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Concerns about money
Old 09-23-2016, 10:38 PM   #1
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Concerns about money

Im a new retiree and am hoping I can learn from your experiences.

I just retired a couple of months ago, and am just getting used to it now. I spent my career saving and learning how to invest, and managed to save what I thought was a comfortable amount in retirement accounts. However, I find I constantly worry that the stock market is going to crash, tax rates will skyrocket or any number of other things will happen to ruin my perfectly laid out plan.

I am not really asking for any financial advise, but have a different question for those who have retired. What sort of real financial problems have you faced in retirement and how did you solve them or what do you do about them? Could better preparation at the beginning of retirement have averted these problems?
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Old 09-23-2016, 11:05 PM   #2
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Well anything can happen, even the Chinese space station could crash on my house

I had a car give out suddenly, so I spent 30K buying a new van, it meant I had to tighten my belt for a few months, watch my spending, sell a stock or two.

I think if you consider what has happened in your life, and how could you deal with it now, then you know what preparation you need to do.

Perhaps turn off the news, don't read the web news it's all bad and terrible, horrible things are possible every day... They rarely tell you about the pretty flowers in the park.
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Old 09-23-2016, 11:06 PM   #3
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Hopefully you retired totally debt free including your home.
That avoids a lot of potential problems.
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Old 09-23-2016, 11:16 PM   #4
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.

Hopefully you retired totally debt free including your home.
That avoids a lot of potential problems.
Or you retired with a nice low rate mortgage so you don't have all that money tied up in equity. That solves a lot of problems too.

I retired in 2006, just in time for the little hiccup we had in the stock and bond and real estate markets in 2008/9. My recommendation is to have enough money in cash/cds/money market accounts to be able to ride out any big drops. If you aren't forced to sell assets at a low price it's a lot easier to not panic when all around you are freaking out. 3 years is a good number for me. Long enough to outlast most downturns without being too much of a drag on your AA. Other than that, just checking things out ahead of time so you aren't surprised with a new roof or HVAC or something just after you FIRE is a good idea. There's always something that can happen, but after a couple of them happen and you realize you're still safe, it gets easier. You're just experiencing the noob FIRE butterflies. It's normal, so take a deep breath, and you'll be fine.
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Old 09-23-2016, 11:31 PM   #5
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Or you retired with a nice low rate mortgage so you don't have all that money tied up in equity. That solves a lot of problems too.

Or you retire to a less expensive part of the country...
so paying off your house is no big deal.

People move here from California, pay cash for a home
and still pocket much of their California equity.

.
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Old 09-24-2016, 01:45 AM   #6
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I am retiring in a few months, but I have given thought to the same stock market stability concern. My own reaction to that is to reduce my equity AA as I approach my date. Over the last 2 years I have gone from 82% to 62% now. I am headed for 55% or maybe 50.
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Old 09-24-2016, 07:47 AM   #7
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... What sort of real financial problems have you faced in retirement and how did you solve them or what do you do about them? Could better preparation at the beginning of retirement have averted these problems?
1) Dog developed arthritis. Requires daily Previcox. Should have planned for an aging dog.
2) Son surprised us with a destination wedding. Paid 1/3. Knew he was style conscious; should have seen it coming.
3) ...it's always something. Good luck!
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Old 09-24-2016, 08:02 AM   #8
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I was nearly set to return in 2001 when the dotcom bubble burst. I learned a number of things from that.


First is to be well-diversified. No heavy dependence on a single or small number of stocks, a single sector, and not be 100% in stocks. I set an asset allocation target of stocks/bonds that give me decent return with lower risk than all stocks, and I stick to it.


Second, I've recognized that at least so far, the market has recovered from every crash, so don't panic sell. As long as I've got enough to ride it out, I've got time for the market to recover. In fact, in a crash I would likely buy more stocks to keep with my asset allocation targets, and that would help me recover faster.


Third, I made sure I had at least some buffer before retiring. I have both extra funds and also fat in my budget I'd be willing and able to live without if I have to.
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Old 09-24-2016, 08:04 AM   #9
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What sort of real financial problems have you faced in retirement and how did you solve them or what do you do about them? Could better preparation at the beginning of retirement have averted these problems?
Twice our portfolio has declined in value by more than 1/3. It may happen again. We have no pension income and will received little SS, so the portfolio is all we have.

What makes a difference for us is not what we could have done differently before retiring, it's what we did after, which was to continue with our retirement.

The financial markets are volatile. If valuation keeps you awake, reduce your equity allocation. If there is a major correction, take advantage of it and buy equities. Set aside enough cash to cover some unexpected spending, as there is no way any of us will make it through the next decade without some major unplanned spending. Dentist, auto, roof, health insurance deductibles, just to name a few. You know at least one will happen so make sure you can pay for it now, then get on with living your life and enjoying your retirement.
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Old 09-24-2016, 08:05 AM   #10
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....What sort of real financial problems have you faced in retirement and how did you solve them or what do you do about them? Could better preparation at the beginning of retirement have averted these problems?
Going on 5 years for us. No real financial problems so far, but investment performance over the last 5 years has been better than expected.

