Many individuals dream of retiring early, whether to escape demanding work or to take advantage of things like traveling while they’re still relatively young. If you plan to retire early within the next year or two, you might wonder whether doing so is still feasible in light of the current stock market slump. However, there are some circumstances where retiring early is more than possible, even if your portfolio recently suffered a significant loss.
You’re probably not alone if you’re reconsidering early retirement in light of the recent stock market slump. However, depending on how your portfolio is set up, you might be in a good position to proceed with your short-term early retirement goals.
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The key is to have a safety net.
As retirement approaches, people are frequently encouraged to switch to safer investments and retain one to two years’ worth of living expenses. As such, they will still have a way to pay their bills even if the stock market crashes. You might be in an excellent position to begin early retirement, even though your portfolio is down, if you took that advice to heart and are sitting on bonds that haven’t lost much value and have a ton of cash.
You may also have a sizable income source that isn’t part of your investment portfolio, such as a paid-off rental property. You have a few choices in this situation.
Considering continuing to work after retirement? Your body can have other plans.
The residential real estate sector is booming even though the stock market is now down. Therefore, you might be able to sell an income property for a healthy profit and utilize the proceeds as a short-term savings account while you wait for the value of your IRA or 401(k) plan to increase.
You might also decide to keep the rental property and use the money you receive each month as income. Of course, you’ll need to ensure the rent you get covers the cost of owning and maintaining that property and your expenses. However, if that’s the case, you’re in a solid position to follow your early retirement goals.
Three ways retirement savers can combat inflation.
However, there are risks associated with early retirement, including prematurely emptying your assets, having to pay for healthcare if you are not yet eligible for Medicare, and just becoming bored since you are still young enough to want to stay active. But if you are aware of the hazards, it can be conceivable to end your employment when the stock market is upsetting many people.
Things to do.
There are a few ways new retirees might lower their risk if they are worried about the state of the market. For starters, you can cut back on your spending to stop taking money out of your retirement account. Although there are several opinions on how much to spend in retirement, a supporter of the “4 percent rule” technique might decide to forego an inflation adjustment, for instance.
Regardless of the approach, lowering withdrawals relieves pressure on the investment portfolio.
Does that imply you can’t go on an enjoyable cruise or vacation? Not always. It may require further consideration of tradeoffs, depending on how things turn out.
Retirees can also change the source of their withdrawals. For instance, retirees can withdraw funds from cash rather than stocks or bonds.
This brings up sequence risk once more and the need to avoid withdrawing funds from declining-value investments. That is accomplished by taking withdrawals from a cash reserve while anticipating other assets’ (hopeful) recovery. You don’t want to sell stocks or bonds in this climate if you can afford not to.
However, you might not have access to several months’ or years’ worth of cash. You can draw from less severely affected sectors, such as short-or intermediate-term bond funds, which are less sensitive to rising interest rates.
Make a wise decision.
Early retirement might have to wait if your portfolio has lost a lot of value, and you don’t have any cash on hand. Even if early retirement is a path you intend to pursue shortly, it may be possible if you have the resources to pay your obligations for a few years without selling investments that are performing poorly.
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Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.
Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.
Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.
Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.
Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.
With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.
Aaron can help you and your family to create, preserve and protect your legacy.
That’s making a difference.
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.
