Will the Market Crash Delay Your Retirement Plans?
The economic impact of the novel coronavirus has resulted in the biggest market downturn in almost two decades. The TSX/S&P Composite Index has lost 30% of its value from its record high.
Some investors are concerned that they might have to postpone their upcoming retirement plans. Losing a third of your wealth so suddenly is extremely nerve racking, for sure.
On top of that, employers have been laying off workers and it’s uncertain when, or even if, they can go back to work.
If you’ve been laid off
A layoff is not a termination. The hope is that this epidemic won’t last long and you’ll be able to return to your job in due course. You can choose to ride it out by taking advantage of all the financial relief available to you right now. Some of you may find that the difference between what you would have earned and what you actually get from the Canada Emergency Response Benefit (CERB) is not that much, especially when you take into account your (forced) reduced discretionary spending.
And while many Canadian employers have been laying off workers, some companies are hiring at this time. In demand are workers in health care, telecommunciations, medical manufacturing, supply chain, drivers and remote-work technology. So dust off your resume and you might be able to pick up some temporary work or a new job entirely.
Build a budget you can live with
As much as you want to pretend it’s business as usual, you’ll need to adjust your lifestyle and stretch your dollars. Grab your bank and credit card statements and identify all nonessential expenses that should be cut for the time being. Re-evaluate your needs versus wants.
That’s better than aggressively dipping into your savings or line of credit.
If you’ve been laid off, or are working from home, many of your expenses are already going to be reduced anyway.
Dealing with investment losses
Ideally, anyone who is close to retirement should have at least one or two years of living expenses in a cash-like product such as a GIC. That way you won’t have to withdraw money from your portfolio when your investments are low. You can wait for the market to correct.
It’s hard not to panic, but the smartest course of action is to stick with your investment plan. You already know that the best way to avoid large market swings is with a balanced portfolio that consists of equities and fixed income in different sectors and geography.
Don’t look at your accounts so frequently if it’s causing you anxiety.
Do you need to delay your retirement plans?
The current coronavirus pandemic, the resulting market crash and future economic impact is causing workers to re-examine their retirement plans and could delay retirement for many. If you had planned to retire within the next couple of years you may be feeling anxious about your plans.
Are you wondering if you will have to work a little while longer? Waiting a couple of years may be a viable option, especially if you have debt to pay off.
Don’t postpone retirement if you can afford to retire. If you have a retirement income plan that you have been successfully following there’s really no reason not to proceed. Life is just as uncertain as the markets and you may not be able to do many of the things you had planned on if you delay until you are older.
Related: Countdown to Retirement
An alternative to delaying retirement is adjusting your spending habits and minimizing expenses until a recovery occurs. That could be easy to do since travel and other social entertainment plans have to be put on hold for now.
The bottom line
People tend to think of retirement as the staging ground for exotic vacations, dining out more frequently, buying treats for grandchildren. In other words, what they can relate to that’s not worrying.
We can’t control the economy, the stock market, or other people. What we can control is our own behaviour. We’re already seeing the affect on many people who are in no way prepared for any kind of financial crisis.
Making a commitment to save diligently and not carry any debt can be a game changer when a disaster hits. It’s important not to panic and consider all your options.