Susan Tompor

Detroit Free Press

A rip-roaring stock market — coupled with increased savings — has driven up average retirement balances to record levels, according to a Fidelity Investments report.

Fidelity said its average 401(k) balance climbed to $95,500 in the first quarter, up from $74,900 five years ago. The average IRA balance hit $98,100 in the first quarter, up from $75,100 five years ago.

Obviously having $100,000 or so in savings isn't going to make you want to rush to retire. But many Baby Boomers who didn't sell in a panic during the financial fallout in 2008-09 are looking at sizable portfolios now that stocks have been in bull market territory for eight years.

So will an influx of cash give the green light to some boomers who delayed retirement a few years ago? Maybe, maybe not.

Just because it seems like you can afford to retire doesn't mean you want to retire.

"Interestingly, a recent encounter with a client who was interested in imminent retirement resulted in her deciding that she would continue to work," said Robert Bilkie, president of Sigma Investment Counselors in Southfield.

"There seemed to be a perverse effect," he said. "Armed with the knowledge that she could retire, she determined that she would work just a bit longer to bolster her resources."

Many times, picking a retirement date has more to do with external events. Do you still enjoy working? Many times, those closer to retirement years cannot even imagine the day when they're not heading to the courtroom, the classroom or the office.

"Their jobs define who they are. They like the structure that their work affords," said Jeanne Thompson, senior vice president Fidelity Investments.

Boomers who are doing a double-take on the size of their retirement nest eggs, though, will want to take some factors into account before picking a retirement date:

• Will your sudden wealth last?

Some retirement portfolios actually could have doubled in less than a year based on one risky bet — putting all or most of that money in your company's stock.

Bank stocks, for example, boomed late last year on the theory that we're set for a rollback in financial regulations under President Donald Trump's administration.

Year to date, several categories of stocks — including those in casinos and gaming, home entertainment software and health care technology companies — saw gains of 30% or more for the year through late May, said Sam Stovall, chief investment strategist for CFRA Research.

Many people aren't risking 100% of their 401(k)s in company stock, like they did in the early 2000s. But some people still are taking on more risk than they should by holding on to far too much company stock in relation to their other investments.

Thompson said baby boomers who are heading into retirement should make sure they're comfortable with the level of risk they're taking with investments in their 401(k) plans and IRAs.

Potential retirees need to consider how they might weather any storm. Do they have enough cash — including short-term certificates of deposit — to help them avoid needing to sell stock and lock in losses during a future bear market?

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Some experts advise socking away enough money to cover a few years of living expenses in a safe investment before you retire in order to minimize a hardship should the stock market face a meltdown in the first few years of retirement.

"Selling equities to live on — after a 20% pullback — may end up being a recipe for having to return to the workforce," said Christopher M. Ruth, senior portfolio manager for Key Private Bank in Toledo.

• What's the risk of burning through your savings?

Many baby boomers are fearful of outliving their savings in retirement, especially if they're not receiving a regular pension check or if they're paying far more than expected for health insurance and medical expenses on their own.

Maria Bruno, senior investment strategist for Vanguard, said she's been encouraged to see more comments on her blogs with questions about how to thoughtfully manage spending and tap into retirement accounts once a person actually retires.

Today's retirees are part of the "RMD generation," she said. They're going to be looking at required minimum distributions — which are taxable — from 401(k) plans or IRAs in their 70s and beyond.

"These retirees are leaving the workforce with large tax-deferred balances," she said.

In some cases, Bruno said, retirees will want to consider withdrawing money from taxable retirement accounts in their 60s before they're forced to take required minimum distributions as a way to control their income tax bill in the future. It's important to review your own tax situation.

Many retirees will be in a relatively lower tax bracket. So they may be paying income taxes at a lower rate. By withdrawing tax-deferred retirement savings money before they're required to do so, they'e lowering their 401(k) and IRA balances and, as a result, reducing future required minimum distributions.

It's key to remember that you could be giving up 10% to 40% of your tax-deferred retirement account balances to income taxes, depending on your tax bracket when you withdraw the money.

• How much is enough?

David Blanchett, head of retirement research for Morningstar Investment Management, said he's concerned that some investors will bank on double-digit returns for stocks and high returns for bonds in the future.

"It's unlikely that you'll have this continued strong performance," he said.

While it's complicated to estimate how much money you really need to retire, Blanchett said, he'd use a general guideline of 25 times your annual income goal. So if you want to withdraw $50,000 from retirement savings each year, you'd aim to have $1.25 million or more in retirement savings.

Someone who has a pension might be able to have less saved, if the monthly pension checks are significant.

It's never too early to try to save more money for retirement, he said.

Many times, people say they want to retire at 62 or 65.

But it's not always a matter of choice. A work issue or a health issue can force someone's hand, and they end up retiring earlier than planned at 59 or 60.

Just rushing into retirement blindly, though, isn't the right approach.

If it's possible, Blanchett said, some people — who may even be good savers — can benefit by delaying their retirement a few years.

Working longer would mean you're going to have fewer years to cover the bills in retirement. You're going to be able to save more money for retirement. Your assets will have a few more years to grow in value. And you'd be better able to delay collecting Social Security benefits.

You can start collecting Social Security retirement benefits as early as age 62. But the monthly benefit amount is reduced compared to what you'd receive if you started collecting at your full retirement age. If you were born in 1960 or later, the full retirement age is 67. For those born from 1943 to 1954, the full retirement age is 66.

It's a little more complicated to figure out the full retirement age for those born from 1955 to 1959. It's age 66 plus a few months. See the Full Retirement Age chart at www.ssa.gov.

Someone born in 1957, for example, would hit the full retirement age at 66 and six months.

For many people, Blanchett said, it can make sense to run two sets of numbers when doing their retirement planning. What happens to your money if you retire three years earlier than planned? What happens if you're able to retire three years later than you want?

A snapshot in time for your 401(k) shouldn't be the only number to consider when picking a retirement date.

Contact Susan Tompor: stompor@freepress.com or 313-222-8876. Follow her on Twitter @Tompor.