Not a good time to retire

Take an exclusive look at the latest issue of The Week [View this email in your browser]( Dear newsletter reader, We thought you'd appreciate this special preview from the latest issue of The Week magazine, where you’ll find everything you need to know about the most important stories in news, business, technology, and culture. Today's preview comes from the Making Money section. If you like what you read you can [try 6 Risk-Free issues of The Week](. Savings: Not a good time to retire "The coronavirus is tempting those of a certain age to stop working," said Alexis Leondis at Bloomberg. Many older Americans have "grown accustomed to staying home and are worried about commuting and returning to crowded workspaces." So should you just pull the trigger now? "For most Americans, even wealthy ones, the answer is clear: Don't do it." There's no way to perfectly time the market for retirement, but the current volatility means "former assumptions about stock and bond returns may no longer be valid." And unfortunately, if the numbers don't work out, in an economy racked with layoffs "it'll be harder than ever to change your mind." On the other hand, now is a good time to negotiate a part-time schedule, perhaps one that has you "continuing to work from home after colleagues have returned to the office." Experts often estimate you'll "need on average 70 percent of your pre-retirement income to live comfortably after exiting the workforce," said Alessandra Malito at MarketWatch. The traditional rule of thumb on withdrawals is that you can expect 4 percent a year, "so someone with $1 million in savings would withdraw $40,000 a year." You might think you have enough in savings to sustain that. But the current crisis "has the potential to upend that model." Low interest rates introduce "problems galore," said Jeff Sommer at The New York Times. It's a "boon when you're buying a house, refinancing a mortgage, leasing a car, or paying off student debt," but it also means that savers have to live on less. Long-term government bonds that paid 6 percent 20 years ago are now yielding less than 1.3 percent, meaning "if you were to retire today and stash your $1 million nest egg" in 30-year Treasuries, "you could only count on an income stream of less than $13,000 per year." Interest rates are expected to remain low — or could even dip into negative territory. If that happens, buying a security would mean you're paying the government to take your money. This uncertainty about returns makes it especially dangerous to take advantage of one of the emergency provisions in the economic stimulus package, said Liz Weston at the Los Angeles Times. If you've been affected by COVID-19, you can get "emergency access" to your retirement funds, taking out up to $100,000 without penalty and paying the taxes on the withdrawal over three years. But even if you need the money badly, "consider other avenues first." You have three years to return the funds to your retirement accounts, but most people who make these withdrawals won't, and will lose out on future "tax-deferred returns." And even spread over three years, the taxes on your withdrawal will be substantial. [Try 6 Risk-Free issues of The Week]( Copyright © 2020 The Week Publications, Inc, All rights reserved. You are receiving this email because you signed up for newsletters from The Week. Our mailing address is: The Week Publications, Inc 155 E 44th St Fl 22New York, NY 10017-4100 [Add us to your address book]( Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](.