Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-27-2008, 11:12 AM   #21
Thinks s/he gets paid by the post
 
Join Date: Dec 2003
Posts: 1,375
Quote:
Originally Posted by REWahoo View Post
Interesting, isn't it, how the first big dip in the equity and housing markets after several years of solid gains causes one to question the courage of their SWR convictions.

I'm very aware of the thin ice created when retiring into a down market. I consider myself fortunate to have been two and a half years into FIRE before we hit a rough patch, resulting in my portfolio declining to about where it was when I pulled the ripcord. Since that relatively small but steep decline has caused me to question my SWR strategy, I can only imagine what a decline of 25% or more could do towards creating an acute case of insomnia.

That said, I'm far from sleepless at this point. I'm not at all convinced those who forecast gloom & doom for an extended period are any more accurate than those who say the problems with our economy will turn around in a few months. I've chosen an asset allocation that, at least so far, has declined at less than half the rate of the S&P 500 (YTD I'm -3.9% vs. S&P 500 -9.4%). Both DW and I will be eligible for early SS in the next couple of years. But...we've decided to postpone our around-the-world cruise until things look a little better.
ReWah00: My health ins. costs went from 12,000 a year to about 6,000 a year when my wife and i were eligable for medicare. (Getting older, besides a lack of interest in taking a world wide cruise, has some other financial benefits.) (I'm sure you can hardly wait).

Re: Portfolio situation, and not having the stomach to face a 25% loss, is damn sure understandable. Rich & I have discussed this situation a few times on the board, and for me personally, I have put as much distance as I can between feeling a need to tap equities as I can withought changing the way my wife and I approach what it takes to keep us active and involved.

My kids bucket has a small hole in it, but at least at this point, my wife and I are o.k.

Jarhead, who truly believes that U.S.C. had the best college football team in the country this year, and hopes the NCAA will come to their senses, and go to a playoff system in the future.
__________________

__________________
Jarhead* is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-27-2008, 11:22 AM   #22
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,107
Quote:
Originally Posted by Jarhead* View Post

Jarhead, who truly believes that U.S.C. had the best college football team in the country this year...


Quote:
Originally Posted by Jarhead* View Post
...and hopes the NCAA will come to their senses, and go to a playoff system in the future.
Agreed. But I'm doubtful we'll live long enough to see it happen...
__________________

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 01-27-2008, 11:43 AM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
The problem with concatenating firecalc results (or cherry picking from the middle of a run and then restarting)...and you get the same problem with monte carlo...is that you lose the relative year to year valuations/market movement correlations.

At some point in an investment slide, things become relative bargains and people overcome their fear and start buying back in, which results in a recovery.

The key question is whether you could live with a 1929 style downturn, or the 60's/70's sideways/stagflation period. One could become far more conservative in their investing, or work an extra 10 years to make sure they'd never run out. Having good control over your spending, at least a small income source, and/or being willing to do a little part time work certainly would help in overcoming any protracted bears.

Thing is, they happen pretty infrequently and dont tend to last long.

Here's the other part of it. Consider that finances are all relative. If we hit a wall economically, the markets plunge, real estate devalues, and job loss is rampant...who is better off...you with your measly $250k sitting in your paid off house with just the utility and food bills to cover, or your worker neighbor who lost his job, cant pay his mortgage, has lost most of whatever wimpy amount he put aside and is overleveraged in credit debt?

Sometimes you dont have to beat the bear...just the other guy.

Under such horrid conditions, luxuries would become worth much less, theres a good chance we'd see general deflation, and a smart person with ready capital (even ready REDUCED capital) could make some nice buys.

There are always uncertainties, but planning for the absolute worst and living your entire life that way might suck more than working until you're 70. Be adaptable. Expect to improvise. Limit your liabilities without reducing your quality of life. Have a backup reduction budget and a bare-bones one. Dont take on excessive risk without clear benefits that make the risk acceptable.

It aint rocket science.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 01-27-2008, 11:52 AM   #24
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Quote:
Originally Posted by cute fuzzy bunny View Post
Thing is, they happen pretty infrequently and dont tend to last long.
Is that so?

1900-1917: long bear
1917-1929: long bull
1929-1943: long bear
1943-1968: long bull
1968-1982: long bear
1982-2000: long bull
2000-?: ?
__________________
twaddle is offline   Reply With Quote
Old 01-27-2008, 12:03 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Hmm, lets see...no consensus opinion is available on what constitutes a bear market, but it seems a majority agree that its a 20%+ drop from a peak value.

Why dont you point those out to me on this chart.

Do remember to adjust the earlier, weaker results with higher dividend payouts that arent incorporated into the index prices.
Attached Images
File Type: jpg dow all dates.JPG (82.9 KB, 34 views)
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 01-27-2008, 12:07 PM   #26
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Easier to see on a linear scale.
Attached Images
File Type: jpg sp500.jpg (126.1 KB, 35 views)
__________________
twaddle is offline   Reply With Quote
Old 01-27-2008, 12:15 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Try a chart of the value of money invested instead of playing games. Do remember to add the dividends.

