Is it really the right time to retire? What to do next? by Wray Matthews
As per Wray Matthews near-retirees who are expected to retire should ask a few questions from themselves before retirement during this COVID-19 outbreak that has turned jobs upside down and accelerated market downtime. Some financial advisors have their best advice for you. We have come up with some questions that every retiree should keep in mind before entering into retirement and leaving the workforce.
With the outbreak of the coronavirus, stock indexes fluctuated, jobs turned upside down, and an accelerated market recession, is it the perfect time to retire?
There might be some Americans waiting to start retirement this spring season or this year, but we must say that the world has changed drastically within a couple of months. Last week, the almost 11-year bull market failed, and the biggest corporations across the country shut down shows, restaurants, and other facilities which could have accelerated the spread of coronavirus. This infectious disease has killed more than 9,000 people worldwide.
Jay Spector, renowned Partner and Wealth Adviser at Barton Spector Wealth Strategies, said that the world is going through unprecedented times. There are so many investors who have never experienced such market situations before.
The advisor advises people to check to see if this is the right time to retire; they should keep an eye on their finances and find out if they are in order. They should keep a plan ready for the foreseeable future.
Wray Matthews said Generally, every financial planning decision depends on certain factors, including savings collected by a person for the future, investment plan of their portfolio, and what profit or loss of income they can expect in a couple of months. Chris Hardy, the Founder of Paramount Investment Advisors, asked a few questions like, “Can people retire? Yes, they can. Should people retire? That is quite different. This is the question where realistic expectations about returns are difficult for the worker to imagine because the flow of cash is the king in this process.”
But when you have no option and your retirement is at its peak, here are a few things that need to be considered:
Most financial advisors advise near-retirees to reduce their investments in stocks as they approach their retirement date, and this is the same scenario that we are going to share here. Michael McKevitt, Director of Financial Planning at Guillaume & Freckman, said that there are saving workers who have heavily invested in stocks and want to delay their retirement. The reason for this that they don’t know the duration of market recovery, and the potential risk of recovery after a long time is high. In that case, people may need to go back and work, and by that time, it will be too late to re-enter the workforce for multiple reasons.
William Parrott, President and Chief Executive Officer of Parrott Wealth Management, said that there are people who want to retire from the workforce and want to buy safer assets like U.S. Treasury bills, notes, or bonds. He advises his clients stuck in this plan to buy three years’ worth of expenses, which means if a person’s annual expenses are $100,000, he should purchase $300,000 in bonds. In that case, they are safe, and they don’t need to worry about the stock market volatility.
There are various categories of allocating assets an investor should consult a professional financial expert about before retiring.
David McPherson, the Founder of Four Ponds Financial Planning, said that people with guaranteed income like a pension or annuity are financially better than someone who plans to use their 401(k) savings. He further added that he would delay spending his retirement income until these hours of crisis pass away and give a better idea of how things will change after this situation.
Charles Failla, Principal of Sovereign Financial Group, said you need to cautiously think of all sources of income and use them to avoid spending until your retirement. The source of income can be from Social Security, pensions, 401(k) or individual retirement account assets, real estate, and any other income family members’ income. Then make a list of your household spending, including mortgage payments, insurance, utilities, health care, and general living expenses.
“Once you have listed down your expenses and tried to find out your source of income and other resources, it would be easier to answer ‘can I retire?’”
Investors should focus on the debt a worker has after retirement. Hardy added that people with no debt payments have more control over monthly cash flow and can bear the situation like we are running through.
Advisers stated that during these times, financial plans are essential. A. Spector said if he or she is doing the right retirement planning from day one, he or she should still consider their retirement plans. If clients can’t control their financial plan during tough times, then stick to the plan developed by the investors. Maybe now they won’t realize the rewards of this plan, but surely, either with income from their portfolio or growth of their portfolio or both, they will benefit.
Overall panic at this time
As per Wray Matthews if someone has properly allocated assets, then he or she doesn’t need to worry but will have to wait for the market activity anxiously. McKevitt advised that working for six months or a year would reduce stress levels. With savings and future retirement plans, people will get an opportunity to reassess their risk tolerance during this market volatility.
Wray Matthews said Michael Hennessy, Founder of Harbor Crest Wealth Advisors, advised near-retirees to ask a set of few questions from themselves before retiring.
Questions like how will he or she support his or her living expenses? What about health care, and your eligibility for Medicare? Will you draw down your investment portfolios to combat your retirement income? If you need to get your Social Security benefits early, you may get limited overall receiving benefits. What are some things that you would do after retirement or after leaving the workforce? Why do you think you should retire now — just because of market volatility?
Hennessy said that there is just one shot to retire. Don’t make this decision in a hurry.