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Can You Retire in a Crisis?

  • June 22, 2020

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Retire in a Crisis

The reality is that you don’t often know what is going to come your way. It can be overwhelming at times when things are on a downward path for a while. That’s even more true in your later stage of life when you’re considering retiring but aren’t sure if it’s possible because of the current financial picture. If you’re wondering whether you can retire in a crisis or not, here are the details to consider in order to make a decision that’s right for you and your partner if you have one.

Determine Your Expenses in Retirement

Start by looking at what you would spend, on average, in retirement, per month. Be sure to include any payments that you would need to make toward existing debts that need to be paid down, as well as whether you will have higher medical payments than before.

Plan a budget to figure out what your household would be spending monthly. Include utilities, groceries, and mortgage or rent. And add in a certain amount for “wants” or those items that will bring you joy in your later years, such as a sewing machine or a vacation.

Keep in mind too that you will likely have to pay tax in retirement (except Social Security). On average, the tax rate is 25 percent, although using a tax projection will give you a more accurate picture of tax withholding or payments each quarter. Be sure to do this as your tax rate might be more than you think at first, and you don’t want any surprises later.

Look at How Those Expenses Would be Paid

Obviously, everyone’s situation is different. You might have a retirement fund that you can start to use, which you haven’t had to dip into before, and that money can go toward your monthly expenses. You might receive a pension or Social Security instead.

Also, look at your investments. Do you have a diverse portfolio that includes alternative investments with a self-directed IRA, such as real estate? Accuplan can help you pursue your own investment strategy, and there are plenty of options available for earning a profit.

That investment savings can be great for helping you retire comfortably. When you have a diverse portfolio, then you are taking a low-risk approach. For example, if one industry drops, another one may remain strong, and if you have investments in different industries then you will not take as much of a loss in that case. As well, if various sectors soar, and you have investments in a few of them, then your profits will increase accordingly.

See if You Have Funds for 5 Years

Given the calculations you have done so far, ask yourself if you have enough investments in savings, assets, and cash to cover five years of expenses. The reason for doing this is so that you have enough resources to cover the period in case you have any more crises happen to you.

This buffer can give you peace of mind and help you decide whether now is the time to retire, or if it would be best to wait a few more years before doing so. If you are still supporting your kids at home while they are going to college, for example, then it might not make sense to retire until after they graduate.

Waiting to Retire

It might be wise to wait a few years to retire, if possible. That will depend on what the numbers crunched in the steps above tell you, whether you make a new investment, and how the crisis you are getting through is affecting you.

You can work part-time or full-time, depending on what you are comfortable with, and your spouse can do the same if you have one. A positive point about continuing to work is that it keeps you active and social.

Over time, you will likely find that you’re able to save enough that it becomes clear that retiring now is a sensible option. Then you will be able to pay for expenses each month without issue.

Planning to Retire

It’s best to speak with a financial advisor about your strategy for retirement. They will know what the best steps are for you, including recommending investments and savings tips that fit with your plan for the future.

Overall, the best thing is to plan so that you are not at risk of outliving your retirement fund. Also, coordinate your plan with your partners so that you both are on the same page.