“It is important not to confuse risk with volatility, because volatility is something we have to live with,” said Ms Benz. “Checking your liquid and near-liquid reserves is one way to understand how much cushion you have and how long you can withstand a downturn.”
For those looking to improve their flexibility or ability to avoid selling in a volatile market, he often asks people to consider the answers to a variety of questions, including: What would it be like to find a job that would replace the income you’d need? your portfolio to generate? What would your expenses be like if you cut back? She encourages people to consider incremental moves or changes, citing the example of a couple who wanted to live on the commuter rail line in Chicago, but decided to move farther from downtown where housing was more affordable. The new place allowed them access to the city but with savings from their previous home.
Wait for Social Security
Delaying receipt of Social Security benefits becomes an even more effective strategy in bumpy markets, according to William Reichenstein, head of research at Social Security Solutions in Overland Park, Kansas, and a professor emeritus at Baylor University.
“The best yield portion of your bond portfolio is actually delaying Social Security,” said Dr. Reichenstein. “Why do most people start as soon as they can or almost as soon as they can? My great expectation is that they have not learned delayed gratification.”
In recent years, the number of people filing for benefits in their early 60s has dropped, with only about a quarter of eligible 62-year-olds filing in 2019, according to the Boston College Retirement Research Center. .
According to Dr. Reichenstein’s calculations, assuming a healthy retiree with an average lifespan, deferring benefits yields an 8 percent return for each year they are delayed. For example, a 67-year-old would collect 108 percent of their expected benefit if they wait until age 68, and 116 percent if they delay until age 69. By contrast, those who collect earlier, at age 62, receive only 70 percent of their expected benefit with incremental increases each year they postpone.
As an example, consider a 62-year-old with a life expectancy of 90 who started cashing a $1,400 monthly check. If he or she had waited to start benefits at age 70, with the same life expectancy, the 62-year-old would have received an additional $124,800 in actual benefits, not accounting for cost-of-living increases, and would reach the point breakeven in 80 years and five months, he said.