Retiring When The Market Is Like This

Retiring when the Market is like this can be a bit daunting. "Like this" is when valuations are as high as they've pretty much ever been. And that means it's likely stock prices will fall, perhaps drastically in a short period of time like they did in 2007-2008, perhaps over a long stretch like they did in the early 2000s. Perhaps they'll even languish for decades as happened after the Great Crash of 1929. 

Imagine you follow the advice of having a majority of your nest egg in stocks and one or more of the above scenarios unfold. So daunting at the very least.

Now, the argument can be made that if you just hold on, you'll be OK. But is that realistic. Do most people hold on when faced with one of the above scenarios or any of the other times when Bear Markets roar and the world looks black to boot?

While we won't give advice here on what do to if you're regular paycheck is about to cease, we can urge a prudent approach where one tempers one's expectations and allows that tempering spirit to help decide where to plop their stash (stocks, bonds, cash, gold, etc.).

Oh, and by the way, the same holds for those approaching retirement. This is not time to lose some significant portion of your retirement funds. 

In any case, as you make your decisions, here are some factors to remember.

Let's start with those calculators so many of us use as we try to determine whether we've got enough to retire, or how much we'll need to retire, or...well, you know the drill. To make these useful in any way, you need to know your needs. What are the essential expenses you cannot cut. And it helps if you know how much you'd like to have over and above those needs for a pleasant enough life - or some variation of this. Some call this "lifestyle." Whatever.

That could include both things we're used to having and doing now, as well as additional items we might desire when we stop working - stuff like traveling around the world, playing lots of golf, etc.. You know the drill.

If we assume our projections and estimates will turn out to be accurate - and that could very well be a stretch - we're looking for some amount of income and assets where we'll be "set" for life.

But here's the rub for many of us: The projections we might have begun with now have to consider living a lot longer than we may have thought we would. "Experts" tell us that lifespans have increased dramatically. And it's likely we know of one or more folks living well into their 90's. And this creates a dilemma for many of us. Can that "set for life" amount we calculated sustain us that long?

Then there's the whole "long-term care" thing. You know this one too. The statistics tell us that some significant percentage of us will need institutional care of some sort, either for a stretch of time, or until we die. And that sort of care costs a lot. We won't get into the numbers here. You can easily find them on your own. But more and more of us are aware of just how expensive elder care has become.

Even if long-term care doesn't suck our money, there's the whole general health care thing. In the U.S., pretty much everyone goes on Medicare at Age 65. It doesn't pay everything. Again, you can look it up. (The best place to get the details is ssa.gov.) 

We won't get into all the details here. It would simply take too much space and time. But if you're not aware of those details, it would certainly behoove you to start dredging them up.

Thus the financial realities of what we all either face now or will face some day. 

Again, all this can be daunting on its own, never mind when the market is so overvalued as it now is.

But the really annoying part of all this - something that can even make you angry (a personal perspective) is that people didn't always face this kind of situation. Once upon a time, bonds provided a decent income. Once upon a time, working stiffs had pensions. Once upon a time...oh, it's really a subject for another time. 

Just know that this reliance on stocks for our survival and/or sustaining of our lifestyle is a relatively recent phenomenon (beginning around the latter part of the 20th century) in the greater scheme of things. 

Of course, there's no law that says you've got to have mostly stocks in a retirement portfolio. It's just that projections, aided by various assumptions and those ubiquitous calculators seem to push this idea. In the end, you've got to sort this all out for yourself, even if you've come to rely on counsel from a financial advisor.

So while the stock market churns, jumps up and down, and altogether persists in its overvalued, some even consider it dysfunctional state, pity those who have come to believe that it must be the lynch pin of a decent retirement.

Either that, or we just keep on working for pay as so many others do these days.