Retirement in Crisis?
A progression of feature articles about retirement from the magazine Kiplinger’s Personal Finance tells a story of changing times. The titles optimistically urge us to “Retire Rich” in the February 2008 issue and “Retire on Time” in September 2008. February 2009’s article insists “You Can Afford to Retire” (caveat: maybe a few years later than you had planned).
The last year and a half has seen drastic changes in the national and now even the global economy. Those over age fifty (like our CVEC members) who are retired or are approaching retirement are being affected in particular ways by the stock market plunge and the drop in home values.
According to financial planners, the most important issue in retirement is ensuring that your funds last through your retirement years. There are myriad formulas used to calculate how much in assets of various kinds this requires, depending on how many years of retirement life are anticipated. Unfortunately, the unforeseen twenty to more than thirty percent loss of value of 401(K) retirement accounts was not part of the original calculation.
The depressed housing market is yet another blow to the plans of many. Typically, seniors who still own the home of their middle years expect to sell it in order to downsize or to make the move to a senior-friendly condominium, cooperative apartment setting, or assisted living facility. Anyone who was planning to do so this year must either wait until the market recovers or sell for a much lower price than counted on. Local anecdote and a recent feature article in the StarTribune confirm the prevalence of this dilemma. On the other hand, the planners note, those who can afford it may purchase their retirement home now at a lower price and hold on to their old home until prices go back up.
All financial planners are very protective of retirement funds. If you are still working, they advise, do not stop your contributions or make early withdrawals. If you are retired, temporarily reduce or halt withdrawals if you can, and withdraw from bonds rather than stocks to extend the life of your retirement portfolio. Do not take your funds out of stocks, because you will be selling at a loss and losing the chance to gain when the market rebounds. Those who kept their stocks during the Great Depression eventually made up their losses. However, it took twenty-five years; we hope for a more rapid recovery this time.