This means withdrawing

This means withdrawing

recession in the retirement market

recession in the retirement market

It’s always difficult to make your retirement savings last as long as you need it – but it becomes even more difficult when you’re retiring during a market downturn, as Americans are retiring right now suffering. A downturn in the market means that any money you have left in the market is shrinking rather than growing, and you may lose money at the point when you are ready to use it. T. Rowe Price, however, has a strategy for maximizing your savings if you’re unlucky enough to retire during a market downturn.

Whether you’re ready to retire now or planning for the future, consider working with a financial advisor to make sure you get it right.

How to Withdraw During a Downturn

The key to successfully withdrawing your retirement funds during a market downturn is to take a conservative approach and not overreach in the beginning. According to a recent T. Rowe Price study:

“By following a conservative withdrawal approach early in retirement and planning for temporary adjustments along the way (if necessary), retirees can navigate the markets and the next phase of life with a truly fulfilling and have fun.”

The most important thing to remember is that a market downturn doesn’t last forever. Bear markets usually don’t last much longer than bull markets, so even if the first few years of your retirement are tough, chances are most of your retirement won’t be.

Historical Precedent for Conservative Strategy

recession in the retirement market

recession in the retirement market

To test this theory, T. Rowe Prices experts looked at three historical examples:

1. Economic recession of 1973, due to oil embargo and energy crisis.

T. Rowe’s analysis tested the “4% rule,” which favors an initial withdrawal of 4% from your retirement funds. Although the first few years of retirement for someone who retired in 1973 were difficult, with shrinking portfolios and significant inflation, things quickly got better. After 30 years, the portfolio balance was double when it started, assuming a 4% drawdown and a portfolio that was 60% stocks and 40% bonds.

2. The recession of 2000, coinciding with the downturn after the September 11 attacks

Again, the first few years were difficult, but by the end of 2022 a person retiring in 2000 would have a portfolio worth close to what it was at the start of retirement – again, assuming drawdown 4% and a 60/40 split portfolio. both stocks and bonds.

3. The 2008 recession, which caused the financial crisis

There was some initial pain for this pensioner, but by 2021 they had a portfolio that had increased in value by more than 50%, using the same assumptions as the examples above.

The Bottom Line

recession in the retirement market

recession in the retirement market

The market is not looking good right now, and that is scary for everyone – especially those who are already retired or close to retirement. There is good news, though – market downturns and recessions don’t last forever. If you’re patient and conservative in your withdrawal strategy, chances are your portfolio will replenish and you’ll be able to enjoy the retirement you’ve been planning – provided you’ve saved what you needed to. during your working life.

Retirement Planning Tips

  • A financial advisor can help you make the right decisions at every stage of retirement planning. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors serving your area, and you can interview your advisor at no cost to decide which one is right for you. If you’re ready to find an advisor to help you achieve your financial goals, get started now.

  • You can use SmartAsset’s free retirement calculator to find out how much money you’ll need in retirement and if you’re on the right path.

Photo credit: ©iStock.com/katleho Seisa, ©iStock.com/Tinpixels, ©iStock.com/PIKSEL

The post How to Retire During a Market Downturn: This Way to Withdraw appeared first on SmartAsset Blog.

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