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ER 2011 - Economic and Market Recovery
Old 03-26-2010, 04:43 AM   #1
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ER 2011 - Economic and Market Recovery

As I stated in some previous posts, I am preparing to ER in the next year.

I have read that FIREing during a recovery increases portfolio survival chances as opposed to doing so during the down-turn if one is attempting to push the boundary of the safe max range of withdrawals.

As I study things, (and this is an assumption of course), if the market recovers and the next business cycle lasts 5 about years... that will put us in striking range of DW taking SS (which will reduce the stress on our portfolio).

I am almost giddy.... it looks like the moon and stars are aligning.

I know Midpack and Rich are approaching take-off for FIRE also.

Comments or thoughts anyone? Are we approaching the launch window for your individual optimum FIRE Scenario?
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Old 03-26-2010, 06:07 AM   #2
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DW and I are also in the launch window for ER2011. DW is scheduled for liftoff August 2011. I work 3 days per week now, stepping down to 2 this summer, then full launch when DW does.

The moon and stars are in alignment. I've run expense scenarios up the wazoo. We have prepared a 4 year plan during which we will use cash reserves and her pension for all expenses until 2015. Then we turn to 401k's, IRA's, and her pension. Health coverage is covered by her employer.
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Old 03-26-2010, 09:44 AM   #3
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Quote:
Originally Posted by chinaco View Post
I have read that FIREing during a recovery increases portfolio survival chances as opposed to doing so during the down-turn if one is attempting to push the boundary of the safe max range of withdrawals

....

Comments or thoughts anyone? Are we approaching the launch window for your individual optimum FIRE Scenario?
Congrats. Let me just throw in that if you are referring to this (from the front page of FireCalc):

Quote:
Shown here are the year-end balances of three identical portfolios. One starts in 1973 (red), another in 1974 (blue), and the third in 1975 (green). So much for relying on averages!
I think that really misstates the issue. The numbers are correct I'm sure, but the premise really makes no sense. The market took sharp drops from 73>74>75. So, apples-to-apples, how could the person retiring in 1975 have an 'identical portfolio' to the guy retiring in 1973? Easy, he had a lot more in 1973 than the guy who retired in 1973 (and more money is always better!).

IOW, having a $1M portfolio after a crash will serve you much better than a $1M portfolio before a crash. To make it apples-to-apples, you would need three people with $X in 1973, and see how they did retiring in 1974 and 1975 with the lower portfolios that they would have.

It does not look like FireCalc allows one to put in a fixed portfolio, and then choose to 'delay' retirement to a past date in order to simulate a $X portfolio in 1973, then choosing to delay to 1974 and 1975. If you could enter that, I suspect the difference would be much less dramatic.

I'll put it another way - I think history would show that (all else being equal) a 4% WR after a crash is safer than a 4% WR at a peak, for two reasons. One, 4% after a crash is a smaller number. Two, since economies do go in cycles, the odds are with you that if you are down, you have some room to move up, but if you are already up, you may be close to the next down cycle.

There is still an effect, I think FireCalc just over-states it if you don't adjust the starting portfolio for those years of decline. Taking a fixed 4% out of an early dropping portfolio represents a larger percentage of the portfolio, and then that money is not there to grow in the next economic up cycle.

If anyone knows how to model this in FireCalc, or if there is an error in my thinking, please share.

-ERD50
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Old 03-26-2010, 10:40 AM   #4
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Quote:
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Comments or thoughts anyone? Are we approaching the launch window for your individual optimum FIRE Scenario?
In my opinion, the best time to retire is when you are SURE you have enough to be able to do it, whether we are on the brink of another market crash or not.

Retirement is so much better than I had thought it would be. I just couldn't recommend that someone should delay it in order to find the best time to pull the trigger, if they are truly FI and ready to go.

Besides, none of us has a crystal ball. Well, I do but it doesn't foresee economic conditions very well.
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Old 03-26-2010, 04:48 PM   #5
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Good comments.

I agree, enough money (i.e., portfolio) cures a number of problems.

To clarify a bit... we have a combination of pensions and SS in addition to our portfolio. Starting ER at the beginning of a business cycle will put us in a situation where stress is less likely to be put on the portfolio before part of our SS begins ( or not long before it begins).

In other words, I look at part of the risk as the market risk (we have diversified against company risk). If I can reduce the window of time I am relying heavily on the portfolio for income, then hopefully I reduce the chances of selling stock assets in a down market.

Of course, I am going to use a quasi bucket approach with several years of living expenses in fixed securities. So I am trying to mitigate that risk anyway.