Except for the depression and the sideways 60's, no protracted loss of value.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 01-27-2008, 12:22 PM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,408
Some guys got to beat the same drum with the same stick:

Pssst - Wellesley! 4.31% current yield as of Friday.

No. no. no! Don't rush out and buy it - it's just that the Norwegian widow would like to point out that dividends are almost as good as real money.

Soooo - my Target 2015 plus a few dividend stocks at a tad over 3% yield plus a small pension and SS have hard times covered. Now after I feel my belly button and decide I'm still kicking - I may go 5% variable if ready to let the good times roll.

Between chickenheartness and FireCalc as a 'ballpark' check - I plan to party till I croak at precisely 86.3 my IRS() number.

And no I have no plans to spend down to zero - RMD to keep the IRS happy yes - but zero probably not.

heh heh heh
__________________
unclemick is offline   Reply With Quote
Old 01-27-2008, 12:27 PM   #29
Thinks s/he gets paid by the post
 
Join Date: Dec 2007
Posts: 4,764
"Sometimes you dont have to beat the bear...just the other guy.

Under such horrid conditions, luxuries would become worth much less, theres a good chance we'd see general deflation, and a smart person with ready capital (even ready REDUCED capital) could make some nice buys."

Good point. Sometimes people forget that things could possible deflate.
__________________
Notmuchlonger is offline   Reply With Quote
Old 01-27-2008, 12:30 PM   #30
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Quote:
Originally Posted by cute fuzzy bunny View Post
Try a chart of the value of money invested instead of playing games. Do remember to add the dividends.

Except for the depression and the sideways 60's, no protracted loss of value.
I'm not playing games. Bears and bulls are generally defined by price movements, don't you agree?

I'm not saying that price movements are all that matter. Dividends matter. Inflation matters. Correlations matter. Etc.

Now, I'm not predicting that we're now in a "long bear," but the current dividend yield doesn't help. The current P/E doesn't help. And the current bond yield doesn't look good if you're hoping for a long-term bond bull market, either.
__________________
twaddle is offline   Reply With Quote
Old 01-27-2008, 12:35 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Moemg's Avatar
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 10,035
Quote:
Originally Posted by cute fuzzy bunny View Post

There are always uncertainties, but planning for the absolute worst and living your entire life that way might suck more than working until you're 70. Be adaptable. Expect to improvise. Limit your liabilities without reducing your quality of life. Have a backup reduction budget and a bare-bones one. Dont take on excessive risk without clear benefits that make the risk acceptable.

It aint rocket science.
WEll said CFB
__________________
Moemg is offline   Reply With Quote
Old 01-27-2008, 01:16 PM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by audreyh1 View Post
I handle it by using a straight X% withdrawal rate rather than the inflation adjusted initial 4% rate as used in the original SWR.

This means that I take more out when the market has been good, but it also means that the portfolio is not being depleted at a high percentage rate when performing poorly. Such an approach means you have to be willing to take a pay cut now and then in the interest of preserving the portfolio. I guess this bothers some people, but it doesn't bother me at all.

I never felt comfortable with taking an initial fixed rate + inflation adjustment each year disregarding market performance. This technique was developed for folks who needed a constant "salary" each year mimicking the financial "predictability" of their working years. I would rather react quickly once entering years of poor portfolio performance.

And instead of doing some kind of artificial annual "inflation adjustment", I prefer to let my portfolio grow enough to supposedly beat inflation over the long run and thus keep up with increasing costs of living by whatever my porfolio performance provides.
I'm with Audrey, though I'll admit that having a pension to cover the basic expenses makes it much easier for us to deal with a changing "take" from the portfolio. Still, regardless of that, would anybody still be taking $40,000 annually out of portfolio that had suffered years of declines and was now worth $150.000? Would the fact that "history says I'll probably be okay" really offer sufficient comfort? Should it? I don't think so, and it's much better to make small adjustments when things start to turn south (and also enjoy the extra cash ASAP when the investments go up) rather than sticking to a fixed sum adjusted yearly for inflation. If, in the real world, we'll adjust our living expenses when the portfolio takes a big multi-year hit, then why not acknowledge that, build it into the plan, and behave that way. Pick a % of year end value and live on that. If it's too volatile for you, then add more cash. Your portfolio should be designed to stay ahead of inflation-if it doesn't, then it is not very smart (IMO) to take inflation-adjusted withdrawals.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 01-27-2008, 02:05 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,385
Quote:
Originally Posted by Spanky View Post
It's insane to debate whether a portfolio can survive under a series of consecutive market declines. It's almost like talking about whether you can survive if a huge asteroid struck the earth or the global economy entered a prolong, say 100 years, depression. We just have to be pragmatic about the world. Can we really identify or prepare for all the worst-case scenarios?
While you make a good point, that is not what this thread is about. This thread is about exploring the paths of net worth in ordinary already experienced times.

