Investors approaching retirement face painful decisions

The stock market has clawed back much of its losses from the new coronavirus pandemic. Ophthalmologist Craig Sklar is selling his stocks anyway.

When the pandemic hit, the value of Dr. Sklar's investments tumbled. So did the income he earned from his private practice in Connecticut, which was forced to furlough staff and dip into emergency loans to try to keep its doors open.

At 62 years old, Dr. Sklar, who had been hoping to retire in a few years, decided he couldn't risk seeing his portfolio take a bigger hit. He sold much of his stockholdings at a loss between January and early March.

"I don't have 10 to 15 years left to recover my losses," said Dr. Sklar, who now has more cash as a percentage of his portfolio than he has in decades. "At some point, I'll need my cash to live on."

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The coronavirus pandemic has created a crisis that some economists believe could take the country nearly a decade to recover from. Individuals like Dr. Sklar now face perhaps one of the most difficult investing decisions they will make in their lifetimes: whether to wait out a potentially long rebound or exit the market altogether.

Data from Fidelity Investments suggests millions of individuals have decided to do the latter. Nearly a third of investors ages 65 and up sold all of their stockholdings some time between February and May, compared with 18% of investors across all age groups.

The stock market has defied many investors' expectations, recovering much of the losses it suffered after the pandemic forced businesses to shut down and countries to close their borders. The S&P 500 is now down 5.9% for the year, while the Dow Jones Industrial Average is off 10%, despite tumbling last week on growing fears of a second wave of coronavirus infections.

Money managers who believe the stock market's rebound is justified have attributed the rally to aggressive central bank action, fiscal policy and projections that the U.S. will be able to contain the pandemic in the coming months. Those who are more skeptical point to the worries about another spike in coronavirus cases -- especially after a wave of protests broke out around the country -- that could send the market tumbling again.

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In many cases, those hoping to retire in the coming years aren't waiting around to find out who is right.

Dr. Sklar has told his children, who are in their 30s, to "be 100% in equities if you can." But he himself isn't planning on dipping back into the stock market soon.

Over in Illinois, Philip Eberlin, who owns a woodwork-restoration business, has most of his portfolio in certificates of deposits and cash.

He knows from experience that, even after world-changing events -- 9/11 and the 2007-08 financial crisis -- the stock market has always gone up again. Mr. Eberlin said he missed out on much of the market's stunning recovery after the last financial crisis because he never figured out a time to move more of his money back into the stock market.

But he is 66. And he hasn't worked since late March because the pandemic has dented demand for contract work in Chicago residential buildings.

With hopes to work for another two or three more years before retiring, "what I'd rather not do is invest at this point and then see the market plunge 40 to 50%," Mr. Eberlin said.

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For the most part, financial planners and advisers recommend that individuals who are approaching retirement gradually reduce their exposure to riskier assets, like stocks, while increasing exposure to more conservative investments, like government bonds.

What they don't typically recommend is pulling out of the stock market altogether.

"When you sell, you have to be right two times: right that the market is going to keep going down, and right that the market is going up when you get back in," said Sarah Catherine Gutierrez, a certified financial planner based in Arkansas. "The problem is, very few people can be that right."

But Ms. Gutierrez acknowledges the impulse to sell can be overwhelming -- especially for those who don't have as big of a cash reserve to fall back on during economic downturns.

One of Ms. Gutierrez's clients had planned to sell his business to help supplement his retirement nest egg. When the pandemic hit, potential buyers pulled out, and the client had to put aside his retirement plan.

"We feel so much compassion for this age group," she said. For many, "it feels like their dreams are being postponed at best."

Both Dr. Sklar and Mr. Eberlin said they consider themselves more fortunate than most.

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Dr. Sklar has been able to pick up telemedicine shifts that allow him to talk with patients over the phone.

And Mr. Eberlin has been able to hold up, in part because of his savings and because of his wife's job as a schoolteacher.

"When you think about how many people in the country have very little in savings and retirement, I am blessed," he said.

But Mr. Eberlin still feels a sting of regret, especially having sat out the nearly 11-year bull market that began in 2009 and missed out on much of the stock market's resurgence the past few months. With the future of his job up in the air, he isn't looking to make any drastic changes to his portfolio soon.

"I wish I had a crystal ball," he said.

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