According to BMO Harris Bank, one-fourth of Americans are considering delaying their retirement. High inflation, a looming recession and poor investment results impact their decision. Today we offer some tips for retiring during a bear market.
Watch Now: Retiring in a Bear Market, Here's What You Need to Do!
- 0:00 – Intro
- 0:21 – BMO Real Financial Progress Index
- 0:54 – Retiring during a bear market: Start Here
- 2:14 – Adding Stress to your nest egg
- 3:41 – Is now the right time to make major allocation decisions
- 4:39 – When do you reduce risk in your account?
- 5:29 – Why delaying retirement is a reasonable option
- 7:32 – If you can’t delay retirement, consider these steps.
- 8:54 – The importance of being flexible.
- 9:48 – Final Thoughts
- 11:53 – Outro
Retiring During a Bear Market – Start Here.
Retiring right after your account values drop can be intimidating. The first place to start is by looking at the numbers. This is a cash flow issue, so you need to understand both your income and expenses.
- Review your “guaranteed income sources” such as Social Security or Pensions.
- Calculate your investment income using the current balances.
- Review your expenses.
Caution: watch your withdrawal rate!
A higher withdrawal rate can add risk to your retirement savings. Pay close attention to how much you are taking from your savings. If that number is more than 5%, you may be adding more risk to your retirement.
Review Your Allocation But Make Careful Adjustments.
Rule 1: Buy low, sell high. Making a major shift in your allocation may be doing the opposite right now. Managing risk is an ongoing process, but you may want to be patient before you make a major shift. Selling some assets, like stocks, could limit your ability to recover from the bear market.
Tip: Reduce your risk at or near market highs. Consider increasing your risk near market lows.
Investing is a tradeoff between the risks you take for the potential returns. At high points, you can face more risk in the future when a correction or bear market occurs. At low points, the potential rewards may be much more attractive than the future risk.
Delaying Retirement Might Make Sense
Delaying retirement can improve your income. Your Social Security benefits can improve either through smaller discounts or even delayed retirement credits. Your pension benefits could improve with another year of service and being a year older.
Your retirement savings will need to provide income for fewer years overall.
It may not be what you want to do, but it might be the smartest choice.
When Delaying isn’t an option
Sometimes delaying retirement isn’t an option, and sometimes it isn’t your choice. What can you do if you can’t continue working?
- Look very carefully at your spending, and make changes.
- Be prepared to potentially reduce your spending later.
- Reimagine what retirement might look like.
- Consider working part time.
Life often happens differently from your plans. No matter how conservative you have been projecting what retirement might look like, your real results maybe fell short. It is important to be able to adjust to what really happens. Your retirement could last two or three decades, so it is important to make good choices along the way.
Appearing in This Episode
Andy is a financial consultant in Parkersburg, West Virginia. He has been helping people plan for retirement for the past 3 years.
Todd Kimpel, CLU®, ChFC®
Todd is a financial advisor in Wheeling, West Virginia. Todd has helped many families navigate through bear markets for over 4 decades.
Neal Watson, CFP®
Neal is a Certified Financial Planner™ Professional in Marietta, Ohio. Neal began his career in 1996. He has helped people manage their retirement through events like the Dot Com bust and the Great Recession.
You're Not Alone!
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