Retiring in a bear market can harm your portfolio for the long-term, even if the market eventually recovers, according to a new study by SmartAsset.
In the study, each investor held $1 million in an investment account at the start of a year in which stocks lost value. Each saver planned on a 4% withdrawal rate, which would increase with the historical rate of inflation. To keep it simple, SmartAsset assumed the accounts didn’t have required minimum distributions or mandated withdrawals.
Retiree A’s account is now worth $833,934. Retiree B, who waited to start making withdrawals until the market recovered, has an account valued at $1,332,513 – or $498,579 more, SmartAsset said. “We always talk about that over 30 years, the market will go up and don’t worry. But we found that those early down years are really impactful,” Snider said. “If you don’t do anything differently, the money does not come back.
“It doesn’t have to be all or nothing. Continuing to work, even part time, or consulting, or a seasonal job, just to have some income so you can reduce the amount you’re taking out can help,” Snider said. “Consider taking money from a short-term savings bucket so you’re not locking in investment losses. Or drawing down 2% rather than 4%.”