When I watched Jerome Powell speak during the Fed’s May meeting, one clear message was that the likelihood of higher prices and higher unemployment have risen — aka stagflation. Add that to the fact that the S&P 500 fell almost 20% from its 2025 highs in a two-month period.
If you are planning to retire this year, it’s understandable if you’re scared. It’s understandable to want to punt. But it may not be necessary.
Below, I’ll go through three factors to help you make the decision that’s right for you.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. How close are your plans to fruition?
When we run financial plans, we typically want the likelihood of success at 80% or above to feel comfortable telling clients to turn in their keys or shop their business.
If the plan is 95%, without a dramatic change in lifestyle, they probably have plenty of money.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
At 80%, every decision matters a little more. You’d better hope that none of your assumptions was too optimistic.
If Powell is right and things go up in price, that 80% Monte Carlo simulation could easily drop sharply with a small increase in inflation assumptions.
If you want to double-check your plan, you can access the free version of the software we use online.
The 80% scenario (or below) is where I would consider hanging on just a little bit longer. It will help you sleep at night. As we enter a more uncertain economic environment, it also makes it more challenging to re-enter the labor market if you have any regrets.
2. How will market returns early in retirement affect you?
If you retired in 2010, 2020 or 2022, the “sequence of returns” was wind at your back. Markets probably drove your portfolio much higher than what you spent.
Sequence of return risk is the other side of the coin and is essentially timing risk. What if you retire into a down market?
I’m certainly not predicting what the markets will do in the next one to three years, but a stagflationary environment is especially challenging for retirees. Slowing growth makes equity markets fall.
Rising inflation forces interest rates up, which causes bonds to fall. If you have a balanced portfolio, when stocks fall, you can sell bonds to create income.
When bonds fall, you can sell stocks to create income. When both fall, hopefully you’re cool skipping that vacation.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
If you saw your portfolio drop sharply early in 2025, this is a good time to re-evaluate and make sure that it still accurately represents your risk tolerance, return needs and time horizon.
You may be able to take some risk off the table without impacting your lifestyle.
3. Are you retiring from something or to something?
Retiring from something means that you’re probably not happy in your current state. Worrying about money in retirement will be worse.
Once again, if your plan is cutting it close, and your main gripe is your current situation, I’d encourage you to tough it out a bit longer.
Retiring to something is almost always a better situation. If you’re retiring to something, you might be missing out on time with your grandkids. You may be missing the years where you’re mobile enough to take that big trip. You’re missing out on memories, and those are hard to buy back later in life.
If this is the case, and your plan is close, see how much you’d have to cut from your monthly spending to make sure the plan is sustainable. That cut may be worth the time you get back.
If you’re retiring to something and your plan is fully funded, stop reading, start retiring.
Related Content
- Is 2025 a Bad Year to Retire With the Stock Market in the Dumps?
- Five Signs It's Time to Retire in 2025
- Sleep Better in 2025: Slay These Five Retirement Fears
- Within Five Years of Retirement? Five Things to Do Now
- Is There a Best Day of the Year to Retire?
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get ItThe Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning PlaybookConsider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get It
The Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning Playbook
Consider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Why Investing Abroad Could Pay OffCountries overseas are stimulating their economies, and their stocks are compelling bargains.
-
Why Retirees Need a Budget, According to a New RetireeA new retiree explains why retirees need a budget.
-
Are These the Next Stocks to Split?Interactive Brokers' recently split its stock to makes its shares more accessible to investors. Could these high-priced stocks be next?
-
Hiring a Financial Adviser: 10 Questions to AskWhen hiring a financial adviser, ask these 10 questions to weed out the duds and find the right person to manage your nest egg. After all, you're the boss.
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a RecessionRecessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
