4 those Retired: If the market drops...

[Dawg52]

I survived 2008 with a refrig full of med's and I can do it again. Plus I have a much more conservative AA now. If a big drop occurs, I will add a tiny bit to my dividend stocks.

 

[Midpack]

Only very recently retired, but I took the first option. Our WR is 2.5% and our plan does not include Soc Sec, though I am sure we will receive a substantial part of the currently stated benefits. And if I have to go back to work, so what? There is no way to remove uncertainty altogether...

 

[Koolau]

Option 1

Belt - Less than 1/3 equities
Suspenders - WDR currently less than 2.5%
Elastic Waistband - Take SS earlier

If I live too long or the downturn lasts too long, there's always the 9mm solution.

 

[ERD50]

If the debt mess is not settled, and the market were to drop (a conservative) 25%, how would that impact your retirement?

The same as if the debt mess was settled, and the market dropped 25%?

As others have mentioned, unless you ave a 100% equity AA, your portfolio drop won't be 25%. And if a <25% portfolio drop causes you to 'do something', I suggest you take another look at FIRECALC and the squiggly lines. It's pretty tough to avoid a 25% real drop historically, probably no way to avoid the ~ 15% drop that would come with a more balanced AA.

-ERD50

 

[ronin]

I survived 2008 with a refrig full of med's and I can do it again. Plus I have a much more conservative AA now...

A diversified fridgeful of meds... look anything like this?

 

[Texas Proud]

I think it make a big difference if you are living 100% from your portfolio or you are getting SS or a pension...


My sister lives 100% off her pension, so if her portfolio dropped it would not affect her at all..

If I were retired, I would be living off 100% of my savings and it would... that is why I am not yet retired...

 

[steelyman]

I did not vote in the poll (currently disqualified), but I think it is great that the responses are so heavily weighted in favor of those who could weather a market drop without dire consequences.

I'm a little confused by what seems an overlap between options 2 and 3, both of which mention cutting expenses, which seems a reasonable reaction to a market drop. It's just normal bobbing and weaving.

#3, though, adds the action of going back to work. Doing that in response to a market drop (versus, say, wanting to continue to be productive in the "traditional way" but at your own discretion, interest/passion in a specific vocation, etc) makes me wonder if a person actually retired too early, without being completely prepared for the inevitable fluctuations?

 

[Rambler]

I didn't/can't vote either. Some have raised the option of taking SS earlier than planned. Isn't that one of the issues? If the ceiling isn't raised, no SS checks?

At the end of the day, we're only a little more than a year away from an election. So if our current set of representatives can't figure it out, maybe the next set will be able to.

FWIW, I'm not REd yet, but my taxable portfolio generates enough income in muni interest and dividends for us to be fine without working if we were retired, provided of course that the states don't default as well, and corporations fail or stop paying dividends. Then, we'll just have to rely on that stock of seeds and the garden. That said, if my stocks took a 25% nose dive, I would be nervous...not that I needed to be, its just in my personality and in my genes.

R

 

[W2R]

I didn't/can't vote either. Some have raised the option of taking SS earlier than planned. Isn't that one of the issues? If the ceiling isn't raised, no SS checks?

Not very likely, IMO. But in the event this should occur, my vote would not change, even though I was one who said I might claim SS earlier than planned. I just wouldn't claim it, so I wouldn't be able to take as much advantage of the "sale prices" on equity funds.

 

[Rambler]

W2R, I agree that it is not very likely. I think it would be political suicide to not pay SS and govt pensions. But, this is one of the outcomes our President mentions, that's why I mentioned it. I do have to say though, and regardless of our own personal political persuasion, that it is very frustration to watch the grandstanding and selfishness that is happening in our government. I think it has never been clearer that, in general our politicians' main objective is to get re-elected, as opposed to doing what is right for the country.

R

 

[youbet]

During the recent recession when our portfolio dropped in excess of 25%, DW and I decided to continue spending and not cancel trips, vacations, purchases that were a planned part of our retirement. And this despite the fact that our retirement finances are NOT so conservatively funded that a permanent 25% portfolio reduction wouldn't threaten our portfolio survivability.

Our logic was that time is more important than money. Since we didn't make it to FIRE until age 58, taking a couple of years out to hunker down with no discretionary spending (camper, kayaks, fishing trips, vacations, home remodeling, etc.) didn't seem like a very good idea, so we continued on. Thanks to the nice recovery we experienced, it worked out.

Not sure how to answer the survey. A sudden and permanent 25% reduction to our net worth early in retirement would threaten our FIRE portfolio survivability. But we bet on a recovery and continued spending at planned levels because we thought taking 1 - 2 - 3 years off from planned activities to be too great a price to pay for the risk reduction gained from not spending those dollars.

Despite the risk, we really did some fun stuff during the depths of the recession (and decline in portfolio value) and would be kicking ourselves now had we canceled plans and just stayed home. YMMV.

 

[youbet]

I think it has never been clearer that, in general our politicians' main objective is to get re-elected, as opposed to doing what is right for the country.

+1 Your opinion is shared by many.

There seems to be a ring of Chicago-style politics in some of this. For example, when our politicians have budget problems and need more revenue, their first act is to list the services that will need to be cut immediately without revenue infusions. Of course everything mentioned is critical. Police will be taken off patrol. Ambulance service will be reduced. Fire stations will be only partially staffed. Water treatment plants may be neglected. Etc. But the junket to Fiji by Aldermen and their wives to "encourage business and trade" quietly stays in place...........

Da Machine rolls on! In fact, it seems to be spreading out.

 

[REWahoo]

I think it has never been clearer that, in general our politicians' main objective is to get re-elected, as opposed to doing what is right for the country.

