Q The way the market is going, am I ever going to be able to retire? -- JOHN
A Yes, you should be able to retire. For one thing, for many savers who are in their 40s and 50s, it's important to realize that time is still on their side. Yes, you're still young. For instance, the investing and saving time horizon of a 52-year-old isn't 10 years (assuming retiring at age 62), but about 30 years (assuming average life expectancy).
The desire to get away from the volatility in today's market is understandable. Still, for many investors the first rule of managing money in a downturn is "do no harm." When people try to time the market, the result is usually disastrous. The average saver who sits tight with the retirement money during a bear market typically does much better than those who get in and out.
That said, my mantra is to take advantage of this time by figuring out whether you're comfortable with your portfolio. Are you too much in stocks? Bonds? International? How would you prefer your portfolio to be constructed? Once you've figured that out, then I would create that portfolio over time.
It's important for all of us to realize that, despite horror stories about retirement compared with our parents at the same age, baby boomers on the whole have higher income, similar retirement savings rates and greater wealth. But what if it turns out that your savings are less than hoped for, perhaps from bad habits, bad luck or bad timing? Well, for many people there is only one solution: Work longer.
The impact of earning a paycheck into the traditional retirement years is dramatic. At least that was my reaction after looking at this calculation about working into retirement from economist Robert Shackleton of the Congressional Budget Office.
A married couple is in their early 60s earning $100,000 pretax a year. They'll need approximately $65,738 a year after taxes to replace 80 percent of their preretirement income. (The 80 percent figure is standard for starting a retirement blueprint.) If both retire at age 62, they'll get about $25,300 in total Social Security benefits and require a portfolio of at least $890,525 to generate the income they need to maintain their standard of living through their normal life expectancy.
But if they wait until age 66 to retire, their Social Security benefits go up and the time they need to bank money shrinks, so $551,548 in savings will suffice.
Chris Farrell is economics editor for American Public Media's weekly "Marketplace Money" program on public radio. He lives in St. Paul. Send questions to: firstname.lastname@example.org or email@example.com and put "Your Money" in the subject line.