How is the market doing?
Living off your retirement savings can be risky when markets are down. The combination of falling stock prices and retirement account withdrawals can cause your nest egg to shrink much faster than you planned, increasing your chances of outliving your money.
“In such a scenario, collecting Social Security would help you absorb the impact of market fluctuations,” says Cameron Barsky, senior partner and managing director of retirement security at Cornerstone Financial Services in Southfield, Michigan. There is a possibility that they will be able to obtain a stable source of income that will not require them to receive financial aid.”
Let’s say you follow the “4 percent rule” and withdraw that percentage of your 401(k) annually. If the market turns bearish and he drops 20%, he has effectively lost nearly 25%. By claiming Social Security early and living off your payments during a recession, you won’t have to sell your lifelong investments at depressed prices, giving your stock holdings a chance to recover when prices recover. Masu.
And remember, market recovery doesn’t happen overnight. According to Wall Street’s S&P Capital IQ, it took on average about 14 months for the Standard & Poor’s 500 stock index, the flagship U.S. stock market, to recoup losses from market declines of 20% to 40%. data provider.
“The biggest benefit of enrolling in Social Security early is that it gives you time before you actually need to start withdrawing large amounts of money from your investment accounts,” says director of advice and planning at online personal finance company SoFi. says Brian Walsh.
Conversely, if the market is firing on all cylinders and you can cover the cost with withdrawals from growing investment accounts, it may make more sense to delay Social Security.
“A raging bull market may give us breathing room to wait for a bigger rally.” [Social Security] You’ll have a paycheck for years to come,” says Brandon Robinson, president and founder of JBR Associates, a Dallas-area investment firm specializing in income strategies for retirees and retirees. pre-retired person. But he recommends this strategy only if the income you receive from your investment doesn’t eat into your principal, or the amount you contributed to your account.
What kind of investor are you?
Are you a risk taker when it comes to the market? Or are you a conservative type who is interested in preserving the money you have already saved? The answers to these questions will determine when to claim Social Security. It is also useful when
A conservative portfolio usually means more modest returns. In this case, Robinson says it makes sense to delay Social Security for as long as you can afford. The higher your guaranteed income by maxing out your monthly benefits, he says, “the more peace of mind and certainty you’ll have.”
According to Wade Pfau, a professor at the American College of Financial Services, most people reduce their stock exposure and rebalance their portfolios toward lower-risk assets as they approach or retire, especially when it comes to their 401(k). It also reduces the growth potential of IRAs and IRAs. Director of Retirement Research at McLean Asset Management Corporation.