I had a brief but fascinating discussion this weekend with someone who is planning on retiring in the next year. The point was the person was actually considering pushing off his retirement by an extra year due to the market down turn last week. I don’t know his exact exposure to the market, but I find this interesting because I can see both sides of the argument.
If he pushed it off another year, it would provide another year to finish saving up a pile of cash to provide a bit more cushion in case of a year of poor performance by the market. It would also provide a more peace of mind since I can understand seeing a market shift down just before you retire could be very unsettling.
Yet if he just pulls the plug and he has done his homework in advance one year shouldn’t make or break your retirement if you have a large pool of funds already saved up. After all you are going to face some down years in retirement with the market. It is just unavoidable. So if you hit in the start, what is the big deal? As long as you have up to five years spending in cash you can let your investments ride out the storm and then start to build up your cash pile again with some profits afterwards.
So what is your thoughts? What would you do if you were in this situation?