Individuals are more likely to retire during peak economic
times, but that may be setting themselves up for rocky finances
later. That's according to a
from the University of Missouri and published in the Journal of
Rui Yao, an assistant professor of personal financial planning
at the university, reviewed the financial and retirement statuses
of more than 4,000 U.S. households containing retirement-age
individuals between 1992 and 2008. The data indicated that a 1
percent annual increase in market returns increased by 2 percent
the probability that a retirement-age individual would leave the
The correlation between a growing economy and more people
deciding to retire may stem from the fact individuals are more
hit their retirement savings goals
during an economic upturn, Yao said in the press release. But she
cautions that retiring as soon as those goals are met can cause big
What goes up ...
"Potential retirees often will first meet their targeted
retirement savings goals during an up market and will be tempted to
retire at that point," said Yao in a statement. "The problem with
this strategy is that the economy runs in cycles, meaning that
after a peak, the market will take a downturn."
For individuals who retired when they had only just met their
savings goals, a downturn can mean significant loss for stock-based
retirement funds such as 401(k)s and IRAs.
"This could result in many retirees outliving their retirement
savings and facing financial hardships toward the end of their
lives," said Yao.
She recommends individuals delay retirement during an economic
boom, particularly in instances in which a savings goal has just
been met. Continuing to work during an up economy can bring in
needed income to create a
that will withstand an inevitable downturn.
Yao also says it is better to retire in an economic downturn so
long as an individual has saved enough to live comfortably. Then,
as the market improves, retirement funds will get a boost to
further help sustain them in the long run.
Married couples tend to retire together
In another finding of the study, it was confirmed that spouses
tend to retire together -- something conventional wisdom has long
Workers in a household with a retired spouse were more likely to
retire as compared to those in a household with a working spouse or
those living alone. While retiring together may seem natural, it
also holds the potential to cause financial problems, Yao said.
"It makes sense that many married couples would want to retire
around the same time," Yao said. "However, if both spouses decide
to retire close to the end of an up market, the household would
have little to no cushion should their retirement portfolios be
affected by an economic downturn."
So while it may seem attractive to retire at the same time as a
spouse, if one partner is still inclined to work at least
part-time, it may be a barrier against a downturn eroding the
couple's entire savings.