Recently, I came across a “Wall Street Journal” article quoting someone from Morningstar, the mutual fund rating service, saying retiring is dangerous now because no one knows what is going to happen in the future.
I am pretty sure this has always been the case. No one knows for sure what’s going to happen in the future.
So, is retiring now dangerous for you? You really need to look at the question from two aspects.
One is the financial aspect. Do you have sufficient financial resources that will hold up to the stress of time, the economy, the financial markets and whatever our fearless leaders in Washington send our way?
The second aspect is, are you emotionally and psychologically prepared for retirement?
To determine if you are financially prepared for retirement you are going to come across all kinds of articles with generic advice like withdraw no more than four per cent of your retirement nest egg. Unfortunately, what this rule doesn't take into account is your own individual situation.
You might be fortunate enough to have a traditional pension plan. Your pension plan, combined with your social security, might be more than enough income for you to experience your version of an Incredible Retirement, making the withdrawal rate of your investment nest egg not that big of a deal for you.
If you don’t have a pension, social security alone probably isn't enough. You’ll have to make up the difference from savings and investments.
The best thing for you to do to determine if you are financially prepared for retirement is to do what we call a Nest Egg Stress Test. This stress test will show you how your money will hold up to the stress of time, the economy and financial markets.
Then you need to step back and ask yourself whether you are emotionally and psychologically ready for retirement.
It is becoming more and more common for us to speak with recent retirees who, after 6 to 12 months into retirement, look back and regret retiring. That or they wish they had an opportunity to do productive work because, let's face it, how many times can you repaint the house? Playing golf is fun, but probably not every day!
The good news is there are now resources available to make sure you have thought through the emotional and psychological aspects of retirement. These will help you prepare as best as possible for what joys and obstacles retirement may bring.
Retiring now is no more dangerous today than it was over the last 25 years!
Making sure you are emotionally and psychologically prepared for retirement, in addition to being financially prepared, will move you one step closer to experiencing your version of an Incredible Retirement – doing what you want, when you want.