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March 4, 2009

So Your Nest Egg Is Cracked! Now What? (Retiring When Your Nest Egg Has Lost Market Value)


by Denise Appleby CISP, CRC, CRPS, CRSP, APA

The recent roller coaster-like performance of the securities market has left many investors coming up short with their retirement nest egg, as their portfolios responded more like bears than bulls. For those who planned to retire within the next few years, the results are even more acute as there is not much time to recover from these losses. These individuals are now faced with the dilemma of whether to retire as planned or postpone retirement. If you find yourself in such a predicament, read on for some helpful tips.

How Far Behind the Eight-Ball Are You?

Even if your retirement portfolio has lost market value, don’t assume that you cannot retire within your originally planned timeframe. The first step is to work with your retirement counselor and/or financial planner to determine your state of retirement readiness from a financial perspective. Much will depend on the  proposed lifestyle for your retirement years and how willing you are to modify your plans. If it is determined that your retirement savings along with social security and pension income, will not be sufficient to finance your retirement years, consider the following: 

  • When your retirement portfolio was designed, did you include all of your assets and scenarios? Many retirement calculators  take into account an individual’s current savings, projected Social Security and pension benefits as well as projected future income from employment.   An assumed rate of return on investments is then used to calculate projected retirement income. The results from these calculators typically indicate a dollar amount which the individual will need to save to cover his/her financial obligations during retirement for a specific number of years. They can also loosely predict how long those savings would last if a predetermined fixed amount is spent each year. However, the results from these calculators often do not present a totally accurate picture primarily because they fail to take into account other possible sources of income,  as well as other militating factors that could affect the individual’s financial needs.  For instance, the calculation  might not have considered income from a reverse mortgage, rental property or pension entitlements from a former spouse.  

  • Did your projected retirement income needs assume you will need a specific amount for each of your retirement years? Most projections assume that a specific amount of income will be needed each year, depending on the retiree’s planned life-style. But-realistically, an individual’s income needs may  fluctuate  due to changes in personal circumstances. These include but are not limited to  life-changing events such as the death of a spouse or increased medical expenses due to ill health. Correspondingly a reduction in expenses could result from no longer having to care for an elderly parent or parents or from no longer having to provide for children who are no longer a part of the household.

  • Did your projected retirement expenses include overseas travel, cruises and other costly but non-essential activities?  If  yes, then  consideration should be given to reducing the number of these activities or eliminating them entirely. An informal non-scientific survey among friends and relatives revealed that travelling overseas was the number one desire of most retirees.  However after discovering the fiscal advantages of Domestic Travel, overseas travel did not seem as desirable. Talk to the Chambers of Commerce or conduct research on the internet to get information about popular local and domestic vacation destinations. After-all, there must be good reasons why foreign tourists continue to visit these areas-right?

  • Are you eligible for federal and state aid that may reduce your financial burden? Federal and local governments provide benefits to the elderly.  These benefits can help to offset some of the various expenses  that will be  incured during your retirement years. Some of these benefits go unclaimed due to unawareness. Examples include the following:

    • Additional assistance  through Medicare’s Prescription Drug Coverage for people with Medicare who have limited income and resources

    • Federal, state, local and private programs that help pay for prescription drugs, utility bills, meals, health care and other needs,  

    • Programs that provide assistance with your health-care and other costs.

Information about these benefits is available through The National Council on Aging’s Benefits Check- up   website,

There are other areas in which you can make changes. For instance, you could decide to take your social security benefits at a later date than  originally planned. This usually results in higher pension payment amounts.

A Working-Retirement or Phased-Retirement May be a Solution

Longer life expectancies and improved health have extended the traditional ‘retirement age’ for many individuals. Age-65 is often viewed as the new 45 in terms of an individuals’ health and vigor.  As a result, many 65-year-olds are ready and able to  keep working, and continue to do so instead of retiring. If you are one of these individual’s, a working retirement can be a solution. This not only helps  to cover  day to day living expenses, but may also allow  for continuation  of the funding of your retirement nest egg. Finding a job may be easier than you think, as an increasing number of companies that are looking for qualified, talented and experienced workers often include retirees and near retirees in their potential employee pool. Your current employer may even be happy to keep you on in a fulltime, part-time or consultancy basis, in order to continue benefiting from your expertise and experience.

Another positive side effect of a working-retirement is that  it helps to keep  the mind sharp and the body strong, potetially providing for an even better quality of retirement-life.

Look to Your Home for Additional Income  

You may have access to other sources of income that you have not yet considered. For instance, if you own a home, a reverse mortgage may provide  substantial additional income.  Ownership of a second home or other real estate property can  generate additional income through renting or leasing. Downsizing to a smaller and less expensive home is also another option to consider, in the case where the current house is larger than needed.

Reassess Your Portfolio

The potential for high returns makes high-risk investments attractive to investors, but with the potential for high returns comes the potential for big losses.  For someone in their pre-retirement or retirement phase when there is substantially less time to recover from losses, having a well balanced investment portfolio is of utmost importance. Talk to your financial advisor about redesigning your portfolio to ensure its suitability to your retirement profile.  In addition to a balance between high and low risk investments, consider including products that provide guaranteed earnings and income.


Waking up to find that the market value of your retirement portfolio is much less than it was before you went to bed does not mean you can’t retire as planned. Market losses do not always mean deferment of retirement. Meet with your retirement counselor / financial advisor to determine your financial status, your retirement readiness and your retirement options before making any decisions. Your retirement years should be relaxing and enjoyable; and by making some financial sacrifices today and modifying some future plans, you may still be able to enjoy a financially stable retirement even if the stock market has been unkind to your retirement portfolio.



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