Has the downturn stopped anyone from ER

[nun]

Has anyone reconsidered ER in 2008 because of the possible recession? The conventional wisdom is that its hard to ER into a down market, are you thinking of working a couple of extra years?

[REWahoo]

It's too late for me, but I'd recommend anyone considering retiring now delay for several years or more - but only if you are currently paying SS taxes. If you aren't, then go ahead - you won't be much help to me either way.

[Animorph]

I already have a couple extra years worked, and a couple of years cash for expenses. This downturn is something I have been planning for for about 2 years now. So no, I'm staying retired.

That said, I'm still receiving severence pay well into this year. DW's new boss is a friend of hers so she doesn't want to retire now. So all my planning will probably not be seriously tested. We will only need a small amount from investments this year.

I'm kind of excited to finally see this drop and have the opportunity (and time) to navigate through it. A lot of my cash is currently held in my 401k, which is stuck there until around mid-year when I can roll it over into an IRA. Then I'll be able to buy specific funds I want, including many asset classes not available in the 401k. When that happens I'll be able to sell those same funds in my taxable account, many with a capital loss. I'll be picking up a little extra gain via the tax loss if we don't see a bounce back up before then. And I'll finally have the cash outside the 401k/IRA where I can use it.

This is a good time to rebalance, if you can take some losses simultaneously, or to diversify out of company stock. The tax hits will be a little less.

Dan

[Nords]

Quote:

Originally Posted by nun Has anyone reconsidered ER in 2008 because of the possible recession? The conventional wisdom is that its hard to ER into a down market, are you thinking of working a couple of extra years?

As much as it pains me to see the American economy and the Social Security lockbox suffer from my lack of participation, I've reluctantly decided to step aside from the employment rolls for the sixth year in a row to give my opportunity to someone who needs it more than I do.

Joking aside, if the success of one's ER depends on whether or not the first few years of ER are in a bear market, then perhaps it's worth working for a couple more years regardless of the economic forecasts.

There's more analysis of the subject on Raddr's & Greaney's websites:
Raddr's Early Retirement and Financial Strategy Board :: View topic - Hypothetical Y2K retiree update
2006 Update: Real-Life Retiree Investment Returns

[W2R]

Quote:

Originally Posted by nun Has anyone reconsidered ER in 2008 because of the possible recession? The conventional wisdom is that its hard to ER into a down market, are you thinking of working a couple of extra years?

My longtime plan has been to ER in late 2009 when I can qualify for lifetime medical.

In my planning, I have assumed a housing crash (check!), a down market (check!) lasting for ten years, and substantial inflation (ehh, not really, so far). I have received my share of gentle, friendly teasing on the board about my almost "doomsday" retirement planning scenario, but this approach helps me to sleep at night.

While inflation has risen, to date it is nowhere near as bad as I had planned for. My biggest concern is the addition of substantially more inflation to the mix.

So far, it looks like my ER will not be delayed.

[Rich_by_the_Bay]

I'm closing in on ESR but haven't yet retired. I must admit that if I had planned to submit my resignation letter tomorrow, I'd probably hold off until things were a bit more clear though not forever.

I realize my plan, like that of most, is designed to weather these storms but retiring right in the face of a recession gives me the willies. If the economy craps out for more than a year or two I might ESR anyway and adjust my expectations down. Now selling/downsizing the house, that's a whole other variable.

[Nords]

Quote:

Originally Posted by Rich_in_Tampa I realize my plan, like that of most, is designed to weather these storms but retiring right in the face of a recession gives me the willies.

"Just one more year, and this time I really mean it!!"

[REWahoo]

Quote:

Originally Posted by Rich_in_Tampa I must admit that if I had planned to submit my resignation letter tomorrow, I'd probably hold off until...

Rich, this reminds me of a question I've been intending to ask you. In some states you have to pass a driving test to keep your license once you are over 85 or so. Do you have to do something similar to keep practicing medicine? Or can you keep postponing retirement until the Grim Reaper takes away your prescription pad?

Not that you would end up doing that, of course...

[danm]

No actually enables it. Sold the house and invested expecting such a downturn, if things continue as I expect then I'll be within shouting distance of FIRE.

[Rich_by_the_Bay]

Quote:

Originally Posted by REWahoo Rich, this reminds me of a question I've been intending to ask you. In some states you have to pass a driving test to keep your license once you are over 85 or so. Do you have to do something similar to keep practicing medicine? Or can you keep postponing retirement until the Grim Reaper takes away your prescription pad? Not that you would end up doing that, of course...

I didn't know I needed a license??!!

Better look into that.

[Jarhead*]

Quote:

Originally Posted by Rich_in_Tampa I'm closing in on ESR but haven't yet retired. I must admit that if I had planned to submit my resignation letter tomorrow, I'd probably hold off until things were a bit more clear though not forever. I realize my plan, like that of most, is designed to weather these storms but retiring right in the face of a recession gives me the willies. If the economy craps out for more than a year or two I might ESR anyway and adjust my expectations down. Now selling/downsizing the house, that's a whole other variable.

Rich: Seems to me that you are lacking the most important element in retiring early. (Motivation)

Re: Retiring in the face of recession, there has always been, and will continue to be dislocations in our economy from time to time.

The biggest threat to most folks during a recession is a loss of job. (Income). My adult children as an example.

You've removed that from the equation, by not having to depend on income from your job by retiring.

From your prior posts, you are a "bucket fan". If you do this, in my opinion, and understand your spending requirements, you wont have any problem sailing through any changes in the economy.

However, I think the fact that you are an MD, you should never retire.

