Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 06-09-2014, 03:45 PM   #21
Thinks s/he gets paid by the post
heeyy_joe's Avatar
 
Join Date: Nov 2012
Location: Madeira Beach Fl
Posts: 1,403
Retire with at least a two year cash cushion and sleep well at night. Market top smarket-top.
__________________

__________________
_______________________________________________
"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do" --Bob Dylan.
heeyy_joe 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 06-09-2014, 03:54 PM   #22
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: 10,031
I retired in Jan. 2008 and proceeded to lose 30% of my nest egg . It was an awful feeling. I seriously considered returning to work . I hung in there and after a few dumb moves my nest egg survived & bounced back to much more than the original value. The good thing is I now feel stronger for future downturns . I do have a survivor pension so that made cutting back manageable . I also have learned to keep several years in cash .
__________________

__________________
Moemg is offline   Reply With Quote
Old 06-09-2014, 04:05 PM   #23
Thinks s/he gets paid by the post
DFW_M5's Avatar
 
Join Date: Sep 2003
Posts: 4,982
Quote:
Originally Posted by nash031 View Post
The effects of a market downturn in the first year or few years of the withdrawal phase can be marked, to the point that in some scenarios, your portfolio never recovers. It makes sense to me that if you RE at market bottom and still have a high success chance, you're good to go, whereas if you retire at market high, and undergo a 10-25-40% correction, you could be screwed. The key in that case is to have enough to absorb the hit.
Tops or bottoms are never known until after the fact, so this becomes plain old guessing. Again, have a good allocation and safety net to ride out a potential bear market.
__________________
Doing things today that others won't, to do things tomorrow that others can't. Of course I'm referring to workouts, not robbing banks.
DFW_M5 is offline   Reply With Quote
Old 06-09-2014, 04:37 PM   #24
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,835
If a 25% drop in stocks would destroy your ER plans then you either spend too much, haven't saved enough or have the wrong AA.

I retired in March 2014 at age 52.5 and I made sure I had enough in cash and my 457 Stable Value account to fully fund my expenses until 59.5. I figure that 7 years will be enough time to recover from any nasty down turns. Over the last 3 months my net worth is up $40k; this ER stuff is easy
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 06-09-2014, 05:02 PM   #25
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 8,804
I'm hoping we're not at market top - I gave notice today and retirement starts in 2 weeks.
What gives me optimism is that I've run every calculator and can maintain my current (not so lavish) lifestyle with 100% success from the calculators.

Now if the market collapses more than it has in the past - or we have another long downturn - I'll probably cut back my spending, and consider a part time job. My grandmother did just that in the 70's. My grandfather had retired with a pension - and the 70's inflation ate into their income... she became a "shop girl" part time at a high end gift shop in La Jolla. I am not averse to taking a part time job if the situation becomes dire. I don't think it will come to that.

But if the market collapses, I'm still retiring. I'll just remain flexible to all my options - reducing spending, adding income streams, etc.
__________________
rodi is offline   Reply With Quote
Old 06-09-2014, 05:04 PM   #26
Thinks s/he gets paid by the post
robnplunder's Avatar
 
Join Date: Nov 2013
Location: Bay Area
Posts: 2,124
Quote:
Originally Posted by rodi View Post
I'm hoping we're not at market top - I gave notice today and retirement starts in 2 weeks.
What gives me optimism is that I've run every calculator and can maintain my current (not so lavish) lifestyle with 100% success from the calculators.

Now if the market collapses more than it has in the past - or we have another long downturn - I'll probably cut back my spending, and consider a part time job. My grandmother did just that in the 70's. My grandfather had retired with a pension - and the 70's inflation ate into their income... she became a "shop girl" part time at a high end gift shop in La Jolla. I am not averse to taking a part time job if the situation becomes dire. I don't think it will come to that.

But if the market collapses, I'm still retiring. I'll just remain flexible to all my options - reducing spending, adding income streams, etc.
Good luck and best wishes to you! I will be following your footsteps soon (this or next year will likely be my last year at work, market top or not).
__________________
Pura Vida
robnplunder is online now   Reply With Quote
Old 06-09-2014, 06:07 PM   #27
Thinks s/he gets paid by the post
 
Join Date: May 2014
Location: Utrecht
Posts: 2,211
Quote:
Originally Posted by robnplunder View Post
This was the impetus for starting this post. Another way to ask the same question is, am I fooling myself that I can RE now when much of my confidence (and increased NW) is outcome of the recent 5 year Bull run?
I think we've been posting in the same threads the last few days

I'm in a similar situation (WR below 4%) and have the same challenge, interesting to read perspectives from others who took the plunge already!

As an extra, I currently have 40% in equities which I want to move to 85% but for the same reason I'm postponing that too. Happy with the overall reduced return in the mean time as long as I have an income, but in FIRE I want to have it at 85%.

