Personal Finance

I've accepted that early retirement isn't in the cards for me — what should I do now?

Rich Duprey

Published: December 31, 2024 1:37 pm

Early retirement is a dream many think about, but reality suggests most will toil away at their jobs until the traditional retirement age, if not longer.

There is nothing wrong with that, so long as we continue to regularly put away at least something toward retirement. No one wants Social Security to be their sole means of support. What we absolutely shouldn’t do is let emotion cloud our judgment.

Although it’s tough to remain unemotional when investing, it’s worse when we allow politics to cloud our judgment. No matter how you feel about a candidate, becoming hysterical about the outcome of an election and making terrible financial decisions because of it, makes a bad situation worse.

Unfortunately, one Redditor on the r/TwoXPreppers subreddit seems to be letting the recent presidential election cloud her thinking.

24/7 Wall St. Key Points:

• Politics should not be your North Star when making financial decisions as emotions can be ruinous.
• Fear and greed are the two biggest emotions ruling Wall Street. It is important to ignore both extremes for your financial and mental well-being.
• Stocks tend to make even the worst crash a distant memory as bull markets wipe away all vestiges of any downturn.
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

The situation

Donald Trump, of course, will be inaugurated as the 47th president on Jan. 20. While the sweeping electoral mandate has many people cheering, those who opposed him are disappointed, or worse, on the verge of making some very damaging decisions.

The Redditor leans towards the latter. She’s teetering on pulling all of her savings out of her 401(k) plan, selling her house, and fleeing the country over what is to come. She fears economic collapse is coming and wants to know how best to protect herself and her sanity.

Now I’m not a financial planner (or a mental health professional), so these are only my opinions, but getting yourself into a frenzy over politics is never a good idea for your financial or personal health. Step one is to go outside and touch grass. 

After taking a deep breath (or several), realize that no matter who is in the White House, the end of the world is not just over the horizon. Get outside of your echo chambers and see the world around you.

Bulls always trounce bears

The Redditor, though, is concerned about her 401(k). The stock market could very well crash  before Trump even takes office as it trades at seemingly unsustainable levels. Yet no one can correctly predict a market top or bottom. As famed economist John Maynard Keynes once noted, “Markets can remain irrational longer than you can remain solvent.”

The best advice is to ignore all the noise and just keep putting away money towards your retirement. That’s because market crashes tend to be short-lived events while bull markets go on for years. They eventually wipe away all the losses and hit new highs. So if you don’t sell, it’s only a loss on paper.

A Hartford Funds study found stocks tend to lose 35% on average during a bear market, which typically lasts for 9.6 months. However, stocks tend to gain 111% during the bull market that follows, and they typically last for 2.6 years. If you just ignore the bears, the bulls will sustain you.

Key takeaway

Making politics your touchstone for personal and financial decisions is not healthy for your bank account nor your mental health. It is best to ignore the fearmongering on both sides and keep your wits about you. The worst thing you can do is make financial decisions based on emotion.

To keep your feet firmly planted on the ground, working with a qualified financial advisor is your best bet. One can help you devise a plan for your future based on your unique situation and keep you from making decisions based on irrational emotions.

When your feelings get the better of you, turn off the news, walk away from social media, and focus on the things important to you in your own life. The market has steadily risen for over 100 years, albeit with some nasty dips along the way. Yet so long as you don’t give in to the fear and sell, in a couple of years you will never even know a correction or a crash occurred.

You will end up in a financially better place and your mental health will be better off as well.