Clearly, the stock market is not having a great year. Many investors' portfolios are down -- a lot -- since January, and this point, there's really no way to predict how long the current downturn will last.
That, in turn, may have you worried about retirement, especially if you're planning to leave the workforce next year. So should you postpone those plans? Ask yourself these questions to find out.
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1. How much of a hit has my portfolio taken?
Maybe your IRA or 401(k) plan balance is down substantially in light of recent stock market events. Or maybe it's only down a small amount because you shifted to more conservative investments in light of your upcoming retirement.
If you're in the latter boat, you may not need to delay your plans at all. But if your portfolio is down a lot, you may want to consider waiting.
2. What do my cash savings look like?
Near-retirees are often advised to have at least one to two years' worth of expenses on hand in the bank in case their portfolios tank and they want to avoid liquidating investments at a loss. If you have a fair amount of cash on hand, recent stock market events won't necessarily have to wreck your retirement plans.
But if you didn't take that advice and have pretty much all of your money tied up in investments that have lost value, waiting to retire could be a better choice. Otherwise, you may be looking at permanent losses you have a hard time recovering from.
3. What income sources do I have other than my savings?
Many people rely heavily on withdrawals from an IRA or 401(k) plan once they retire. But you might have other options that leave you less reliant on your savings.
Maybe you've been delaying your Social Security filing, so you now have a larger monthly benefit to look forward to that can cover a lot of your bills. Or maybe you own a rental property with a recently renewed lease. If you have income outside your IRA or 401(k), then you may feel perfectly comfortable retiring soon -- even with your investments being down.
Make the right call
Nobody wants to postpone retirement, especially after a lifetime of hard work. But sometimes, plans need to be adjusted -- especially when stock market conditions take a turn for the worse.
You don't have to rush to assume that retiring next year is off the table because of the recent downturn. But it does pay to run through these questions for guidance.
If your portfolio is down and it's your main source of income, taking withdrawals before the market gets a chance to recover could mean setting yourself up for an income shortfall down the line. That's really not what you want.
That said, there may be a compromise: partial retirement. Though it's not an option for everyone, you may be able to move forward with a partial retirement next year if a full-fledged retirement seems risky. And that's a move worth considering if your portfolio hasn't managed to recoup its losses by then.
