Aside from a short-lived crash following the start of the pandemic, the stock market has enjoyed a series of strong years. But things aren't looking as rosy right now.
With stock values being down, a lot of investors are growing increasingly nervous by the day. And if you have plans to retire this year, you may be even more anxious than the average investor.
The question is: Should you start making plans to postpone your retirement? Or can you move forward with your plans, albeit cautiously? Ask yourself these questions to find out.
1. How bad a hit has my portfolio taken?
First, let's get one thing straight. While stocks are having a rough week, we don't know when they'll spring back. If you're planning to retire in February, you may need to reconsider your plans if your portfolio is now way down. But if you're not planning to retire for another six months, things could very well turn around by then.
That said, you'll need to assess the damage to your portfolio before deciding whether it's safe to retire this year or not. Savers are often advised to shift toward conservative investments, like bonds, as retirement nears. If you have a large chunk of your retirement account in bonds right now, you may be OK to move forward with your plans if you can leave the stock portion of your portfolio alone to ride out the current downturn.
On the other hand, if your portfolio has taken a substantial hit and is largely comprised of stocks, then you may want to hold off on retirement — or at least prepare to be flexible until we see how the current market correction plays out.
2. Do I have income sources outside of my portfolio I can tap?
You may be able to retire without touching your investment portfolio for quite some time. If you have a small side business that generates money, an income property, or even a nice amount of cash you can take out of your home via a home equity loan or line of credit, then you may be OK to move forward with your retirement plans.
But if your primary retirement income source is your portfolio, you'll need to see how much damage it's sustained. If its value is down heavily, you'll probably want to wait on retiring to avoid locking in losses.
3. Will working longer impact me negatively?
If your job is harming your health or making you miserable, then delaying retirement could have negative consequences. But if you're reasonably happy with your work and you don't have health concerns (say, you can do your job remotely and it's not notably stressful), then you may just decide to stick with it until stock values come back up — whenever that happens to be.
To be clear, the stock market could recover from this recent bout of volatility in a matter of weeks. But that may not happen, and things could, in fact, get worse before they get better. If you're able to plug away at your job a bit longer, it's an option worth considering.
It's frustrating to set a target retirement date in advance only to have the stock market mess with your plans. The good news is that you're not necessarily doomed to delay your retirement if you were planning to make that workforce exit this year. You'll just need to assess your personal circumstances and prepare to be flexible as we ride out the current storm.
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