I'll probably work a year or two more, change career again. Most jobs I found can be tolerated for at least a year while there is novelty in them
__________________
Totoro is offline   Reply With Quote
Old 06-09-2014, 06:20 PM   #28
Thinks s/he gets paid by the post
nash031's Avatar
 
Join Date: Jun 2013
Location: Coronado
Posts: 1,486
I'm targeting Jan 1, 2020. If the bull run continues until then, and I'm just at my number, I won't feel comfortable. If I am, say 10 or 20% over it, I would. So perhaps the suggestion to take 20% right off the top of your stash and run FIRECalc is a good one...?

In my personal case, DW wants to keep working anyway, so that's my backup plan.
__________________
nash031 is offline   Reply With Quote
Old 06-09-2014, 06:29 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,382
How hard is it to RE at the market top (2014)?

Not hard at all. Other than pensioners, most people retire during high markets, where net worth, quotes and confidence are also high. Like several people have pointed out, we can't say that it is a market top until the market declines meaningfully. We can say without fear of being wrong, that the market is quite high.

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 06-09-2014, 06:32 PM   #30
Recycles dryer sheets
 
Join Date: May 2011
Posts: 270
left the office in 2010 when I thought I had enough $$$. Market and company stock have gone up significantly since then and I have a big cushion especially since we have spent so much on travel, moving and upgrading our new home in the past six months. A lot of room to spend less, though my legal advisor was greatly surprised when he saw our NW and thinks we are not spending enough.
__________________
sanfanciscotreat is offline   Reply With Quote
Old 06-09-2014, 06:42 PM   #31
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 1,904
Quote:
Originally Posted by robnplunder View Post
Currently doing OMY to pad my RE fund. I should be able to RE now but the current market got me concerned. It'd give me a lot of stress if RE now and market goes into a bear market run. For those of you who RE'd at (then) the top of the market, how was it? Were you concerned about market turning south? What strategy did you use to safeguard potential market downturn?
Sounds to me like the perfect time to ER and rebalance to an AA you feel comfortable with including a significant cash reserve to tide you over wtshtf as it surely will sometime along the way. I ER'd December 2002, the end of a three year bear market as it turned out but I didn't know that at the time. During the prior three years I re positioned my AA to my sleep well point (50/50) so the 2000-2002 bear market didn't hurt as much and I felt comfortable that I could make it. And so it has been so far...
__________________
ejman is offline   Reply With Quote
Old 06-09-2014, 07:49 PM   #32
Recycles dryer sheets
 
Join Date: Dec 2013
Posts: 366
Upon bailing into retirement earlier this year my AA ended up such that the fixed income could carry me for quite a while.
AKA - How I became a dirty market timer.

It helped ease the transition, the 40% AA for equities will move higher over the next couple years. Any significant pullbacks/corrections will make good re-balancing points. Meanwhile I miss out on some gains, not great but works for me.
__________________
springnr is offline   Reply With Quote
Old 06-09-2014, 07:59 PM   #33
Full time employment: Posting here.
CaliforniaMan's Avatar
 
Join Date: Dec 2013
Location: San Diego
Posts: 846
Quote:
Originally Posted by nash031 View Post
The effects of a market downturn in the first year or few years of the withdrawal phase can be marked, to the point that in some scenarios, your portfolio never recovers. It makes sense to me that if you RE at market bottom and still have a high success chance, you're good to go, whereas if you retire at market high, and undergo a 10-25-40% correction, you could be screwed. The key in that case is to have enough to absorb the hit.
I agree that the key is to have enough (relatively small WR) to absorb the hit. But how would one ever know if they were retiring into a market bottom or market top? Whether the market had risen 25% or fallen 25% before retirement, it could still fall 25% the next year and then continue falling.

For me to be on the "safe" side, I assume a 10% decline in stocks and a 5% decline in bonds even before calculating the withdrawal. I also test for a 30% decline and see if my WR is still livable. But in the end who knows? And this is my first year of retirement so for me it's all theoretical at this point anyway.
__________________
Merrily, merrily, merrily, merrily,
Life is but a dream.
CaliforniaMan is offline   Reply With Quote
Old 06-09-2014, 08:02 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,264
Quote:
Originally Posted by robnplunder View Post
I've never learned to swim .

Pb4uski: I get 95% success from FireCalc but with Bernecki box checked. However, I have some major expenses (entertainment, downsizing) I can shed if faced with bear market.
This is why I like to shoot for 100% success in FIRECalc , w/o any adjustments. That means your retirement would have survived at any point in history, and those failures will occur at market peaks. So when you retire should have no major concern with timing (assuming your future is not worse than the worst of the past).

You could look at reducing some of the discretionary if the market tanks, but I think people generally underestimate how much an after-the-fact adjustment can make. You can investigate this by entering an offsetting income in year five (or whatever), and see what that does to your success rate.

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 06-09-2014, 08:12 PM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by Dd852 View Post
My "insurance" is that my cash+fixed income allocation is 10 years of expenses - I figure if I'm not forced to sell equities I can ride out most traumatic scenarios.
Good point - that is my minimum allocation to cash+equities myself: another statistic I compute on my retirement portfolio along with the current AA.

