Column: Bear market might be good time to put retirement on hold

It may be time to rethink that retirement date if it was slated for this year or next. There could be a more significant impact in drawing down retirement assets while the stock market is in correction than when times are good.

We run Monte Carlo analysis for our clients to help them plan for retirement. This runs thousands of different sequences of returns based on market volatility. If you start a retirement income stream from your 401(k) or IRA account during profitable market years, your assets appear to last much longer than starting out when markets are in a slump.

Many retirees like to keep their distribution rate below 3% in order to keep from tapping into principal during a low interest rate environment. When the stock market is down and interest rates are low, it is difficult to get a sustainable income stream off of a declining balance. The longer you withdraw while markets are down, the more years of income you shave off of your long-term retirement plan.

Let's take a typical 65-year-old couple, Jack and Jill, looking at retirement scenarios this year. They need $2,500 per month to supplement their Social Security and pension income. Thirty thousand each year is 3% of a $1 million portfolio. According to their retirement plan with 3% inflation, their assets should last until age 95 under normal market conditions. They do not start dipping into principal until age 89.

Changing the sequence of returns from average to negative reduces the assets which runs dry at age 88 as they started spending principal almost immediately. Therefore, the time to decide how long you want your assets to last is how long you work or how much you save now, not when you are 88 and it is too late to recover.

You may also want to consider the current Misery Index which follows metrics like inflation, unemployment, GDP (Gross Domestic Product) and growth of the S&P 500. According to Forbes contributor Peter Cohan, the current Misery Index shifted from a happy state of -13.4 to an all-time high of 29.2 in the last 18 months. This alone could cause some to delay retirement in favor of better times.

Some people don't have a choice about when they retire which makes planning even more crucial. It is important to adjust your investments to the optimum risk/return opportunity and reduce expenses in years markets are not favorable. You may need to postpone discretionary spending until the economy is on more solid footing. Consider using other non-liquid assets such as the equity in your home through a reverse mortgage or a refinance to access additional cash when real estate values are high and investment values are falling.

Patricia Kummer has been a certified financial planner professional and a fiduciary for over 35 years and is Managing Director for Mariner Wealth Advisors, an SEC Registered Investment Adviser.