Should you rethink your retirement plans now that we are in a bear market?


Llast week the S&P500 plunged into bear market territory for the first time in just over two years, and unsurprisingly, it shook a lot of people. If you’re decades away from retirement, you might not be as bothered by the state of the market. But if you’re only a few years away from retirement, you may be worried that current market conditions will hurt your plans.

So should you change your retirement plans in light of our current bear market? It depends on what your investment portfolio looks like.

Are you ready to withstand a stock market decline?

Older workers are generally advised to move away from stocks and into safer investments, such as bonds, as they approach retirement. They are also advised to store enough cash to cover one to two years of living expenses if retirement is on the horizon. And if you’ve followed this advice, you may not need to change your retirement plans at all.

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Without a crystal ball, we don’t know how long the current bear market will last. Typically, bear markets last around a year, but that may not be the case this time around. Our last bear market, which occurred in the wake of the COVID-19 outbreak, was actually short-lived, and we could see something similar this time around.

On the other hand, the bear market we just entered could last for more than a year. But if you’re invested appropriately, it shouldn’t matter.

At some point, stocks are more likely than not to recoup the value they lost. And if you have enough cash and bonds to cover your living expenses for several years, you may not have to change your retirement plans, even if the market is as low as it is. is today.

However, if your retirement savings are still heavily invested in stocks and you don’t have a lot of cash at your disposal, you may need to consider postponing your retirement until the stock market recovers. Once that happens, you can change your wallet to protect yourself from a downturn later.

I hope to face a delayed retirement

Delaying retirement may not be ideal. But it could save you from locking in losses and missing income as a result.

The benefit of postponing retirement, however, is being able to save more money in your IRA or 401(k) plan. Additionally, working longer could delay your Social Security filing. This could mean a more generous monthly benefit and greater financial freedom once you retire.

Don’t be so quick to cancel your plans

Today’s bear market has the potential to upset some pension plans, but it doesn’t necessarily have an impact on yours. If you have the right asset allocation, you may be better able to move forward with short-term retirement plans. And if not, you have the opportunity to learn from your current situation and take steps to secure a higher income in your retirement years.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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