With the recent stock market fall, a lot of near-retirees are seeing their nest eggs fall below their “Number,” the amount they need to retire comfortably. This has, rightfully so, a lot of near-retirees worried. What should a near-retiree do? Draw on Social Security early so that the retirement assets can recover? Pull out of the stock market and lick your wounds? Continue working?
Bingo. Option 3 appears to be the most viable and least damaging, but the scariest especially if you’ve been staring at a date on a calendar for the last year or two. Drawing on Social Security before your full retirement age reduces your benefit, so that’s a hit you want to avoid. Pulling out of the stock market locks in the losses, something that probably isn’t all that appealing. Working… well, if you’ve eyed retirement, another year of work probably isn’t your cup of tea.
The answer? Maybe something part-time if you’re tired of your current job. If you were to take a job for $20,000 a year, you effectively increase your nest egg by half a million dollars. The general rule is that you should draw 4% of your nest egg each year. At 4%, your nest egg’s appreciation will slow down the draw down long enough for you to fund the remainder of your retirement years. When you earn $20,000, that’s $20,000 you don’t need to draw from your fund. That $20,000 represents half a million dollars in your nest egg.
Now the difficult part is finding a $20,000 a year job in this economy.