No matter how much you have saved, it's important to remember that your returns will always vary. Instead of planning on regular returns each year, consider planning for volatility by varying what you withdraw and when.
Be Ready to Flex
Since the bond market is extremely low, your retirement investments are probably concentrated in stocks. When the return is good, it may be tempting to set your withdrawal rate a bit higher than 4%, but when the return drops or the market contracts, you will be better off having more money available to buy back into the market.
Hold Off on Social Security
If you've included social security dollars in your retirement calculations, it may be best to hold off until you're at least 67 years old to get your best benefits from what you've earned. Before choosing your retirement date, carefully review any pension benefits you're entitled to make sure that you:
- retire at the right time
- gain the full benefits of health insurance
If you're not eligible for Medicare at the time you plan to retire, you may consider starting your pension before you apply for social security for an easy transition from pension to social security.
Phase Out of the Office
Instead of leaving the office cold turkey, you may have better luck phasing out of employment. For many professionals, their workplace has been a place for socialization as well as professional fulfillment. Many workers face a big emotional boost right after retirement but can struggle with post-retirement depression. To protect yourself from that feeling of social isolation, consider doing either part-time or consulting work to stay connected and keep your income flowing to avoid pulling cash from your retirement in the event of a market contraction.
This part-time connection will also allow you to keep a schedule and maintain a sense of continuity in your daily activities. If you choose to work in the morning and take a class in the afternoon, you can expand your social connections, built community, build a new schedule and keep earning.
Watch for Bargains
As noted above, if you experience a market contraction, having some cash to put back into the market can add to your nest egg. If you want to do other activities with your retirement dollars, you now have the time to watch for bargains. For example, if you're interested in taking a cruise, you may get a much better price flying out of a city on the southern or western coast.
As a retiree, you have the time to make arrangements to get to these port cities. For example, if you live in the Midwest and are interested in a cruise to see the glaciers in Alaska, you have the time to take the train through the Rockies, enjoy Seattle, and then cruise to Alaska.
Be Ready to Buy
Keep an eye out for bargains to keep your expenses low. This can mean buying a smaller home to lower your maintenance labor and free up your time; keep the profits from the sale of your existing home handy so you can either invest in products that will pay off later or use part of it to treat yourself on an item or activity that you've always wanted to enjoy.
Many retirees and those approaching retirement have faced a lot of uncertainty in the past 15 months. Trying to be certain of your retirement funds means breaking away from the yearly focus on 4% of your total investments. Instead, consider doing your best to take out what you need for the bargains that matter to you, don't go cold turkey on your employment, and do your best to hold off on drawing social security until you reach full benefit age.