But still.... it is nice to FIRE with the market and economy looking like they are heading up rather than down. If for no other reason, a little more peace of mind.
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Old 03-26-2010, 05:06 PM   #6
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I will probably go end of May. We have more than enough according to FIRECALC and other sources, but I also believe the market has more upside than downside in the next 5 years which should get us off to a good start - and is part of my reason for jumping now vs later. And if it doesn't pan out, I'll go back to work, not a big deal. Work just won't be at the level of pay/responsibility I'm leaving - enough of the stress that comes with exec responsibility...
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Old 03-26-2010, 05:33 PM   #7
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Good for you Midpack.

I am as confident as I can be that I will not need to go back to work when I FIRE in 2011.

Looking back on it, I could have FIRED back in 2008 and generated an income above our current spending level. My reason for waiting is to get my mega corp pension (albeit reduce for early retirement). It is not a huge amount of money.... but it helps.
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I'll be in that class of 2011!
Old 03-26-2010, 09:04 PM   #8
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I'll be in that class of 2011!

I have 311 days left until RE. When you work for megacorp like I do, then your final year is spent in the golden handcuffs. I could go now but there is so much incentive to remain, that I am taking advantage of it. This will result in high confidence that the future will be bright. Now if I can just make it until then without running out of patience.
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Old 03-28-2010, 08:02 PM   #9
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August 6th, 2010 for me. Personally although I am confident the recovery will continue, I am concerned equity prices already have discounted that. And as someone who is still 90% in equities and needs to start buying some fixed income, I am worried that bonds are headed for a fall. May just buy into the GIC in my 401(k) for a risk free 3%.
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Old 03-31-2010, 08:35 PM   #10
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If I were ready to RE now, this would make me feel pretty good:

Widespread strength drives economy higher - The Globe and Mail
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Old 03-31-2010, 10:54 PM   #11
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I have 311 days left until RE. When you work for megacorp like I do, then your final year is spent in the golden handcuffs. I could go now but there is so much incentive to remain, that I am taking advantage of it. This will result in high confidence that the future will be bright. Now if I can just make it until then without running out of patience.
Been there and done that

Hang on in there - it may seem like forever but it will over in less than a year and you'll be so pleased to have that pension and any other RE benefits they provide.

I got my FIRST pension check today after hanging on like you are doing.

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Good for you Midpack.

I am as confident as I can be that I will not need to go back to work when I FIRE in 2011.

Looking back on it, I could have FIRED back in 2008 and generated an income above our current spending level. My reason for waiting is to get my mega corp pension (albeit reduce for early retirement). It is not a huge amount of money.... but it helps.
I have a couple of small pensions as well as my main one - they make a significant difference - kinda like icing on the cake.
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Old 03-31-2010, 11:04 PM   #12
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2011 is pretty unlikely for us, but within the next 5 years is very likely as a timeframe for us to ESR. We have been doing a lot of research and know what bogey we have to hit, so when we hit it we are about at the point where we could throw the switch and start executing on a plan. My suspicion is that we will get there within 3 years, but if we get a gift from the market I suppose it could even be sooner.
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Old 03-31-2010, 11:07 PM   #13
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2011 is pretty unlikely for us, but within the next 5 years is very likely as a timeframe for us to ESR. We have been doing a lot of research and know what bogey we have to hit, so when we hit it we are about at the point where we could throw the switch and start executing on a plan. My suspicion is that we will get there within 3 years, but if we get a gift from the market I suppose it could even be sooner.
That is where I'm at exactly!
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Old 03-31-2010, 11:25 PM   #14
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I can't really give you any reassuring thoughts, although I think you are right. Things will probably be better for you than for someone retiring at the apex of a bubble (like me). I did fine, YMMV.

If it makes you feel any better, I retired on June 1, 2007. My portfolio is (due to some lucky factors) up about 50% since then. Even so, I had some dark thoughts about a year ago.

Ya, gotta go sometime and better sooner than later, I think. Worst case is, you might have to w*rk sometime. Better than w*rking the next couple of years? No?
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Old 03-31-2010, 11:33 PM   #15
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2011 is pretty unlikely for us, but within the next 5 years is very likely as a timeframe for us to ESR. We have been doing a lot of research and know what bogey we have to hit, so when we hit it we are about at the point where we could throw the switch and start executing on a plan. My suspicion is that we will get there within 3 years, but if we get a gift from the market I suppose it could even be sooner.
That could describe us as well. Our target date for ESR is 2013 but I think that we could reach our "number" earlier than that if our stock options continue to do well. So all eyes on the market, and fingers crossed!
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Old 04-01-2010, 01:57 AM   #16
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Oh no! There will be a lot of people with so much time on hand, sitting around all day looking sad, wondering what to do all day...
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