When the U.S. economy and investment markets are struggling, and many global markets and economies are under duress, how can you cope if you are about to enter retirement or are already retired?
Guidelines during times of economic hardship and uncertainty:
- All market declines come to an end; this one will, too. Therefore, exercise patience and self-control.
- If you are approaching retirement in a severe market downturn, it may be wise to postpone retirement until market conditions improve.
- If you are in retirement during a severe market downturn, you may need to significantly decrease your draw-down rate until market conditions—and your portfolio—improve.
- During an economic downturn, be especially cautious and conservative in your spending patterns. As a precaution, set aside at least one year’s worth of living expenses to protect against having to sell investments at low values to raise cash. You may even want to consider setting aside up to three years of living expenses, if you are conservative.