,050 for married in 2024). Tax-free portfolio rebalancing.
  • Accelerate Deductions: Pay Q4 property taxes in December to itemize. Bunch charitable giving into Year 1.
  • HSA Drawdown: If over 65, you can withdraw HSA for ANY reason (taxed as ordinary income). Use it before tapping Traditional IRA.

Pro Tip: The QCD Strategy (Age 70.5+)

Once you hit 70.5, use Qualified Charitable Distributions (QCDs) to satisfy RMDs without increasing taxable income. Donate up to $105K/year directly from IRA to charity. Counts as RMD but not included in AGI. Lowers Medicare premiums (IRMAA) and keeps you under ACA subsidy cliffs.

The Pre-Retirement Checklist

20 tasks you must complete in the final 12 months. Print this and check them off.

Financial

Healthcare

Social Security & Benefits

Administrative

The Emotional Side of Retirement

Everyone focuses on the numbers. But retirement is an identity shift. You're no longer "VP of Marketing" or "Senior Engineer." You're... retired. For some, that's freedom. For others, it's disorienting.

Three Common Struggles

  1. Loss of purpose: Work gave structure. Now what? Plan activities, hobbies, volunteer work BEFORE you retire.
  2. Social isolation: Work friends disappear fast. Join clubs, travel groups, or online communities.
  3. Spending guilt: You saved for 40 years. Now spending feels wrong. Give yourself permission to enjoy it.

Financial independence is the goal, but it's not the finish line. It's the starting line for the next chapter.

Action Items

1

Complete the Pre-Retirement Checklist

Print the 20-item checklist above. Schedule tasks 6-12 months before retirement date.

2

Map Your Withdrawal Strategy

Document which accounts you'll tap in which order. Run tax scenarios for Year 1-5.

3

Test-Drive Retirement Income

Stop DRIPing. Take dividends as cash for 6 months. Do you have enough? Adjust portfolio if not.

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