A bear market can be scary for any investor. But if you are planning to retire anytime soon, a market downturn can be downright terrifying.
Stocks officially entered a bear market last week. The S&P 500 is currently down around 21% for the year, and U.S. Treasury yields (which move in the opposite direction of bond prices) recently hit their highest levels in a decade. The classic portfolio of 60% stocks and 40% bonds is getting clobbered, and, understandably, investors are fearful.
Given the current market environment, soon-to-be retirees are likely to be especially stressed about the prospect of living without a regular paycheck.
"We're in an uncertain, tumultuous economic period," says Chris Orestis, president of Retirement Genius, a national retirement information and resource platform.
But does that mean you should change your plans? Here's what to consider, as well as some financial moves to help make the transition into retirement as smooth as possible, even in a bear market.
Gold can be a safe haven against bear marketsGold IRAs help you protect your investments by providing the asset diversification and stability you need during uncertain times.
Should you delay your retirement?
If you had your heart set on walking out of those office doors for a final time this year, it can be hard to convince yourself to stick it out for a bit more time. But doing so could really help you financially in the long term, Orestis says.
Inflation is at a 40-year high, as you are probably aware if you've gone grocery shopping or filled up at the gas pump recently. To battle those high costs, the Federal Reserve is hiking interest rates, most recently by 0.75% — the biggest increase by the central bank since 1994. While the hope is that upping interest rates will bring down those high prices you're experiencing, there are also constant fears that it could tip the economy into a recession. And the rate hikes have the stock and bonds markets in turmoil as investors assess what the state of the economy means for their portfolios.
In short, we're in unpredictable and unsettling financial times that aren't ideal for kicking off retirement.
"If it were me and I was going to declare I’m retired and have my retirement party, I'd look to delay it a year or even two if I could," Orestis says.
We know that the economy will follow a typical pattern — one in which interest rates go up, demand will cool and inflation will come down — but we just don't know the exact timeline, he adds.
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