Jun 28, 2019
This week, I’m talking about the danger of retiring during a recession. The problem with retiring during a recession is that your investment portfolio will also likely drop - 10, 20, or even 30% or more, which can derail your plans for retirement.
Each day this week, I’m sharing with you how you can protect yourself from a stock market drop either just before or just after you retire - which can be devastating for your retirement and significantly increase your chances of running out of money later in life.
Today, I’m focusing on a wise and practical way to protect yourself from a stock market drop in the early years of retirement - keeping enough cash on hand to weather the storm.
The typical stock market drop lasts about 18 months. Even the massive stock market decline in 2008 only lasted about 18 months. When you have enough cash on hand to get you through the big drops without making the problem worse by withdrawing money from your portfolio when it’s cratering, you give your portfolio a better chance of recovering and recovering quicker.
One smart way to deal with this problem is to keep 1-2 years of cash on hand in a money market fund, that you can draw from, so you don’t have to tap into your portfolio when the stock market it dropping and the economy is in the tank. Most of the time, 1-2 years worth of cash is enough to see you through, so consider sidelining some of your retirement portfolio in the later years of working and the early years of retirement to see you through a potential recession.
That’s it for today. Thanks for listening!
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My name is Ashley Micciche and this is the One Minute Retirement Tip.
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