The fear can be paralyzing: You’ve worked and saved all of your life and now, just as you plan to embark on retirement in your ‘golden years’ … the stock market stalls.
And if you are now forced to dip into and withdraw from your retirement portfolio – as it is eroding in value – you raise the risk of outliving your assets.
The most obvious – and best – option is to delay your retirement until the volatility eases.
By delaying retirement, you can avoid withdrawing money when your portfolio is down and continue adding funds to your nest egg. “Those contributions might be especially powerful if you’re deploying money into stocks when they’re falling,” Christine Benz, director of personal finance at mutual-fund researcher Morningstar Inc., told The Wall Street Journal.
Many people, however, don’t want to—or can’t—delay their retirement.
Highlighting the Journal’s advice to reduce bear-market risk to your retirement:
"Don’t like the idea of a reverse mortgage but moving to a smaller home has always been part of your long-term retirement plan? Now may be the time to consider that option, if the home-sale proceeds would help you delay or reduce portfolio withdrawals," the Journal suggested. “People may want to ‘unlock’ what is for many people their biggest asset—their home,” says Michael Falk, a partner with Focus Consulting Group Inc. in Long Grove, Ill.
Trim expenses to reduce portfolio withdrawals. “Get in the frame of mind that when times are tough, ‘I’m pulling back a little,’” says Tom Fredrickson, a Brooklyn-based financial planner with Garrett Investment Advisors LLC.
Stick with your investment plan. For investors with diversified portfolios, their losses “aren’t nearly as big as the market,” says Rick Kahler of Kahler Financial Group in Rapid City, S.D. “These dips are to be expected.”
Don’t believe everything you hear.
Just because everyone is saying something doesn’t mean it is right for you. Take the idea that you shouldn’t sell in a down market. Generally, that makes sense—but selling might be the right decision for you, depending on your individual circumstances, Benz told WSJ.com.
To be sure, your midlife crisis need not include an affair or a sportscar. For many, it's a lack of retirement planning, USNews
"Recent government statistics reveal that just 53 percent of the civilian workforce participates in or contributes to a retirement plan, according to the U.S. Bureau of Labor Statistics. And in the private industry subset, it's even lower, at 48 percent," USNews reported.
"Among the two major categories in the civilian workforce surveyed, only one – state and local government workers, at 81 percent – shows healthy participation rates."
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