Retiring During a Crisis

This was going to be the year. Your 401k was robust, you'd put in your time, and a leisurely retirement was on the horizon. Maybe you even had an exit date and celebratory travel plans.

And then the coronavirus invaded. Words like "social distancing," "shelter in place," and "flatten the curve" entered our vocabulary. Masks and gloves became part of our wardrobes. Thriving businesses closed their doors. Jobs disappeared. The stock market tanked. Suddenly, your nest egg doesn't look so secure.

I faced a similar situation in 2008, on the cusp of the Great Recession. After years of working in the beleaguered airline industry—where we suffered pay cuts while employees in other industries earned raises, where I dodged the ax time and time again amid multiple reorganizations—I decided I was going to accept a retirement-incentive package as soon as I was eligible. And in early 2008, I had the right combination of age and years of service to take advantage of a buy-out.

Years of frugal living had enabled us to pay off our mortgage. We were debt-free and had no children to educate. Our investments were doing great. My husband's job was safer than mine, and I could be added to his health insurance plan. So, I signed the papers.

And then the housing market collapsed, taking the stock and bond markets along with it. Suddenly my retirement accounts didn't look as hardy.

I knew better than to yank my money out and cement my losses, but going off the payroll took away my ability to keep contributing to my 401k and dollar-cost average, taking advantage of fire-sale prices.

Reneging on my commitment to accept the early-retirement package wasn't an option nor did I want it to be. But, luckily, my company offered me the opportunity to work short-term as a contractor in one of my old departments while still drawing my pension. Contract jobs off and on for the next few years enabled me to shore up my portfolio and participate more in the market's recovery.

But what can you do now if you're in that predicament—planning to retire and suddenly not as prepared as you'd thought? In a few short weeks, we went from almost full employment to record unemployment claims, so postponing your decision to leave or picking up part-time work might not be possible.

Hopefully, you've already planned for survival without your salary. You've paid off or greatly reduced your debts. You've anticipated expenses, decided on the lifestyle you want in retirement, and figured out how to finance it. You've moved your investments to a more conservative allocation, so you don't have to sell volatile assets at a depressed price to cover living expenses. 

But still, if most of your retirement income was set to come from your investments, you might need to make adjustments. Here are some suggestions:   

• Review your asset allocations. After the drastic drop in the stock market and interest rate cuts, your investment distributions might be out of balance. Ensure that you've adjusted to a mix suitable for someone drawing down assets instead of accumulating them.

• Make your withdrawals from cash accounts, or mutual funds with the most stable values. This will give your more aggressive holdings time to rebuild their worth.

• Tighten your belt; comb through your budget and look for areas where you can reduce spending without compromising your values.

• Postpone major trips and events. (The pandemic might have already wreaked havoc with your plans for a big retirement bash or a family cruise.)

• Clean out your garage, your attic, your spare bedroom, and have a yard sale. (If it's allowed in your community and you practice social distancing!) Or sell some possessions you don't need anymore on e-Bay.

• Consider taking Social Security earlier. But be careful; be sure you really need the money now. If you're under full retirement age, you'll be permanently sacrificing some of your future earnings. The longer you wait to file (up until age 70), the bigger your checks will be when they finally come.  

Life is full of surprises, and the best-laid plans can sometimes fall by the wayside. But the more flexible, patient, and prepared you are, the better your ability to adapt.

What are your thoughts about planning for retirement? I’d love to hear your comments.

Sharon Marchisello is the author of Live Well, Grow Wealth.
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