Many are calling the COVID-19 crisis the end of the FIRE movement (financially independent, retired early). The narrative is that no one can now afford to retire early since the market fell apart last month. Many expect that we’ll see a huge number of people retiring much later, but I don’t think that will be the case.
First, the average age of retirement has not seemed to move much in good times or bad historically. It has been steadily rising, due to changes in the minimum age to reach Social Security, but even the Great Recession didn’t change that trend too much. If anything, GALLUP shows that it dipped a bit for one year in 2010 …
Second, anyone getting close to retirement should be relatively insulated from the recent market decline if they were serious about building a strong, diversified portfolio. They should have their nest egg ‘bucketed’ into short, medium, and long-term investments that will allow them to weather the current storm.
Lastly, while some people may decide to work ‘One More Year’ until the market recovers from CV-19, their numbers will unfortunately be offset by others that have their retirement sprung on them through job layoffs earlier than they expected. It would be very disappointing in the middle of all of this to lose your job, but for many people this crisis will be the ‘final straw’ to their working careers.
If I was getting close to my retirement date during the COVID-19 crisis, I think I would be among those moving forward to early retirement anyway. The market was actually amid a sudden -10% ‘correction’ when I announced my resignation in early 2016 and I didn’t sweat it too much. I trusted that the savings we had put away were enough to ensure our resilience in through a bad market. All of the modeling I had done for our FIRE Plan included the possibility of a -40% decline at some point, since that’s what we saw in 2008.
If you are close to your target retirement date, I appreciate that you certainly have some serious thinking to do. If anything, this crisis should have you well-tuned into the strength of your FIRE plan. If your retirement is more than a few years away, I wouldn’t worry too much about the immediate challenges in the financial markets. A lot will change over the next several years and hopefully this will be remembered only as an unfortunate ‘blip’ that we’ve put behind us.
How close are you to your FIRE date? I you holding off? If retired, would you recommend others hold off for another year?
Image Credit: Pixabay