Retiring in a Recession: Really the Smartest Decision?

Of all the issues a potential retiree considers, "Will I have enough money?" is the Big Kahuna.  Add to that a nasty recession, and you have a lot of recent retirees, myself among them, asking, "What the hell have I done?"

I was concerned before I retired when the value of my retirement nest egg dropped by what now looks like a trivial descent.  Concern turned to worry when it was down 4%, worry to panic when it was down 13%.  By the time the market hit rock bottom in March of this year, I stopped calculating the percentage drop and wondered whether I should just do something already.

What did I do?  Nothing.  Much of those losses have since been recovered, and while we're nowhere near where I figured we would be when I contemplated retirement, it turns out one thing is helping.  The recession. 

Yes, our assets have shrunk.  Significantly.  But so have our expenses.  Partly because it turns out I spend less money when I'm happy, partly because it's easier not to spend when your friends aren't spending, but mostly because so many things are costing a lot less because of the crappy economy.

By far the biggest line item in our budget is property taxes.  Mine were just reduced by a whopping 34%.  Yes, that means the value of my house is in the toilet, but the value of my home can't pay for food, money in the bank can.

Am I bummed that interest rates are so low my cash is barely earning a living?  You betcha!  But my mortgage rate just adjusted this month, and as a consequence of these pitiful rates, it's also down a stellar 34%.

Our health insurance premiums went way up, but not as much as our gasoline expense went down.

Part of managing a financially successful retirement is having an adequate reserve of liquid assets so you are not forced to sell the less liquid ones at fire-sale prices just to pay the bills.  As this New York Times article points out, if you can manage to adjust your withdrawals in lean years, if you can be more financially agile, you'll still be right on track in the long-term.

I've just passed the halfway mark of my second year of retirement and am again pleasantly surprised by the financial results.  Certainly not by the value of my assets.  But the fact that the other scary, often overlooked element of the retirement plan, inflation, turned out to be negative for us, means we're still right on track.  Since our expenses deflated 10% the first year and are on track to deflate another 7% over this year and next, neither one of us needs an untimely death to make the retirement plan work.  

And that's certainly a relief to my husband.

Comments

[Retiredhubby]

Yes, I am glad I will be a able to live another day (with you of course XOXOXO!

[Art]

awwwww

[r4i kort]

True retirement means we have finally moved from denial to acceptance of the "R" word, often the reality faced appears to grow worse with each passing day. A recent quote that said "Americans are much better spenders than savers", So too, "Retirees are much better spenders than savers".

[Joe]

Sydney

I really enjoy your blog. The information - exchange is helping me get perspective on my 8/1/2010 retirement date at 54. All the stars lined up for me - but a lot of the emotional issues - and financial - that you discuss are relevant - keep it up. I'm reading your archives now!

Joe

[Retired Syd]

@Joe: I'm so glad you are enjoying it, thank you! Congratulations on your retirement, right around the corner. I hope you'll chime in from time to time on your experience adjusting.