[Zoocat]

[quote=Want2retire;603996]
In my planning, I have assumed a housing crash (check!), a down market (check!) lasting for ten years, and substantial inflation (ehh, not really, so far). I have received my share of gentle, friendly teasing on the board about my almost "doomsday" retirement planning scenario, but this approach helps me to sleep at night.

[quote]

I'm curious to know what methods you have used to prepare for ER in a down market and housing crash besides saving more money. Or is that it?

Since I am semi-ER'd I am planning on reducing my expenses this year and/or raising my income. Since my forays into the job market in recent years have been disappointing, to say the least, I am focusing my efforts on trimming the budget. But if the stock market takes a big dip south I am not adverse to other more drastic measures to save, like taking in a roommate.

[cute fuzzy bunny]

I'm as committed as the pig in a bacon and egg breakfast. But if I were contemplating doing it right now, I think i'd keep contemplating, draw a few more paychecks and wait a while.

[dm]

I just recently retired and I'm not going back. The only thing that bothers me is I am not still in the accumulation phase to benefit from these downturns. I may put that overseas vacation on hold for a little while though.

[Rich_by_the_Bay]

Quote:

Originally Posted by Jarhead* Rich: Seems to me that you are lacking the most important element in retiring early. (Motivation)...you wont have any problem sailing through any changes in the economy.

There's just this one thing: I really like my job (though I'd like less of it). Not fanatically, not enough to work til age 62, and not at the expense of other things I'd love to do. But enough to select my final performance with a bit more flexibility than someone who is hanging on by their fingernails in some stress-filled horror scenario.

So you might say I have competing motivations rather than a lack thereof. It's all good, but it changes the equation.

[W2R]

Quote:

Originally Posted by Oldbabe Quote: Originally Posted by Want2retire In my planning, I have assumed a housing crash (check!), a down market (check!) lasting for ten years, and substantial inflation (ehh, not really, so far). I have received my share of gentle, friendly teasing on the board about my almost "doomsday" retirement planning scenario, but this approach helps me to sleep at night. I'm curious to know what methods you have used to prepare for ER in a down market and housing crash besides saving more money. Or is that it? Since I am semi-ER'd I am planning on reducing my expenses this year and/or raising my income. Since my forays into the job market in recent years have been disappointing, to say the least, I am focusing my efforts on trimming the budget. But if the stock market takes a big dip south I am not adverse to other more drastic measures to save, like taking in a roommate.

Well see? There's an idea other than saving money. Every aspect of my plan reflects my desire for caution. I am constantly thinking of the "what if"s and looking for extra safety nets. I have no desire to spend much in ER, and if I am able to sell my house I will spend even less, since I plan to move to an area with a lower cost of living. I plan to buy a home within walking distance of stores when I move there, so that I won't be totally dependant on my car. If I can't move, my present home is paid for and within walking distance of things. Due to LBYM, I don't really need much to live on. I have worked on refining my LBYM low-cost lifestyle for some time, and this is as much a part of my financial plan as my investments. I am not considering taking on condo/homeowners' fees, since they are repeating and possibly increasing expenses that cannot easily be cancelled. I plan to grow fresh vegetables in my garden, for health as well as for LBYM.

I will have enough in cash and fixed income to live my LBYM lifestyle for the rest of my life, if I can protect it from inflation. My asset allocation will be pretty conservative at about 45:55 stocks:fixed. My investment plan is pretty normal and boring, with the equity part being in index funds and the equity fraction of Wellesley. I will have enough equity investment to hopefully take care of inflation and more over the long term, and if nothing outrageous happens then I will be able to spend quite a bit more than I am now spending. I know this is overkill!! The reason I didn't retire earlier is that I am waiting until 2009 for lifetime medical to kick in.

The only thing I can think of that would "get me", would be if somehow Vanguard went belly up and swallowed my investments. But from what I have read on the board, that just can't happen. (gulp!) Also I worry about Wellesley getting a bad manager or its yield becoming really bad for some reason, or CD/MM rates going way down. I worry about possible huge new taxes at many times the present rates, to fix the medical and housing problems. I worry about not being able to keep up with inflation. I am a worrywart (I really am!) but I am really having to struggle to find things to worry about.

[walkinwood]

I'm sticking to my ER plan for end of April 08. I figure, the 4% SWR takes just these kinds of early down markets into account.

First year withdrawal may be less that what we expected, but we'll make do.

To ease our minds, we've long referred to our ER as a sabbatical, so if needed, we'll get back to work - but then, who among us wouldn't!

[Lakedog]

I had originally planned to retire at the end of 2007 but decided to work through the end of March 2008 in order to max out my 401K (TSP actually as a fed) for another year. It is too late for me to change my mind now even if I wanted (which I don't). I am getting out early at age 51 but no buyout. My pension which is a mix of the old CSRS (75%) and FERS (25%) is not that large (about $32K) and only 3/4 has a full cola, the rest will not be cola'd until I'm 62. The pension covers most of my expenses but I do plan to spend from the nest egg as well on travel and other fun stuff. It is not a great feeling to be going out with the market behaving like it is currently, but I have several years worth of expenses in cash (MM) in taxable accounts to make it through. I may look at taking a few losses in taxable accounts and investing a similar amount in non-taxable.

[Retire Soon]

Lakedog,

Congratulations on your planned March ER. Time will go by very quickly between now and then. With your pension covering most of your living expenses, you should be well on your way to peace and happiness.

[Jarhead*]

Quote:

Originally Posted by Rich_in_Tampa bit more flexibility than someone who is hanging on by their fingernails in some stress-filled horror scenario.

Rich: You described to a Tee, the look on my wife's face when I told her last month that I was going to give up my traveling tournament golf schedule.

In any case, we'll be sure and save you a place at the fly-stream, golf course, etc. etc. when you're ready.