Retirement Countdown in a Down Market

Among people who in the past year decided to change their planned retirement age, 36% said it was because of the poor economy and 28% said it was because they needed to make up for losses in the stock market.¹

Everyone who plans to retire someday faces the risk of not accumulating enough money and thus having to postpone retirement. However, the reality is that the process leading up to retirement should begin years beforehand to help protect your portfolio in the event that the markets are affected by unfavorable economic conditions.

Some advance preparation may help avoid surprises, such as having to add years to your career at the last minute.

Review your investment strategy. Three to five years prior to your target retirement date, you may want to begin shifting to a more conservative asset allocation. Reducing risk in your portfolio well before you plan to stop working may help you avoid significant losses from which you may not have time to recover.

Consider whether to stay put or move. The decision to stay in your current home or move to a less expensive place should also begin years ahead of time. Paying off your mortgage may help reduce the pressure on your retirement income, but waiting too long to decide to pay it off could cause you to forego retirement contributions or cut back on your current lifestyle.

If you expect to move to a less expensive area or a smaller home, give yourself as much time as possible to sell your current house.

Deal with outstanding debt. It can take years to pay off car loans, credit cards, and other debts. If you are carrying significant personal debt, it may be a sign that you are probably not ready to retire. The role that debt will play in your retirement should be decided long before you stop working.

Pad your cash cushion. Having cash reserves increases your flexibility and may protect you from having to sell portfolio investments at an inopportune time in order to pay for basic living expenses. By taking a long-term approach to building a cash cushion, you may be able to avoid crimping your current lifestyle or making hasty investment decisions.

You will probably spend much of your working years setting aside money for your retirement. It’s a good idea to spend time preparing for when and how you will tap those assets to make the most of your retirement.

1) Employee Benefit Research Institute, 2009

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by StoneRiver–Emerald. © 2009 StoneRiver, Inc.