According to Price's figures, by the bottom of the bear market at the end of September 2002, your portfolio shrank to $374,096. Your chances of having money at the end of retirement were reduced to 57 percent. Those are odds most of us wouldn't like.
Luckily, the market recovered. If you stayed the course - only increasing the amount of your withdrawals by 3 percent a year - your portfolio would have returned to $447,375 in January this year. And the chances of having money throughout retirement went back up to 78 percent.
But if you had reduced the amount you took out of your portfolio while the market was weak, you would be in even better shape.
For instance, if you had not increased your withdrawals for inflation for the first four years, your portfolio in January this year would have been $461,799. You would still have about a 90 percent chance of having money into old age.
Or, if you reduced your monthly withdrawal amount by 25 percent at the bottom of the bear market, your portfolio would have been $484,245 in January. And you would only have a 1 percent chance of outliving your money. Your monthly withdrawal would now be $1,582. But you could increase that by about $500 and still have an overwhelming chance of success.
The worst move would have been to flee stocks near the bottom of the market and rush into bonds. Your portfolio would have fallen to $337,753 early this year and you would have a 95 percent chance of being penniless someday.
You can run your own scenarios using Price's online Retirement Income Calculator at www.troweprice.com.
The lesson to take from these numbers, Fahlund says, is that when markets are falling "try to cut back on the amount you are withdrawing."
Or, if possible, consider delaying retirement a year or so until the bear market has passed, Fahlund says. You can still take vacations or do some of the things you planned for retirement. But staying on the job a little longer and having fewer years of retirement to finance can do wonders for your finances.
Financial planners say they are delivering these messages now to near retirees.
Phillip Cook, a financial planner in Torrance, Calif., has been urging a client to reduce his high lifestyle for the past three or four years. Now the client plans to retire in July, at a time when interest rates on his investments are low.
The client now will have to rent out his Palm Springs vacation home and will be able to visit only in the off-season, Cook says.
Michael Beriss, a private wealth adviser with Ameriprise Financial Services Inc. in Bethesda, says people might not like to hear that they have to cut costs. But most do when faced with the math and the prospect of running out of money in retirement, he says.
"Reality is a remarkably powerful force," Beriss says.
eileen.ambrose@baltsun.com
