How are you getting ready for "next time"?

[steelyman]

We've just had an amazing recovery from a serious market crash over the past couple of years. It may be that it's a once-in-a-generation type of event.

There's no shortage of people on Internet boards or financial networks that proudly say they know exactly what you should do to make money, but the truth is that for these past two years just about anyone could make (a lot of) money by throwing it at the market(s). So I generally discount these people's advice.

I am wondering, though, what most people are doing at present in response to where things were then, where they are now, and where they may go. Are you going to stand pat and say you were very smart since 2008, or are you changing your tune and approach?

 

[hakuna matata]

Well since I am NOT retired yet, I am just maxing out my 401k (as my wife does too) and I max out my ROTH IRA (as my wife does). What more can I do? We both have chosen 2014 as our retirement date as that is when my wife has her pension. So our goal is to just hold the course. We survived the last two years with that course and we will stay the course I think. I don't think you can determine what the future will hold, so it is about risk and what you are comfortable with. I think in our case our backup is that we could just continue to work (not that we want to mind you!) but it is an option.

 

[Ed_The_Gypsy]

It may be that it's a once-in-a-generation type of event.

Wanna bet?

"It's different this time."

 

[Spanky]

We still have 25% in cash and are hesitant about investing in the equity markets because of continued Middle East instability impacting oil prices, disruptions in supply-chain caused by Tsunami, and slow economic recovery. We should, however, ignore recent events and financial news and continue the course.

 

[W2R]

We've just had an amazing recovery from a serious market crash over the past couple of years. It may be that it's a once-in-a-generation type of event.

There's no shortage of people on Internet boards or financial networks that proudly say they know exactly what you should do to make money, but the truth is that for these past two years just about anyone could make (a lot of) money by throwing it at the market(s). So I generally discount these people's advice.

I am wondering, though, what most people are doing at present in response to where things were then, where they are now, and where they may go. Are you going to stand pat and say you were very smart since 2008, or are you changing your tune and approach?

If we have another crash, I don't know what else to do but just hang on (and not sell low) - - just do what I did last time. THIS time two things are different. (1) I am retired, and (2) I am eligible to claim SS. So, something that I might do in the event of another bad crash, is to claim SS and live on SS, pension, and cash or cash equivalents until the crash is over. I do have less cash on hand than I did then, but still it is sufficient. As far as investing, I plan to just rebalance and like last time, whistle a happy tune:

Whenever I feel afraid
I hold my head erect
And whistle a happy tune
So no one will suspect
I'm afraid.

While shivering in my shoes
I strike a careless pose
And whistle a happy tune
And no one ever knows
I'm afraid.

The result of this deception
Is very strange to tell
For when I fool the people
I fear I fool myself as well!

I whistle a happy tune
And ev'ry single time
The happiness in the tune
Convinces me that I'm not afraid.

Make believe you're brave
And the trick will take you far.
You may be as brave
As you make believe you are

You may be as brave
As you make believe you are

 

[NW-Bound]

We still have 25% in cash and are hesitant about investing in the equity markets because of continued Middle East instability impacting oil prices, disruptions in supply-chain caused by Tsunami, and slow economic recovery. We should, however, ignore recent events and financial news and continue the course.

Is the rest all invested, meaning you are 75% in equities?

 

[GregLee]

Are you going to stand pat and say you were very smart since 2008, ...

Yes!

 

[Spanky]

Is the rest all invested, meaning you are 75% in equities?

We are about 40% in equity, 25% cash, the rest in bonds.

 

[NW-Bound]

I'll do the same I did the last two market crashes; play it by ear to tweak my "tactical asset allocation".

 

[traineeinvestor]

Based on experience of the last 30 years, once in a generation investment opportunities come along about twice a decade (YMMV depending on where you live and what you are prepared to invest in).

I'm happy to continue holding a mix of mostly equities and real estate as I go through what I hope will be my last year w@rking. If the markets drop, it's unlikely that I would change my plans since I don't expect it to "be different this time".

 

[Alan]

I am wondering, though, what most people are doing at present in response to where things were then, where they are now, and where they may go. Are you going to stand pat and say you were very smart since 2008, or are you changing your tune and approach?

I'm sticking with my current AA, same as during the 2008 crash and the crash before that. In 2008 I was 2 years from RE so was only 40% in equities. I kept on pumping money into my accounts but let the equities go to 35% in line with my AA plan.

 

[RetiredGypsy]

I think I'm wired a bit odd. Whenever I see stocks going down I'm more happy that they're on sale than upset that it may be eating away at my principle. Or maybe if you're accumulating, that's normal? But I started my investment life at the tail end of 2008, so I'm not too worried about the ups and downs right now in relation to needing to live off those investments.

My AA has changed not because of the market, but to be more diversified. Until recently I was 100% in equity, but I've moved some into the Wellesley fund. I have a lot more in cash than I'd like, but that's because of a car purchase in the near future.

 

[Arnie]

Are you going to stand pat and say you were very smart since 2008, or are you changing your tune and approach?

I'm very smart. I'm also a better than average driver.

I hope to be deccumulating by the time the next one hits so it may be more stressful, but hopefully I'll stay smart.

 

[REWahoo]

I'm very smart. I'm also a better than average driver.

I hope to be deccumulating by the time the next one hits so it may be more stressful, but hopefully I'll stay smart.

