Is It Safe to Retire During the Pandemic?

The fallout from the coronavirus COVID-19 has impacted many New Jersey resident’s retirement plans. A volatile stock market and widespread unemployment have derailed long established retirement plans. Soon-to-be retirees are watching their retirement savings disappear in the blink of an eye. It is difficult to say how long this will last, but here are a few things to keep in mind if you are planning to retire in the near future.

The country is heading toward a recession and it can be risky to retire during an economic downturn. When stock prices fall, it can be a great time to invest because you can buy low and sell high after the stock market rebounds. But if you are selling your stocks, a down market can be disastrous for your lifelong investments. You likely bought your stocks in a healthier market, meaning you bought them for more than they are currently worth.

If you’ve been watching your retirement savings dwindle over the last few months, try to remain calm. You cannot, technically speaking, lose money on your investment in the stock market until you go to sell your stocks. Even if your investments have shrunk significantly, you can still get this money back by keeping your funds invested until the stock market recovers. Withdrawing your money now will solidify your losses.

So, if your retirement plan is based largely around stock market investments, it’s probably a good idea to hold off retiring for a year or two until the stock market has time to rebound. While we cannot predict how long down market will last, if you can wait even a year or two, your investments might be worth more when you finally do decide to retire.

There are, however, some circumstances which would make it a good idea to retire in the face of a recession. If your retirement fund is mostly cash, you can probably afford to retire even during a recession. If your retirement portfolio is geared towards conservative investments like bonds instead of stocks, you may find that your savings are largely unaffected by the current economic climate. In these instances, as long as you budget well and live within your means, you may indeed be able to afford to retire right now.

Another way you might be able to consider retirement now is if you have other sources of income to keep up with your bills. If you have a pension or intend to collect on your Social Security benefits, you can depend more heavily on these sources of income in the beginning of your retirement while your investments recover.

Frustration is understandable—you’ve spent your whole life preparing for retirement only for events outside of your control to derail your plans. But unless you can afford to live off of other means of income, it will be worth it in the long run to hold off on retiring for a few more years. If you are worried about your retirement savings or how to protect your assets, Veitengruber Law can help. It is never too late to make some changes to reach your retirement goals.