Erickson Financial Solutions Blog
Minute video: Do not let timing ruin your retirement.
When is the worst time to retire.
Many people seek the optimal time to retire. Unfortunately, there is also a terrible time to retire.
Here we will cover a few factors to consider when deciding to retire to avoid the “worst” time to retire.
First, if you retire and you will not have medical coverage, this is a clue that it is not the time to retire. This is a huge risk. Without insurance, you are one accident away from insolvency or a severely underwhelming retirement. And if you retire and do get insurance on the open market, you may find the cost essentially unaffordable and cause a catastrophic meltdown of your assets.
Second, you have no real source of income to meet your critical needs. As mentioned in an earlier blog, Social Security retirements are unlikely to be enough. If that is the case, where is the rest coming from? It is incredibly surprising how fast a “nest-egg” can be depleted.
Investment returns go sour. Investments that can vary in value are subject to the risk that they will perform badly at the wrong time. So, while your investment nest egg loses value, you will compound the loss by drawing living expenses. This a double whammy from which your portfolio may never recover.
Imagine retiring in January 2000. Within 10 years the account could easily be down 50% in an all equity portfolio - and that does not include any withdraws along the way. If in your estimates you barely had enough to retire in 2000, then you surely are sunk in this scenario. So, the time to think twice about retirement is when the market is high. Or if you elect to retire, make sure you planned on a low rate of return.