Quote:
Originally Posted by heeyy_joe View Post
Retire with at least a two year cash cushion and sleep well at night. Market top smarket-top.
We also did this - in addition to the retirement portfolio.

Belt and suspenders
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 06-09-2014, 08:44 PM   #36
Full time employment: Posting here.
 
Join Date: Feb 2008
Posts: 920
Quote:
Originally Posted by robnplunder View Post
I get 95% success from FireCalc but with Bernecki box checked.
Ooh I used to love the Bernecki box, man did that make everything so much easier. I finally stopped checking it a couple years ago to bite the bullet on a fixed expense model, figure if Ty was right and I'm just sitting there drooling instead of spending then it is a bonus and I'll buy the best gold-plated drool cup I can.
__________________
tuixiu is offline   Reply With Quote
Old 06-09-2014, 09:08 PM   #37
Thinks s/he gets paid by the post
nash031's Avatar
 
Join Date: Jun 2013
Location: Coronado
Posts: 1,486
Quote:
Originally Posted by CaliforniaMan View Post
I agree that the key is to have enough (relatively small WR) to absorb the hit. But how would one ever know if they were retiring into a market bottom or market top? Whether the market had risen 25% or fallen 25% before retirement, it could still fall 25% the next year and then continue falling.

For me to be on the "safe" side, I assume a 10% decline in stocks and a 5% decline in bonds even before calculating the withdrawal. I also test for a 30% decline and see if my WR is still livable. But in the end who knows? And this is my first year of retirement so for me it's all theoretical at this point anyway.
Both you and rob pointed this out: as I said in another post this thread, we'll only know if it's a high (or a low) after the fact. So I agree that having some % (whatever you're comfortable with) over your "number" is the way to go. If you think you need $2M to get by, get to $2.5M and call it. (And enjoy that OMY syndrome!!)
__________________
nash031 is offline   Reply With Quote
Old 06-09-2014, 10:17 PM   #38
Full time employment: Posting here.
 
Join Date: Feb 2008
Posts: 920
Quote:
Originally Posted by nash031 View Post
If you think you need $2M to get by, get to $2.5M and call it. (And enjoy that OMY syndrome!!)
Throwing another half million into the pot might take enough years to take more time than some are willing to take. If I was 50 years old and firecalc said I had finally reached 100% success with my 2 million portfolio, I sure wouldn't be pleased thinking I might have to work until I was 54-55 to get it to 2.5 million.

I'd much rather be doing like someone mentioned, figure out how much I could reasonably live comfortably on by reducing my spending if early bumps in stock market road.
__________________
tuixiu is offline   Reply With Quote
Old 06-09-2014, 10:26 PM   #39
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Posts: 3,395
I believe in the Bernicke concept but I think it is safer not to use that method to calculate success chances
__________________
Katsmeow is online now   Reply With Quote
Old 06-09-2014, 11:54 PM   #40
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
Quote:
Originally Posted by robnplunder View Post
Currently doing OMY to pad my RE fund. I should be able to RE now but the current market got me concerned. It'd give me a lot of stress if RE now and market goes into a bear market run. For those of you who RE'd at (then) the top of the market, how was it? Were you concerned about market turning south? What strategy did you use to safeguard potential market downturn?
I ER'd this year and I'm very concerned with a possible bear market or entering a long period of stagnant returns. To combat this I've planned for under 3% WR (ERD's criteria of 100% in FIRECALC yields roughly 3.5% for the default portfolio) and also have 10+ years in fixed income (includes cash). Basically this is layering enough extra safety factors such that if we enter a bear market I feel that we would be ok.

A few other posters have mentioned cutting spending. One thought I've had is that since I will have control of income (due to roth conversion), I can control the amount of ACA subsidy. Given the amount we've budgeted for health care, this could be a substantial decrease in expenses (at the cost of spending down taxable faster than tax deferred accounts).

Currently we are renting/traveling. But a deep bear market will likely result in depressed real estate. So if this happens we could lock in housing expenses at a much lower cost than we are budgeting (for a future home purchase). Of course this requires adequate fixed income/cash reserves to be able to buy the home and last through the bear.
__________________

__________________
photoguy is offline   Reply With Quote
Reply


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
Updated: "Who Rules America - An Investment Manager's 2014 Update on the Top 1%" Mo Money FIRE and Money 158 06-11-2014 09:21 PM
Will 2014 be a year to be in emerging market funds? Rothman Stock Picking and Market Strategy 25 03-08-2014 12:00 PM
5 hard truths for a tough market REWahoo FIRE and Money 18 10-08-2011 10:29 AM
Top 7 Ways to Tell a Bear Market is Coming........ FinanceDude FIRE and Money 25 10-02-2006 02:17 PM

 

 
All times are GMT -6. The time now is 11:27 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.