Is Now a Bad Time to Retire?

When it comes to retirement, flexibility is key.

You've been working for years, and you're ready to retire. Unfortunately, inflation is high, interest rates are on the rise, and your portfolio has taken a beating. It's natural to ask yourself if now is the "right" time. The answer depends largely on where your money is tucked away.

Counting on Social Security, pension, or annuity

If you're going to receive all or most of your retirement income from Social Security, a pension, or an annuity, you'll be less impacted by what's happening in the stock market than someone who plans on making regular withdrawals from their retirement account.

Of course, you'll still have inflation to deal with for a time, but you can make plans to meet inflation head-on by cutting costs where you can. Will it be fun? Probably not, but inflation comes and goes. It is possible to wait this period out.

If you're healthy, you also have the option of postponing retirement for a year or two, asking to work part-time, or even taking on a new side hustle that will allow you to retire from your 9-to-5 job while also bringing in enough extra cash to keep you comfortable.

Whatever you decide to do, start slow. You may want to put off the trip to the Great Pyramids until you have a good idea of how far your guaranteed monthly income will stretch. And frankly, even if inflation weren't high and interest rates were low, easing into retirement is good advice.

Counting primarily on your portfolio

If the bulk of your retirement funds will come from personal investments, it can help to look back on how others have retired during tough economic times.

Those who came before

According to fascinating research from Intuit Mint, the late 1960s began the worst 30-year period in which to retire. Inflation was through the roof, and back-to-back bear markets hit around 1969 and 1973. Retirees drained their nest eggs much faster than most anticipated, although many had other forms of income to rely on, such as traditional pensions.

Still, some of those retirees must have felt the weight of the world on their shoulders. That doesn't mean it was all bad news, though. Through studying previous retirees, Mint uncovered an interesting (and hopeful) fact.

A small change can have a dramatic effect

For years, retirees heard about the "4% rule." According to the 4% rule, as long as a retiree withdrew no more than 4% of their investments each year, they would have enough to get by for the rest of their lives.

However, for folks who retired in 1966, it was a different story. If someone had stuck with the 4% rule, they would have run out of money after 30 years. But a small tweak made all the difference. Those who withdrew 3.8% of their nest egg from the start still had most of their original investments by year 30.

Flexibility matters

If you're dead set on living it up after retirement and refuse to cut back during tough economic times, now may not be a good time for you to bid adieu to the job. Overspending from a portfolio that is simultaneously losing value due to market pressure is a recipe for disaster.

Retirement works if you're willing to ride the wave. When your portfolio is taking a hit, you want to preserve as much of the capital as possible. The more you save, the easier it will be for your portfolio to recover when a bull market comes back through. And according to Mint, retiree portfolios can and do recover. The bull market following the Great Recession illustrates how well a carefully managed portfolio can bounce back.

Retirement can be scary, no matter what's going on with the economy. After all, most people dream of the day they can be their own boss, but it's impossible to know exactly what to expect.

The early years of retirement are the most critical as they set the foundation for what's to come. It's okay to ease in, to familiarize yourself with the financial landscape, and to make adjustments where necessary.