+1

That's precisely why I spent a few minutes earlier today emailing my Congressional Rep and Senators explaining they MUST find a way to settle this without defaulting if they didn't want me to support their opponent in the next election...

 

[youbet]

I think it make a big difference if you are living 100% from your portfolio or you are getting SS or a pension...

You're the winner of the youbet "Understatement of the Day Award." Congratulations!

You bet it makes a difference. See my post above regarding spending during a large portfolio value decrease. Our budget is financed about 50% pension/SS and 50% portfolio withdrawals. I'm not sure we would have had the guts to continue on without cutting discretionary spending if our financing was 90% or 100% portfolio withdrawals. It's a big deal and an issue frequently overlooked in our discussions here on the ER board.

 

[Texas Proud]

W2R, I agree that it is not very likely. I think it would be political suicide to not pay SS and govt pensions. But, this is one of the outcomes our President mentions, that's why I mentioned it. I do have to say though, and regardless of our own personal political persuasion, that it is very frustration to watch the grandstanding and selfishness that is happening in our government. I think it has never been clearer that, in general our politicians' main objective is to get re-elected, as opposed to doing what is right for the country.

R

I don't want to get into a political debate about this, but I remember a town hall with Rangel and some republican..... and they were doing the same thing that is happening now... back and forth on what to do about whatever it was.... when someone said 'it is easy if both of you compromise'....

Rangel said something like 'dont' trivialize the fundamental differences we have on this subject'... IOW, there ARE fundamental beliefs on both sides that they are 'right'.... and that what they want is better for the country... and trivializing that is not good...

That is why I think it is so difficult as both sides believe in what they say... not that they are planning on the next election, but that what they want is RIGHT for the country and the other person just doesn't get it...

And it seems that the American people are about the same... about 50/50....

 

[galeno]

Many of us who have a decade or more under our belts have watched our equity positions fall by more than 50% TWICE in one decade.

The first time it happened to us in 2000 we were about 80% equities. So we lost about 40% of our retirement portfolio. This was scary! We lowered our AWR accordingly and lived off our MMFs and laddered CDs until the market recovered. We then adjusted our AA to a more traditional 60% equities.

The second time it happened in 2008 we were better prepared. We were holding 60% stocks and lost about 30%. At the end of the year, we rebalanced to 70% equities and rode the market back up.

Right now we sit at 60% equities because I see more danger in the bond market than I do in the stock market. If the stock market takes another dump, we will INCREASE equities again to 70% and sit tight.

 

[Midpack]

I think it has never been clearer that, in general our politicians' main objective is to get re-elected, as opposed to doing what is right for the country.

R

Not disagreeing, but how did these two objectives ever become mutually exclusive

 

[kcowan]

I voted 2. We would cut back on our discretionary travel every year.

 

[ERD50]

Not disagreeing, but how did these two objectives ever become mutually exclusive

One way is, if the 'grasshoppers' are a majority, and the 'ants' are a minority, the majority can vote/elect for things that are good for them short term, and ignore the long term. That's the ants problem.

I'm not saying that is the case now or in the past, or that anything is different. It's just one way that it could happen.

What's the old saying, democracy is two wolves and sheep debating what's (who's) for lunch?


-ERD50

 

[rescueme]

Our logic was that time is more important than money. Since we didn't make it to FIRE until age 58, taking a couple of years out to hunker down with no discretionary spending (camper, kayaks, fishing trips, vacations, home remodeling, etc.) didn't seem like a very good idea, so we continued on. Thanks to the nice recovery we experienced, it worked out.

DW/me feel the same way as you. In fact, in preparation for our joint retirement (even though DW changed her mind the month before her scheduled date - found she wasn’t emotionally ready), we set our plan with no "discretionary spending". To us, it is all required (including extensive travel) and did not plan for any cutbacks.

We looked at it in a way that a big step such as retirement should not be done "part way" - that is with the thought that if things didn't turn out, we could cut back or even (heaven forbid) look for another job.

Like you, we did not retire as soon as we could have, but did so when we felt we could retire and meet any market "hiccups" along the way, at the age of 59.

It's a different POV from what most questions - "can I retire" vs. our "should I retire". There is a difference, IMHO. There is a very good chance that we retired with “too many assets” and could have done so earlier, but we’ve always been kind of “belt and suspenders” couple.

 

[HpRyder]

If it drops 25% again, as it did last time, I'll buy using most of $ reserves. I regret not buying more aggressively last time, but of what I did get, its been great gains.

 

[donheff]

I think it has never been clearer that, in general our politicians' main objective is to get re-elected, as opposed to doing what is right for the country.
R

+1 Your opinion is shared by many.

There seems to be a ring of Chicago-style politics in some of this...

Da Machine rolls on! In fact, it seems to be spreading out.

+1

That's precisely why I spent a few minutes earlier today emailing my Congressional Rep and Senators explaining they MUST find a way to settle this without defaulting if they didn't want me to support their opponent in the next election...

+1. It's nice to be able to agree with everybody. Unfortunately, I have no one to write to. Anyone want to make DC a state?

 

[Koolau]

+1. It's nice to be able to agree with everybody. Unfortunately, I have no one to write to. Anyone want to make DC a state?

I suppose you are marginally worse off than I. At least I can write to my elected officials. But they have already made it perfectly clear that I would be wasting the postage. We only have one "flavor" in our state (instead of your "none".)

 

[donheff]

We only have one "flavor" in our state (instead of your "none".)

We may not be a state but we only have one flavor - Dem. Which, unfortunately, is why we will never be a state

 

[obgyn65]

I am not retired but will be in less than 12 months. I voted 1.