Phased Retirement: Uncertain Times

Today’s times are uncertain.  Pick up the paper, or glance at the news online on your laptop or phone.

Inflation, war in Ukraine, falling stock market, and Covid cases rising again.  It’s mostly scary news with unknown outcomes.

But here’s the thing.

The times are always uncertain for the people living through them (that’s us).

Think back to the 1960s when US President John Kennedy was assassinated, there were violent civil rights demonstrations, Martin Luther King, Jr. was assassinated, and the Vietnam war was in full swing along with the cold war and its threat of nuclear annihilation. 

No one knew how things would turn out.  People made the best decisions they could with the information they had at the time.  They went to college and started jobs and families and made plans for their futures.

From a retirement planning perspective, today’s headlines also are questioning some long-held beliefs.  One example is the “4% rule” that was devised by former financial planner Bill Bengen in 1994.  This is the notion that by withdrawing 4% of your assets each year, your nest egg should last your entire lifetime.  Though it’s a catchy name, it isn’t really exactly 4%.  It has varied over the years as times and economic conditions change (the number was 4.7% even recently).  Today’s trend of lower returns and higher inflation have experts recommending that you should be even more conservative.

Perhaps, but keep in mind my opening assessment that times are always uncertain.  No one can predict the twists and turns of the future.  The present may be relatively stable or relatively turbulent – but we don’t know what will happen in the coming year.  Or tomorrow.

So, make your best plan today with the information you have, stay the course,  but pivot to a more conservative or aggressive position when you feel you need to.  A phased retirement offers hybrid options for you to flex your schedule and your income to augment your savings.  Earning even $40K annually in the perspective of the 4% rule means you don’t have to withdraw 4% ($40,000) of a $1 million portfolio.  It can continue to grow. 

See:  The Million Dollar Part-time Job

Remember the insightful words of investing pioneer Sir John Templeton when he stated that the four most expensive words for individual investors are, “This time it’s different.”

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