I'm in a similar position. Was feeling quite some angst due to available cash dwindling quickly as I look at spending 100-200k over the next year or so fixing up the age-in-place house I just bought. Some things that have brought me peace of mind, in rough order of their significance (not in the order I did them):
1) Looked up how much I have in Roth contributions that I could tap if I really need to. Obviously this is not my first option, as it is highly preferable to keep that money invested and growing tax free as long as possible. But since I had a Roth 403b in my last job that I contributed to over 7-8 years, that is actually a pretty big chunk (110k+ in my case). Gotta say when I found the paperwork from the rollover that confirmed that chunk had been documented properly I was HUGELY relieved. I also have another 30kish in contributions to my personal Roth + 30k in a conversion I did in 2018 that are currently tappable. And I'll have another 20k or so in more recent conversions that will become tappable in 2025 and 2026. SO overall I have about 190k in my Roth contribution/conversion bucket that I can use before age 59.5 if I need to. Again, the weight this knowledge took off my shoulders is hard to describe.
2) Looking at potential cash flow needs and my anxiety about the markets, I decided to cash out about 25k I had in an index fund in my brokerage a couple of weeks ago. In hindsight I should have waited as things continued to go up -- would have harvested nearly $1800 more in capital gains if I sold yesterday instead -- but again, the peace of mind of having more of a cash cushion was probably worth it to me. Like you I need to be careful about when/how I harvest my gains in order not to mess up my bigger tax and health coverage picture, but I think I should be able to spread out sales over the year during times when the market is doing well to continue to maintain a comfortable cash buffer.
3) I am also starting to move portions of the Roth accounts that I might need to tap into money market or other less volatile funds. That way if the markets tank at least I still have those funds available if I need them. Yes, this may dampen my returns somewhat, but for me the peace of mind is worth it. I already moved the 30k in 2018 conversions to a MM bucket. Need to look more closely at the rest and decide when to move those funds around. Note that I am NOT cashing the Roth money out at this point -- just moving money within the accounts to buckets that are less likely to leak/slosh about as the markets do their thing. I think that will help calm my brain down if the markets start dropping again.
4) RE-worked my SS estimates and discovered that with the past couple of years of inflation my estimated benefit at age 70 is now 57k, up from the 42k it was when I last ran the numbers a couple of years ago. That is a HUGE change for me as now SS is likely to cover my entire expenses in my later years. Yes, I know the benefits will probably be reduced, I still need to plan for long term care, yadda yadda, but if we're talking about what helps psychologically that piece was huge for me.
5) I also plugged my new estimated budgets, including the estimated renovation costs, into the main planning spreadsheets I have come to rely on. Those are the bogleheads retirement sheet (great for estimating Roth conversion strategies in particular) and the Fidelity Retirement Income Planner or whatever they call it now. Both confirm that I should be find financially even if I spend up to 200k next year on the renovations.
One thing that has become abundantly clear to me over the past few weeks/months: As my cash stash has decreased, my anxiety has gone through the roof, especially with the volatility we have seen in the markets. I seem to do best when I have at least 2-5 years of basic living expenses + planned large expenses readily available to access without any risk of the market taking them away, or at least a solid plan for getting myself to that point. It may dampen my returns over time, but that is how my brain works. IF I don't have enough perceived "security" my Inner Bag Lady starts running amok.
Oh, a couple of weeks ago when I was in the thick of my anxious spinning I was looking for jobs. Not doing that any more. Still might try to pick up some PT flexible work, especially during the winter when I don't have other stuff to do, but not feeling the urgency to do it right at the moment.
And one other thing I just thought of -- since you are on the glide path to 59.5/medicare eligibility/SS FRA, maybe consider being a little more mentally flexible about the 4% rule. If you look at the Fidelity RIP table for my inputs, I don't hit a 4% WR from now until age 70 when I start taking SS. BUT, I still have a pretty robust nest egg at that age (plus a nice house I could sell if I really needed money), and then once SS starts my WR goes to 0. Granted, that is on a modest budget, but I'm pretty sure that even if I upped spending to splurge more on myself and family I will still be fine. I'm more worried about the cash flow between now and age 59.5. The bogleheads spreadsheet is also very reassuring because I can see how my Roth conversion strategy will help to minimize taxes both short- and long-term and gradually get my taxable buckets drawn down with pretty much everything else in Roths and my house. Anyway, I guess my point is that it might be worth giving yourself a bit of mental flexibility about the 4% rule as you are in this last phase before penalty-free access to all your buckets + SS as a possible additional income stream arrive.