We have ended up spending some that I did not anticipate... demolished a one-car garage and built a two-car garage with a loft and more recently, bought a winter condo and replaced both cars (one expected, the other about a year earlier than we wanted to). Despite all this and our normal living costs, our nestegg is 10% higher than when we retired.

Only thing that we have done differently financially is to increase our cash as a cushion in the event of a correction or bear market. When I was working we carried no cash but in retirement we carry about 5% of our nestegg in an online savings account. We have an automatic monthly transfer from that online savings account to the local credit union account that we use to pay our bills (our monthly "paycheck"). The online savings account is replenished when we rebalance our asset allocation.

We have been investing for over 35 years so are comfortable with the ups and downs of the stock market but the cash cushion is comforting. If we were less comfortable with risk what we might have done is to go with a more conservative AA going into retirement and then let it drift to be less conservative during our retirement... for example, start off 40/55/5 and drift up to 60/35/5.
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Old 09-24-2016, 08:10 AM   #11
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First is to be well-diversified. No heavy dependence on a single or small number of stocks, a single sector, and not be 100% in stocks. I set an asset allocation target of stocks/bonds that give me decent return with lower risk than all stocks, and I stick to it.


Second, I've recognized that at least so far, the market has recovered from every crash, so don't panic sell. As long as I've got enough to ride it out, I've got time for the market to recover. In fact, in a crash I would likely buy more stocks to keep with my asset allocation targets, and that would help me recover faster.


Third, I made sure I had at least some buffer before retiring. I have both extra funds and also fat in my budget I'd be willing and able to live without if I have to.
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Old 09-24-2016, 08:25 AM   #12
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.it's always something.
Roseanne Rosannadana It's always something; if it's not one thing, it's something else.
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Old 09-24-2016, 09:03 AM   #13
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Old 09-24-2016, 09:41 AM   #14
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I'm on my 3rd year of retirement and DW on her 5th. About a year before I retired we reduced our equity allocation to 50% and we are living exclusively on our portfolio until SS. We had a couple of unforeseen dental expenses for both of us the last two years that cost about 30K but we had a buffer in our budget to absorb it. We keep a 15% buffer for unforeseen expenses such as dental work, newer car, appliances etc..

Meanwhile enjoy your retirement.
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Old 09-24-2016, 09:54 AM   #15
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We ER'd on May 1st, 2008. So, your fears regarding the stock market came true for us in a big way. But if you have some headroom in your spending and can cut back when your portfolio declines, you'll be fine. We are still ER'd.

This fear of unknowns can't be new to you. Didn't you worry about losing your job? Deal with these fears in much the same way.

We did over-react (in hindsight) to the 2008-09 down turn and returned to work part-time for a time in 2010. But that act gave us a lot of confidence in our ability to weather future downturns. We saw that we could be flexible and were willing to do what it took to protect our future. It will be a lot more difficult for us to go back to work now, but if we need to, we'll do it - and have fun at it too.
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Old 09-24-2016, 11:03 AM   #16
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Sure things happen but we do not know what and when, most of us keep an emergency fund for it but something even not related to money is scariest. My grandmother always told that if I knew where I am going to fall, I would put a pillow at that place.
As of now, stop worrying and be happy as much as you can.
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Old 09-24-2016, 11:54 AM   #17
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What sort of real financial problems have you faced in retirement and how did you solve them or what do you do about them? Could better preparation at the beginning of retirement have averted these problems?
None, during my first 7 years.

Sometimes things happen, like when my central AC system cratered and the entire system (other than the duct work) had to be completely replaced this summer. But I knew it was old and this could happen. I would have preferred that it waited a year, but that's life. I paid for it out of my annual withdrawal for this year. I'm financially prepared for the big irregular expenses that happen whether you are retired or working.

I do expect the market to crash someday - - whether it is this year, next year, five years from now, or longer. I think I am prepared for that as well. But of course, you never know for sure until something like that happens.
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Old 09-24-2016, 12:01 PM   #18
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I was very well prepared financially and thus far, my biggest financial problem has been figuring out how to spend more freely. I have no pension so am living quite frugally.
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Old 09-24-2016, 12:37 PM   #19
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5Th year, income seems higher than outlay. Subscriber to NO Debt! No Debt AT all.
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Old 09-24-2016, 12:43 PM   #20
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I haven't faced any financial problems yet and I don't worry about the market. I plan to keep diversifying for stability.

And I constantly think of new ways to blow more dough -
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