Perhaps it might be insane, to use your word, to expect the future to be markedly better than the past?

Ha.
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 01-27-2008, 02:17 PM   #34
Recycles dryer sheets
 
Join Date: Oct 2007
Posts: 463
I've been kicking around the idea of using a constant % withdrawal and banking any 'excess' that we don't spend in a year under that rule in a 'reserve' fund, MM / CD ladder / Treasury ladder or something ultra-safe. That fund could then be used for more spending in down years and/or big ticket fun stuff.
__________________
TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future

"I've traded love for pennies, sold my soul for less" -Jim Croce, Age
TickTock is offline   Reply With Quote
Old 01-27-2008, 02:35 PM   #35
Full time employment: Posting here.
Delawaredave5's Avatar
 
Join Date: Dec 2004
Posts: 606
Quote:
Originally Posted by haha View Post
This thread is about exploring the paths of net worth in ordinary already experienced times.

Perhaps it might be insane, to use your word, to expect the future to be markedly better than the past?

Ha.
Historical data in Firecalc is US data - correct ? What is the imapct of the "global economy" going forward and having a chunk of international stocks in the mix ?

Anyone ever look at the "dark ages" in Firecalc (1929, 1972, etc) and re-run assuming 1/4 to 1/2 of the equities in the mix are International ?

I believe equities around the globe will have similiar long term returns as an asset class. I'm hoping that having 1/2 of my stocks international will counterbalance a little future "dark ages" in the US stock market.
__________________
Delawaredave5 is offline   Reply With Quote
Old 01-27-2008, 02:35 PM   #36
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Quote:
Originally Posted by haha View Post
Perhaps it might be insane, to use your word, to expect the future to be markedly better than the past?
Forget better than the past. I would be ecstatic if I could convince myself that the future would be nearly as good as the past.

I don't like the dividend yield. I don't like the P/E or earnings trend. I don't like the demographic trends. I don't like our current economic hurdles.

Give me faith, Ha. Tell me we'll have another 20 years of P/E expansion, will ya?
__________________
twaddle is offline   Reply With Quote
Old 01-27-2008, 02:50 PM   #37
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Quote:
Originally Posted by Delawaredave5 View Post
Anyone ever look at the "dark ages" in Firecalc (1929, 1972, etc) and re-run assuming 1/4 to 1/2 of the equities in the mix are International ?
In the past, being in the right asset mix has absolutely helped. For example, small caps did relatively well during the 1968-1982 period. But nobody knows what the right asset mix is going forward.
__________________
twaddle is offline   Reply With Quote
Old 01-27-2008, 03:33 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,385
Quote:
Originally Posted by twaddle View Post
Give me faith, Ha. Tell me we'll have another 20 years of P/E expansion, will ya?
Better speak to one of the others on this request.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 01-27-2008, 03:44 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,686
To answer the original post (anyone scared?), I am scared but then I'm always scared. I try to be really scared when I stress test my portfolio with FIRECalc. It says the worst case would be that my portfolio goes down to 38% of original. Not permanently but if that happened it would really cramp my style.

But I like to think there are a few options like (1) reducing comsumption a little, (2) buying TIPS to ward off that nasty 1970's inflation possibility, (3) being fairly conservative in equity selection to avoid the worst of a depression scenario and (4) having the right long term AA. For (1) we're taking a domestic vacation this year. For (2) I had 10yr TIPS and just sold to buy short term bonds for the low rate environment ahead. For (3) I tend towards larger balanced stock approach instead of highly tilted to value and small cap value which might be a problem in a very severe recession (or depression).

I've enjoyed a lot of the posts above. And guys, if your showing long term charts you need to do it with semilog on the y-axis or it just doesn't give the right picture for growth rates.
__________________
Lsbcal is offline   Reply With Quote
Old 01-27-2008, 03:44 PM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,018
I must admit I feel a bit queasy about the prospect of a long term market decline. I reworked a spreadsheet I had been using to project net worth and SWR, using lower growth rates - though not negative ones! I was relieved to find that I could withdraw up to $100K without going over an SWR of 3%.

Here is a sample in Word, based on a starting NW of $1m. (Excel files can't be attached). If anyone wants a copy of the spreadsheet, send me a PM and we can do that by email. In this example, the "special expenses" are new cars in 2011 and 2021.
__________________

__________________
Meadbh is offline   Reply With Quote
Reply

Tags
net worth


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Hi, my net worth Gazingus Hi, I am... 21 01-11-2008 05:12 PM
Net Worth Benchmarks saltydog Young Dreamers 46 10-27-2006 08:11 PM
net worth spreadsheet Martha FIRE and Money 26 07-31-2005 10:09 PM
Net worth sunrunner4@hotmail.com Life after FIRE 23 08-11-2004 12:23 PM

 

 
All times are GMT -6. The time now is 06:22 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.