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Old 10-04-2011, 07:26 AM   #21
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Putting it another way. If your budget is 50K/year and you lose 100K, you either have to make up for the 100k or leave this world 2 years earlier.

Hmmm..which is a better to lose. Your money or your life?

Like Jack Benny would say "I'm thinking it over."
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Old 10-04-2011, 08:15 AM   #22
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My plans between now and year end, for those interested.....

May do some tax loss harvesting as part of an effort to reduce some cap gains I took in Jan as a result of AA rebalance. Will sell some losers to offset the gains and then reinvest the cash as part of my Jan 2012 AA rebalance. Not a large percentage of my portfolio so not worrying that I will miss a bounce back by sitting with more cash than usual for a couple of months.

Converted a traditional IRA to a Roth last year and deferred taxes to 2011/12. It has taken a hit since it has been a Roth so will recharacterize back to a TIRA and either convert to a Roth at a later date or just leave it as a TIRA. I refuse to pay taxes on gains that are no longer there! This has to be done by October 15th I believe.

Other than that I just think like W2R...the market was a lot worse on my retirement date in July of 2009.
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Old 10-04-2011, 08:19 AM   #23
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But that still means that your living budget must either be slashed by $4K, or made up for by drawing more than 4% from other sources, doesn't it?
Of course.

That's why a retiree (such as myself) has more than several years in cash or cash equivalents to satisfy immediate retirement income needs.

You don't draw from your retirement portfolio just because the market is down for a period (for me, years).

OTOH, you don't wait when the market returns (as it had after the 2008-early 2009 period). You "reap your harvest" as I did earlier this year, to add to cash (e.g. my "silo").

Just call me farmer Brown...
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Old 10-04-2011, 08:34 AM   #24
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My rebalancing is pretty simple.

Still 100% stocks outside of our emergency fund

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+1

And rebalance if it gets too far out of kilter. (Your judgement required.)
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Old 10-04-2011, 09:02 AM   #25
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I sold 60% of my stock investments when the S&P was at 1300 and the rest of it when the S&P was at 1200 (late July/early August). The S&P closed yesterday at about 1100. A financial adviser I listen to on the radio advised his clients/listeners to get out of the market at that time to conserve their retirement savings because he felt the downside risk was much higher than the upside potential. I'm curious, are there any other people like me on this forum that don't subscribe to the "buy and hold/rebalance asset allocation" but instead try to preserve their retirement savings?
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Old 10-04-2011, 09:08 AM   #26
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Moemg, don't read this next sentence!

I hope this doesn't spoil the trick, but $100k isn't just 4k, it's 4k per year.

Not necessarily ! I do a straight percentage of my portfolio based on it's Jan.1 total. so my spending fluctuates. In down years I just cut back and since I have a survivor pension and SS it's not too painful.
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Old 10-04-2011, 09:17 AM   #27
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Quote:
Originally Posted by Moemg
If you use 4% of portfolio value for your budget . Each $100,000 only equals $4,000 dollars .
Thanks, I understand. You're looking at the loss of actual spending money assuming a 4% SWR. So losing $100K means the loss of $4K of spending money per year.
Actually, no - not if you are following the FIRECALC methods. FIRECALC reports a success rate based on a 4% initial WR, adjusted for inflation each year. And that takes into account that markets will dip, and you keep drawing the same (inflation adjusted) amount.

Of course you can choose to reduce spending, and that will make you somewhat more conservative than FIRECALC would report. But you do not need to cut spending to achieve the success % reported by FIRECALC.

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Old 10-04-2011, 09:22 AM   #28
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I'm curious, are there any other people like me on this forum that don't subscribe to the "buy and hold/rebalance asset allocation" but instead try to preserve their retirement savings?
I feel that it is based mostly on your age and the number of "challanges" you have faced investment wise, over the years.

I'm retired (DW will soon be). When I retired (in early 2007, at age 59) we had already hit "our number" for more than a few years - in our mid-50's.

Not starting to save/invest for retirement until our mid-30's (when our respective pension plans were eliminated and replaced by 401(k) plans) and starting additional IRA's, we knew we had to be a bit agressive - even with an initial planned retirement date of SS FRA age (for us, 66).

