Regret Retiring Given Inflation/Market Woes?
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Anonymous
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Had been planning to retire this summer in my early 60s, but the rampant inflation and stock market declines have been kicking our butts financially.
Would still have a sizable net worth but have seen investments go down substantially in recent months. Wondering if people who were part of the "Great Resignation" over the past year or so are regretting their decision. I would feel like a chump if I retired now and felt obliged to work again and ended up taking a lower-paying job. As it stands, don't have a pension and would have to pay for healthcare out of own pocket. |
Anonymous
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There is some data out there around reitrees and when they retired and how a poor market impacted them. If I remember correctly there was a period in the late 60's into the early 70's where new retirees in that period were screwed.
Run the numbers, hopefully you have at least a couple of years cash on hand to deal with a downturn. It will happen, its just when and are you prepared. |
Anonymous
| Great Resignation crowd and boomers are not the same people. A lot of coworkers (boomers) are definitely rethinking retirement. A few have changed their mind. I suspect more will before the end of the year. |
Anonymous
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We were in this position in 2007 and chose to work for another ten years. So glad we did. We are now in a position to ride out this downturn. We actually backed off a bit, work wise, since we didn’t really need to save more, but just covering our expenses while waiting to make withdrawals and letting the market recover was big.
There are articles out there about this — it’s called “sequence of returns.” Basically, the usual math doesn’t work if there is a significant market drop is early in your retirement. https://www.cnbc.com/2022/01/21/a-lasting-market-downturn-can-be-big-risk-early-in-your-retirement.html Here’s how a sequence of returns risk can impact your savings: Say a person had retired at the turn of the century with $1 million invested in the S&P and withdrew $40,000 each year, with withdrawals after the first year adjusted 2% for inflation. In 2020, the remaining balance would have been about $470,000, according to Ben Carlson, director of institutional asset management for Ritholtz Wealth Management, who crunched the numbers for a blog post. In the above scenario, the portfolio would have been subject to a bear market at the outset of the person’s retirement, when the S&P lost 37% over three years during 2000-2002, but enjoyed a long-running bull market that began in 2009. It’s not the specific returns over time but the order of those returns that matter. However, if the order of yearly returns were flipped — the gains posted by the S&P at the end of the 20 years happened first and that early bear market happened last — that same person would have more than $2.3 million after withdrawing the $40,000 or inflation-adjusted amount each year. “It’s not the specific returns over time but the order of those returns that matter,” Pfau said. |
Anonymous
Most folks start to adjust their investments as they reach retirement(5 or so years out). Mostly to low risk and and least aggressive. Did you guys making any adjustments? |
Anonymous
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For healthcare reasons alone I'd recommend keep working.
Have you priced out Obamacare for your state? I pay $800 per month (for 1) with a $6000 deductible under the Affordable Care act. It is the cheapest plan offered in my state. I get no government subsidy as I earn over $46,000 per year. |
Anonymous
I'm guessing you live in one of those states that rejected federal expansion of Medicaid and ACA which lowered premiums in general. That would have made your base premium at a lower rate regardless of your earning potential. Perils of being blue in a red state. There's 12 of them - including 'business friendly' Texas and Florida. https://www.kff.org/medicaid/issue-brief/status-of-state-medicaid-expansion-decisions-interactive-map/ |
Anonymous
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I retired 7 years ago at 53. So far I've been through two major market adjustments. The first was two years ago, when Covid first hit and the market dropped more than 30 percent. The second is now.
Market fluctuations are part of life. If you don't think you can stomach them, you're not ready to retire. You have to think and look long term. Yes, things suck right now -- big time. But I'm still well, well ahead of where I was when I retired despite two major market fluctuations. My net worth was $4.8 million when I retired in 2015, and as of today it's $7.02 million. Yes, six months ago it was $8 million, meaning on paper I've lost $1 million this year. But I'm staying the course, and not regretting my decision to retire one iota. |
Anonymous
+1. You need to be comfortable with the equity portion of your portfolio dropping as much as 50%. If that makes you nervous, then you had too much at risk. |
Anonymous
| If I am OP, I postpone my retirement for 2 years, if possible. We are in a very volatile financial period. It will get worse before it gets better. Stay the course, if you can hang in with your job, enjoy the cheaper health care, PTO, salary, etc... 2 years will go by quickly and you will have had the consistent income. Wishing you the best. |
Anonymous
+1 |
Anonymous
| Market woes are not affecting our retirement plans (61&58). Cost of ACA after COBRA runs out and before Medicare kicks in is the reason. |
Anonymous
We priced it out, around $40k for our family of four for a silver plan. |
Anonymous
| If you have enough cash to last 1-2 years without touching your investments, you’re fine. The people who get screwed are not those who retire in bad times, but those who retire in bad times AND sell their investments. |
Anonymous
Re: cash What happens in times of inflation, when your money buys less? |