Take the story of Joe Smith as a good lesson. Joe made a lot of money in the 90's stock market craze when technology stocks were going crazy. He did so well that he decided to retire in 2000. OF course, this was bad timing for Joe. The market hit the top of the bull market and then proceeded to lose -50% of its value. Joe kept invested because he saw the power of the market comeback from declines. Little did he know he was going back to work because of the -50% drop. It declined too much for him to just wait it out.
The story of Joe is fictional. However, it offers up a good example that represents a lot of people. This article from www.finsum.com illustrates the problem. It is the dangerous assumptions that pre-retirement investors are making today.
The Trump economy is producing a booming economy - (our President's words not mine).
The market always goes up.
I have confidence enough in the market to retire.
Now, let me introduce you to another reality. Nothing goes up forever and everything runs in cycles. To assume that has changed is dangerous thinking. Bull markets change into bear markets (which can drop -50%) and "booming" economies change into recessions.
Just look at the environment - we are in the longest bull market on record. We are in the second largest economic expansion. Said another way, there is no question we are late in the game and due a cycle change. For that reason if you are considering retiring consider this:
If you have the amount of money that is needed to retire, start thinking about protection mode. Then transition into a portfolio that is built to provide protection and income for the remainder of your life. Don't let greed take over and influence you to double down on the Wall Street casino. -50% declines did not all of the sudden become extinct just because Donald Trump is our President.