Key Points
Retiring during a down market can be challenging.
Retiring early when the market isn’t doing well can be even scarier.
Whether you should move forward with your plans or not depends on how your portfolio is set up.
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Retiring at 50 isn’t something everyone gets to do. But if you save enough money, it’s a goal you might manage to pull off.
In this Reddit post, we have someone who’s 50 years old with $8 million in investments. And their plan initially was to retire in July.
But now, they’re worried about retiring given the state of the market. And even with a big cushion, their concerns aren’t unfounded. But with the right portfolio composition, they may not need to make changes to their plans at all.
It’s a matter of whether your portfolio is set to withstand a downturn
If you’re many years away from retirement, the fact that the market is volatile may be frustrating to you. But it doesn’t necessarily have to be scary.
If you’re in your 30s or 40s with plans to retire in your late 50s or 60s, you have many years to ride out the current wave. And even if your portfolio is down year to date, there’s a good chance it can recover by the time you’re ready to end your career.
A down market is much scarier for someone who’s on the cusp of retirement. If you’re retiring in July like the poster wants to, there’s pretty much no time to recover from losses between now and then.
But that doesn’t mean a market downturn has to wreck your plans. With the right asset allocation, you can move forward with retirement even if your portfolio has lost value.
Savers are generally advised to shift away from volatile assets like stocks when retirement is approaching. So let’s say the poster has at least 40% of their assets outside of the stock market and in safer alternatives like cash and bonds. For an $8 million portfolio, that’s $3.2 million in assets whose value may be perfectly stable right now.
That should, in theory, be enough money for the poster to live on for a good numbers of years. So even if the market takes, say, five years to recover, they would have a backup plan.
On the other hand, if the poster still has 90% or more of their assets in the stock market, they may want to reconsider their retirement plans. Chances are, that’s not the case, though, because someone savvy enough to accumulate $8 million by age 50 probably knows a thing or two about asset allocation.
Talking to a financial advisor could help
If you’re nearing retirement and are worried that current market conditions might impact your plans, it pays to sit down with a financial advisor. A financial advisor can review your finances and portfolio and help you make the right call given the state of the market. They can also review your portfolio and make sure it’s allocated appropriately.
Even if you’re not close to retirement, if the current market has you worried, it could pay to speak to a financial advisor about your concerns. They may be able to put your mind at ease and help you assemble a more diversified portfolio that can better withstand market turbulence.
The post I’m in my mid-50s and was going to retire this year but am having second thoughts because of the market appeared first on 24/7 Wall St..