Bet your driving goes to hell...

 

[Arnie]

Bet your driving goes to hell...

Now that's funny!

 

[donheff]

I am still pretty heavy in equities although I do have a pension so the volatility is not as big an issue for me as for many others. I plan to gradually move toward a slightly more conservative AA over time as I perceive relatively high valuations. I did move about 5% from equities to bonds just before the latest dip/correction. When we get a bit higher than that say Dow 13000 or so I will probably move another 3 percent. Regardless, if we crash again I will sit tight.

 

[pimpmyretirement]

I'll continue dollar cost averaging into low cost target year retirement funds, putting a little into a bond fund, and holding my emergency fund steady at a year of living expenses.

The recession did prompt me to refinance my mortgage, meet with a financial planner, get my accounts in order and develop an actual financial strategy. Watching my assets get cut in half also motivated me to start saving much more.

I went from maxing my 401k, to maxing my 401k, Roth IRA, putting another 12k a year in a bond fund, and another 6k a year in savings. The refinance also involved a switch to a 15 year mortgage, which is kind of like saving more.

There's a good chance once the real estate market recovers, we'll move to a smaller house in a less expensive area. I am trying to live more frugally:

- eating out much less often
- buying groceries only once a month, using a spreadsheet for prices
- trying to learn to cook less expensive food
- keeping the house at temperatures closer to the outside
- switching to a less expensive phone service
- replacing a bi-monthly cab ride with a longer bus ride
- dropped bottled water service
- switched garbage service from container rental to stickers

There's not much more I am willing to do.

I guess I changed a lot in response to the recession. As a young investor, I'd never encountered something like that before. Having my home lose so much value was very upsetting. I am getting even!

 

[Midpack]

I'll do the same thing I did in 1987, 2000 and 2008 when I was at 80-100% equities - nothing really, and sleep like a baby. Sure it hurt to watch my holdings decline on paper, especially 2008, but I never sold (I bought with what cash I had) and was richly rewarded each time. I wouldn't be able to RE now had I panicked and sold on any of those selloffs.

I am getting a little more defensive as I age, and I'll have to be a little more defensive in retirement as sequence of returns become significant. But I won't ever abandon equities altogether, I can't imagine going below 40% anytime soon (I'm at 62% now).

When/if it really is "different this time" we are all going to suffer and I'm better positioned than most people (assets and having minimized fixed expenses as much as possible), that's all I think I can hope for. There is no way to suspend uncertainty and risk in life, and never will be...

 

[Gumby]

I plan to aggressively do nothing. At least, nothing different. We will continue to max our 401k and IRA contributions, while maintaining a roughly 60/40 allocation. If I see some equities that look like fire sale values, and I happen to have cash on hand, I will buy, as I did in 2009.

 

[freebird5825]

32/63/5 - that's my story and I'm sticking to it.

Status: FIREd 2007 with pension and annuity income streams.

When I can draw my own little FERS pension in 3.5 years, my immediate cash flow will be much better. I am still letting my TE muni bond fund dividends serve as my source for continued DCA. For now, I will let my equity position ride at 32%.

cluck cluck cluck

 

[nun]

I plan to aggressively do nothing. At least, nothing different. We will continue to max our 401k and IRA contributions, while maintaining a roughly 60/40 allocation. If I see some equities that look like fire sale values, and I happen to have cash on hand, I will buy, as I did in 2009.

+1.

For me there's no magic answer to "making money" in any economic environment because I have a "couch potato" portfolio. I save aggressively and invest passively in low cost funds. I have a 50/50 allocation because I'm 50 years old, I do age in bonds. I max out ROTH, a DC plan, 457, 403b and save some after tax and rebalance through the ups and downs. I'm using after tax equity gains to pay down my mortgage as 4.5% is a good return right now and I want to minimized my need for cash flow in any future down turn and going into ER.

 

[ItDontMeanAThing]

Two and a half years into retirement, 3 more years to draw down taxable accounts until I can tap the retirement accounts without penalty.

Asset Allocation hasn't changed since retired in '08. That's mostly because I'm well diversified and don't have a clue what's going to happen next. I have sold some winners (except the gold mining fund) and bought some losers, but it involved less than 10% of my retirement assets.

Am LBYM on the draw down. Well beneath my means because I'm living comfortably and I don't know what's going to happen next in the global economic s*itstorm.

 

[Moemg]

Hopefully next time the exuberance of the market will make me take notice and I'll take a chunk off the table and hold it in cash . If I have three or four years in expenses I'll let the market play out. I also have a pension and that makes the bumps somewhat easier to take .

 

[steelyman]

Interesting replies and thoughts. Guess I forgot to answer my own question.

Next time around, I expect I will be FIREd, so anticipating that, I'm close to gathering the cash I will need to get through three years (not living expenses, but the amount needed to supplement pension income to get me to my target annual amount).

I was still accumulating in '08 (still am), but that won't be the case next time (unless next time comes in the next few months!). So further adjustments may be in order... but I hope not.

 

[nun]

Hopefully next time the exuberance of the market will make me take notice and I'll take a chunk off the table and hold it in cash .

Rebalancing will automatically make you take a chunk off the table. I've decided to be quite conservative and use that chunk to pay down my mortgage rather than buying bonds or holding cash.