The stock market is crashing and we’re in a recession. Can I still retire? – USA TODAY

Posted: April 21, 2020 at 3:48 pm


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Peter Dunn, Special to USA TODAY Published 7:40 a.m. ET April 21, 2020 | Updated 2:59 p.m. ET April 21, 2020

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Dear Pete,

I had planned on retiring from my job this October after 42 years in the workforce. But with all this stock market crash and recession stuff, Im not sure I can or should. I live alone, currently bring home $4,100 a month, and I have $452,000 in my 401(k) (even after the crash). I havent filed for social security yet, but Ill receive about $2,500 a month. Ill be 67 when I file. I dont have too many bills, and we only spend about $3,000 a month. I think I can make it work, but Im just nervous about leaving the workforce with all the unknowns.

Robert,

Kansas City

Answer: Your apprehension is understandable. To attempt to retire in one of the most challenging financial environments in a century is undoubtedly harrowing, but based on the situation you described, you might just be the type of person to pull it off without a hitch.

To understand why youre likely to be successful, you first must understand what typically compromises a retirement plan.

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There are four circumstances that will typically ruin a retirement strategy before its even rolled out.

The good news is I dont think youre vulnerable to any of the four culprits.

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Becauseyoure older than 65, you wont be forced to come up with an alternative health insurance strategy, which typically puts a strain on the retirement finances of those who retire prior to age 65. This remains a problem until they become eligible for Medicare at 65. Fortunately, youve avoided this very expensive period of time. Additionally, at67 youll be able to claim your full Social Security retirement benefit, as opposed to accepting a reduced amount at a youngerage.

The second circumstance youve avoided is an expensive lifestyle. As it stands now, you only live on about 73% of your take-home pay. Thats phenomenal and is arguably the primary reason you will be able to successfully retire in October. A successful retirement is rarely defined by having a lotof money. Its usually determined by not needing a lot of it. Thats you.

The next factortripping up many retirees is the percentage of money needed from non-fixed income sources. In other words, if your fixed-income sources (Social Security, pension, etc.) arent enough to fully fund your retirement, youd at least like them to be a high percentage of your income. Per your numbers, 83% of your initial retirement income needs will come from a fixed source (Social Security). That means youll only need your assets to fund the remaining 17%, which in your case is $500 a month.

The final circumstance which can ruin a retirement before it begins is the percentage of total assets required to support your lifestyle afteryour working years end. For years, financial experts warned people to not withdraw more than 4% of their total assets, in order to ensure their money will last throughout retirement. That "four percent rule certainly has its flaws, but its still a decent litmus test. By your account, you only need $500 a month from your nest egg, which is only 0.6% of your assets.

Robert, I think you can retire in October, and do so in peace. Between now and then, make sure your 401(k) is properly allocated, and continue to maintain that $3,000-a-month lifestyle. If you havent already, make an appointment with a financial planner sooner rather than later, and they can chart your specific strategy going forward.

Congratulations on creating a sustainable retirement strategy. Your discipline and diligence made it happen. Allow me to be the first to wish you an (early) happy retirement.

Peter Dunn is an author, speaker and radio host, and he has a free podcast: "Million Dollar Plan." Have a question for Pete the Planner? Email him at AskPete@petetheplanner.com. The views and opinions expressed in this column are the authors and do not necessarily reflect those of USA TODAY.

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The stock market is crashing and we're in a recession. Can I still retire? - USA TODAY

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April 21st, 2020 at 3:48 pm

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