If you are very close to retirement, the struggles in the economy may worry you. When your retirement occurs at the same time as a market lull or bear market, there are some standard “rules” to follow.
Most people these days are living longer. Therefore, when you do retire, you will need to ensure you have enough income to sustain your standard of living for 30 plus years. This can be tricky to accomplish if the market is on a downtrend.
Many financial experts recommend that you withdrawal no more than four percent of your total portfolio as an initial first year income. Then you can increase that amount by about three percent per year due to inflation.
If the market is on the downside, this strategy can be riskier. If you withdrawal too much earlier on, you run the risk of running out of money. If the market is down, it can be easy to get ahead and sell off too much of your portfolio.
Markets do fluctuate. If you can be patient, then you can recover from this drop. If you are retiring soon, you need to be extra careful in these first five years. Ideally, you will want to cut back on your initial withdrawals until the market starts to improve again.
There are a couple ways to get through this. You can postpone retirement, you can continue to work part time or freelance, or you can live frugally until the market improves. What you decide to do will ultimately depend on your unique situation.
If you do decide to still retire completely and withdrawal money from your portfolio, be careful. I highly recommend you sit down with a knowledgeable financial planner to ensure the parts of your investments you sell to begin your retirement make the most sense to the larger picture. In general, you don’t want to sell off those equities that are on the downturn. Ideally, you want to wait until the market recovers.
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*http://money.families.com/blog/couple-retirement-planning