So we invested mostly in equity mutual funds and had an AA (before we knew what an AA was) based upon actual investments of 90/10 (90% equity, 10% cash/bonds).

When our first downturn occured (1987) we went into a panic and were ready to pull all our retirement funds out of equities, and put them into cash/cash equalivents. At the time I was going to night school and had an instructor (younger than I am, today) discussing the market pullback, and what it meant to us. I remember his words well, that regardless of the duration, there would always be market flux.

The result? We did not change a thing, through 1987 (which snapped back quickly) and even into the early 2000's when most people were fearful (and pulling out of equity - tech mostly) at the same time we paid off our note/mortgage and took that payment and increased our 401(k) contributions. Heck, we were used to making that payment. We could either spend it on immediate desires or invest it for the future. Well, you know how that worked out (buy, when others are in a panic).

Today (in retirment)? Our joint AA is set at 50/50 (50% equity, 50% cash/bonds). Due to the current "challange", our holdings are at 45/55 (45% equity). We are not making any changes (rebalance) at this time simply due to our age. We are not accumulating for the future (trying to hit our number) nor are we concerned about the current market as it affects our income (we indivudially have more than a few years in cash).

I can't say when the market will return other than I have faith that it will. Sure, there are a lot of folks that say "this time, it's different" (heard that before, even when times are good?)

We don't need to pull out of the market nor re-allocate (which I do endorse for certain folks - as those currently younger and in their accumulation stage). When the market returns (whatever year, or decade), so will our AA.

Again, it's all depending on your age, and your time in life...
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Old 10-04-2011, 09:52 AM   #29
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I sold 60% of my stock investments when the S&P was at 1300 and the rest of it when the S&P was at 1200 (late July/early August). The S&P closed yesterday at about 1100. A financial adviser I listen to on the radio advised his clients/listeners to get out of the market at that time to conserve their retirement savings because he felt the downside risk was much higher than the upside potential. I'm curious, are there any other people like me on this forum that don't subscribe to the "buy and hold/rebalance asset allocation" but instead try to preserve their retirement savings?
IMO, the key word there is "try".

Sure, I would get out of the market if I 'knew' it was dropping - heck, I'd short it!

But what if the radio guy is wrong? Plus, he has to be right twice, and get you back in at a decent time. Maybe he can do this, but I am not too willing to risk my portfolio on it. If I agree with his view, I might use options to make a few 'side bets' - but I wouldn't pull out of the market, other than re-balancing.

It is possible that you attempt to preserve your portfolio could do just the opposite. I'd say if it worries you, take a smaller WR, and maybe a variable one (though I don't know how much this really helps).


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Old 10-04-2011, 10:15 AM   #30
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Putting it another way. If your budget is 50K/year and you lose 100K, you either have to make up for the 100k or leave this world 2 years earlier.
Another painful way of looking at losses, is that if you lose 50% of your $million$, you must earn 100% of the remainder just to get back to even.

OK, so it's less painful than leaving the world two years earlier.
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Old 10-04-2011, 10:25 AM   #31
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I'm curious, are there any other people like me on this forum that don't subscribe to the "buy and hold/rebalance asset allocation" but instead try to preserve their retirement savings?
I think many of us subscribe to "buy and hold/rebalance asset allocation" and "try to preserve their retirement savings."

You pose your question as if the two were mutually exclusive and history has proven quite the contrary.
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Old 10-04-2011, 10:29 AM   #32
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I think many of us subscribe to the "buy and hold/rebalance asset allocation" and "try to preserve their retirement savings."

You pose your question as if the two were mutually exclusive and history has proven quite the contrary.
Perfect answer! - ERD50
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Old 10-04-2011, 10:53 AM   #33
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I sold 60% of my stock investments when the S&P was at 1300 and the rest of it when the S&P was at 1200 (late July/early August).
Congratulations for making a very good decision. Now, having avoided the loss many of us suffered, I imagine you're thinking of buying back into stocks?
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Old 10-04-2011, 10:57 AM   #34
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I was looking at periods that had sharp SP500 drawdowns like we have seen recently. One period was the onset of the Persian Gulf War when the SP500 went down about 17% in a few months in Aug - Oct 1990. There was plenty of angst back then. The "bottom" was hit well before the major peaks of that armed conflict.

