The stock market is crashing and we’re in a recession. Can I still retire?

Dear Pete

I had planned on retiring from my job this October after 42 years in the workforce. But with all this stock market crash and recession stuff, I’m not sure I can or should. I live alone, currently bring home $4,100 a month, and I have $452,000 in my 401(k) (even after the crash). I haven’t filed for social security yet, but I’ll receive about $2,500 a month. I’ll be 67 when I file. I don’t have too many bills, and we only spend about $3,000 a month. I think I can make it work, but I’m just nervous about leaving the workforce with all the unknowns. 

Robert,

Kansas City

Answer: Your apprehension is understandable. To attempt to retire in one of the most challenging financial environments in a century is undoubtedly harrowing, but based on the situation you described, you might just be the type of person to pull it off without a hitch.

To understand why you’re likely to be successful, you first must understand what typically compromises a retirement plan.

There are four circumstances that will typically ruin a retirement strategy before it’s even rolled out.

The good news is I don’t think you’re vulnerable to any of the four culprits.

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Retirement plan culprit 1: Age

Because you’re older than 65, you won’t be forced to come up with an alternative health insurance strategy, which typically puts a strain on the retirement finances of those who retire prior to age 65. This remains a problem until they become eligible for Medicare at 65. Fortunately, you’ve avoided this very expensive period of time. Additionally, at 67 you’ll be able to claim your full social security retirement benefit, as opposed to accepting a reduced amount at a younger age.

Retirement plan culprit 2: Lifestyle 

The second circumstance you’ve successfully avoided is an expensive lifestyle. As it stands now, you only live on about 73% of your take-home pay. That’s phenomenal and is arguably the primary reason you will be able to successfully retire in October. A successful retirement is rarely defined by having a lot of money. It’s usually determined by not needing a lot of it. That’s you.

Retirement plan culprit 3: Income sources 

The next factor tripping up many retirees is the percentage of money needed from non-fixed income sources. In other words, if your fixed income sources (Social Security, pension, etc) aren’t enough to fully fund your retirement, you’d at least like them to be a high percentage of your income. Per your numbers, 83% of your initial retirement income needs will come from a fixed source (Social Security). That means you’ll only need your assets to fund the remaining 17%, which in your case is $500 a month. 

Retirement plan culprit 4: Withdrawing too much 

The final circumstance which can ruin a retirement before it begins is the percentage of total assets required to support your lifestyle after your working years end. For years, financial experts warned people to not withdraw more than 4% of their total assets, in order to ensure their money will last throughout retirement. That “four percent rule” certainly has its flaws, but it’s still a decent litmus test. By your account, you only need $500 a month from your nest egg, which is only 0.6% of your assets. 

Robert, I think you can successfully retire in October, and do so in peace. Between now and then, make sure your 401(k) is properly allocated, and continue to maintain that $3,000 a month lifestyle. If you haven’t already, make an appointment with a financial planner sooner rather than later, and they can chart your specific strategy going forward. 

Congratulations on creating a sustainable retirement strategy. Your discipline and diligence made it happen. Allow me to be the first to wish you an (early) happy retirement. 

Peter Dunn is an author, speaker and radio host, and he has a free podcast: “Million Dollar Plan.” Have a question for Pete the Planner? Email him at AskPete@petetheplanner.com. The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.

This article originally appeared on USA TODAY: Retirement: Avoid the 4 culprits that can ruin your nest egg

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