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Recession tips: Planning for retirement during recession
If you are a retiree or close to retirement, the recent declines in the stock market has
undoubtedly affected you. Here are a few suggestions to consider as you think about your
retirement during recession:
1. Given the recent losses in the stock market and the ongoing recession, many retirees or
those who are close to their retirement are dealing with the problem of having to withdraw
money from their retirement accounts, which usually means realizing losses now instead of
keeping it in the form equity/stocks to be able to participate in the market recovery perhaps
later in the year or in the coming years.
2. In the current recessionary environment, an objective review of your retirement strategy
as well as consulting with qualified professionals is likely to prove advantageous. Taking out
your money from the stock market may not be the best option. This is because even though
the equity market may stay volatile in the short-term, few other areas have shown the
long-term growth that the equities have historically provided. Therefore, taking your money
out of stocks with losses and placing it into safer options such CDs or money-market fund
may not be the best choice.
3. As always, finding the right combination of bonds and stocks for retirement accounts is
critical. The common wisdom is to take on more stocks at younger age and gradually move
to more bonds as one gets closer to retirement. However, note that inflation can easily can
erode the purchasing power of bonds' interest payments if your bonds interest is not
adjusted for inflation, which is not in many cases.
4. Given the recent declines, some may have to make changes in their retirement plans and
potentially change their scheduled retirement, which allows for a few extra years of saving.
This also allows your portfolio to recover as well as potentially a bigger social security
check, since for each additional year of postponing retirement after the age of 62 (until 70),
you will receive "delayed retirement credits."
5. If you decide to retire immediately and tap into your retirement accounts, you can save
quite a lot of money by withdrawing money from your taxable accounts before
tax-advantaged accounts and allow the tax-advantaged accounts to compound interest for
as long as possible.
6. Regardless of your choice, it is important to develop a good understanding of your
financial needs in retirement before making any decision. It is also critical to understand
your available sources of income, namely your assets, your savings, Social Security, and
pensions and annuities.
Finally, as alway, talk to an objective professional advisor.
If you are a retiree or close to retirement, the recent declines in the stock market has
undoubtedly affected you. Here are a few suggestions to consider as you think about your
retirement during recession:
1. Given the recent losses in the stock market and the ongoing recession, many retirees or
those who are close to their retirement are dealing with the problem of having to withdraw
money from their retirement accounts, which usually means realizing losses now instead of
keeping it in the form equity/stocks to be able to participate in the market recovery perhaps
later in the year or in the coming years.
2. In the current recessionary environment, an objective review of your retirement strategy
as well as consulting with qualified professionals is likely to prove advantageous. Taking out
your money from the stock market may not be the best option. This is because even though
the equity market may stay volatile in the short-term, few other areas have shown the
long-term growth that the equities have historically provided. Therefore, taking your money
out of stocks with losses and placing it into safer options such CDs or money-market fund
may not be the best choice.
3. As always, finding the right combination of bonds and stocks for retirement accounts is
critical. The common wisdom is to take on more stocks at younger age and gradually move
to more bonds as one gets closer to retirement. However, note that inflation can easily can
erode the purchasing power of bonds' interest payments if your bonds interest is not
adjusted for inflation, which is not in many cases.
4. Given the recent declines, some may have to make changes in their retirement plans and
potentially change their scheduled retirement, which allows for a few extra years of saving.
This also allows your portfolio to recover as well as potentially a bigger social security
check, since for each additional year of postponing retirement after the age of 62 (until 70),
you will receive "delayed retirement credits."
5. If you decide to retire immediately and tap into your retirement accounts, you can save
quite a lot of money by withdrawing money from your taxable accounts before
tax-advantaged accounts and allow the tax-advantaged accounts to compound interest for
as long as possible.
6. Regardless of your choice, it is important to develop a good understanding of your
financial needs in retirement before making any decision. It is also critical to understand
your available sources of income, namely your assets, your savings, Social Security, and
pensions and annuities.
Finally, as alway, talk to an objective professional advisor.
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