Now we have economic problems in the developed world, not a war. The decline from May has been about 19% on the SP500 as of the Oct 3rd close. The problems seem intractable as several smart economic people have discussed. The bottom, where is it?

Just thought I'd point out that investors have had to go through some of this sort of decline before. Personally it drives me a bit crazy. Getting out here could be quite hazardous but staying in is a torture. Wonder how the retirees of 1990 handled it? Of course, they had those high real bond rates back then.
I handled it by buying a big slug of FF, at the time a closed end fund of S&Ls, mostly California S&Ls, which at that time were really bombed out. The CEF was also selling at a huge discount. The manager was a smart young guy named Adams. I talked to him on the phone a few times, and thought this is a good bet.

Came out hugely positive for me.

Remember that what count is not how much something has come down, but what its vaue is relative to its price. Plenty stocks come down, on a zig-zag path to zero.

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Old 10-04-2011, 11:03 AM   #35
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Remember that what counts is not how much something has come down, but what its vaue is relative to its price.
Amen ...

Current perceived value (e.g. the last trade, on market close) has nothing to do with the ability to have market price => holding value.

It takes a bit of waiting for the holding to equal/exceed it's price, in value.

It also takes a bit of courage - both to wait (at the bottom) and to "harvest gains" at the top...
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Old 10-04-2011, 11:03 AM   #36
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An interesting article by Mark Hulbert today: Still hope for fourth quarter - Mark Hulbert - MarketWatch
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Consider the average recommended equity exposure among a subset of short-term stock market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). This average currently stands at minus 16.8%, having gotten as low as minus 20.4% a couple of weeks ago.

Thatís the lowest the HSNSI has been since early March 2009, right as the 2007-2009 bear market was coming to an end and the bull market was beginning.
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Old 10-04-2011, 12:33 PM   #37
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I respect the fact that there are many paths to Rome and will not criticize what is working for others or what the conventional wisdom says. Anyways, as I have said before, I have been reducing my exposure to equity since April, and right now am about 60% cash/15% stock/25% bond. I did that based on my perception of a deteriorating macro economic climate. That said, I never totally exited the market, but it does let me sleep a little better at night. Nevertheless, like Lsbcal I am still bothered going through periods like this. Sure I could set an even lower equity allocation than my target and be buy and hold/rebalance (my target allocation is 35% equity/55% bond/10% cash), but I doubt that would achieve more favorable returns when the climate begins to flash green signals. Further, during such downturns, I also average back in slowly/carefully. While its impossible to get it right, the sell high/buy low concept makes sense to me and I believe one should never be afraid to take a profit or a loss.
So, right or wrong, I will continue to adjust my equity/FI allocation based on my own instincts. If I lose out on some $ upsides in the process, I am OK with that, but I don't believe I'll take a bath either. This comes from a buy and hold guy during the 2007-2009 period.
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Old 10-04-2011, 01:14 PM   #38
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I take comfort that I survived the 2008 meltdown at not long ago recall posts asking "Have we recovered from 2008?" There were several "Yes" answers.

That said, sometimes I do have to remind myself to think long-term.

This too shall pass.
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Old 10-04-2011, 10:36 PM   #39
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So, right or wrong, I will continue to adjust my equity/FI allocation based on my own instincts.
What does your instincts say now? What is your perspective of the macro economic climate?
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Old 10-05-2011, 07:54 AM   #40
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What does your instincts say now? What is your perspective of the macro economic climate?
Well since you asked, its not very positive; just look at the unemployment situation (and it will get worse); the deficit and other large structural problems to be handled by a gov't that can't work together; european crisis and ramifications of further contangion; a Fed with nothing viable left in its quiver; no reforms made in terms of regulating wallstreet after the last financial fiasco; a manipulated high frequency trading market; record low interest rates and a bond market posied to take it in the shorts when inflation sets in, etc.........

Sure the market can be irrational based on the above and move up short term, but this does not look like an environment that with produce growth and a bull market anytime soon. While I prefer to adopt the glass is half full philosophy in times like this, my previous optimism has waned.
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