Why Taking Regular Withdrawals From a Retirement Account Can Be a Mistake

Aarp

Why Taking Regular Withdrawals From a Retirement Account Can Be a Mistake"


Play all audios:

Loading...

By


John Waggoner,

  AARP En español Published September 12, 2022


Financial experts don’t always agree on much, but one thing they do agree on: Don’t take withdrawals from stock mutual funds in a bear market if you can avoid it. You’ll just make matters


worse.


This is especially important to keep in mind if you are making automatic monthly withdrawals from your nest egg, as many retirees do. Although automatic withdrawals are handy, they can


sometimes backfire when stocks are suffering sustained losses, as they have been this year.


Members only Count the cost


Bear markets, defined as a decline of 20 percent or more from the most recent market high, come with their own cruel calculus: To get back to even, you must earn a larger percentage than you


lost. For example, if you lose 50 percent in an investment, you need to earn 100 percent to get back even. To get even from a 20 percent loss, you’ll need to earn about 25 percent to get


where you were before the bear clawed your account. The S&P 500 index, the main gauge of U.S. stock performance, has fallen into a bear market in 2022.


Let’s say that on January 1, 2022, you had $100,000 in a low-cost, broad-based stock index fund. Good choice! You get diversification and don’t pay much in fees for it — and sometimes,


nothing at all. But bear markets can be cruel. By the end of March, you had just $78,615 — a 21.89 percent loss, according to Morningstar, the Chicago investment trackers. If you panicked


and moved your remaining money into a money market fund, you’d have to guess exactly when to get back into stocks — something that most investors mistime. In the meantime, you’d be earning


about 2 percent on your investment.


Even if you’re determined to sell, you’re generally better off waiting a bit, says Sam Stovall, chief investment strategist at CFRA, a stock research firm. Bear markets end with a whimper,


but bull markets start with a bang. “It has taken an average of only three months to go from the low to the 20 percent advance,” Stovall says. In addition, he says, the market typically


rises an average of 40 percent in the 12 months after a bear market bottom.


Trending News

Hollywood, Bollywood, YouTube-wood? Talking to Zerodha’s Nikhil Kamath, YouTube CEO Neal Mohan charts a new path for cinema

Kamath, reflecting on his own media journey growing up in India, recalled, how he grew up in the city of Bangalore (now ...

Stadiums to staycations: How IPL 2025 is powering a silent travel movement

Summer cricket fever aside, the Indian Premier League (IPL) 2025 has led a silent movement–reshaping India’s travel and ...

Tata Motors demerger to give long-term returns to shareholders: N Chandrasekaran

“The proposed demerger will bring greater strategic clarity and agility, enabling a more focused approach to execution a...

EVs to account for 12-15% of India's total car sales by 2030: Moody’s

Electric vehicles will account for 12%-15% of total car sales in India by the end of the decade, falling short of the go...

All changes to Income Tax Returns you need to know for FY 2024-25

The revised Income Tax Returns (ITRs) for the AY26 are in place as a prerequisite. As anticipated, there are major chang...

Latests News

Why Taking Regular Withdrawals From a Retirement Account Can Be a Mistake

By John Waggoner,   AARP En español Published September 12, 2022Financial experts don’t always agree on much, but one th...

Muswellbrook District Hospital staff thankful for generous Humpty Dumpty Foundation and Glencore donation

AdCommunity NewsCommunity NewsNews HomeSectionsMy RegionHome PageNewsLocal NewsPropertyNSWHistoryPoliticsRuralNationalBu...

The aarp minute: february 13, 2023

Memorial Day Sale! Join AARP for just $11 per year with a 5-year membership Join now and get a FREE gift. Expires 6/4  G...

A “sequester” is not the same thing as a “substitute for the sequester”

Get your news from a source that’s not owned and controlled by oligarchs. Sign up for the free _Mother Jones Daily_. Who...

"brutally honest" - mako vunipola shares details of awkward eddie jones phone call - ruck

SARACENS PROP MAKO VUNIPOLA HAS REVEALED THAT HE HAS ‘A CLEAR UNDERSTANDING’ OF HOW TO GET BACK INTO THE ENGLAND TEAM FO...

Top