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I keep telling myself "it's better to retire when the market is down"...
Old 01-09-2016, 06:54 AM   #1
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I keep telling myself "it's better to retire when the market is down"...

And I tell myself this a LOT this week, as I'm pulling the plug in a few months.

It's so counter-intuitive, but I believe the numbers support this. If you're still able to retire after a downturn, then you're well positioned to get a few good years early in retirement.

It's still tough to watch the bleeding. We're at a conservative AA (45/45/10). I haven't done anything, as I'm a firm believer in staying the course.
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Old 01-09-2016, 07:26 AM   #2
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And I tell myself this a LOT this week, as I'm pulling the plug in a few months.
Just remember that the market isn't really down yet, it is still high in historic terms. (Chart of Shiller PE10) The CAPE is now at 24.35, the historic median and mean are about 16-17, which would be an S&P 500 level of about 1300.
The PE10 has been above its historic averages since the late 80's except for a brief period in 2008-2009. Anybody who retired in that period has done so in an up market. Folks wondering if they have enough saved up, or if their allocations are right, should run the numbers and a "gut check" of how things would look if their equities declined by about 30-40%, to the historical average, and stayed there.

Just call me "Mr Sunshine." Or H***s .
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Old 01-09-2016, 04:27 PM   #3
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Starting retirement when the market is down or up makes no matter. What matters is when your needs require you to make withdrawals from your stash. If you retire and do not have to remove cash from your accounts to live on, what the heck?
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Old 01-09-2016, 04:38 PM   #4
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I retired in late 2009. The market had started to recover, but who knew that? I sure didn't and thought it was just taking a breath before another, deeper plunge. I was ready for it and contemplated some extreme ways to save money if necessary. For example who needs to use electricity for AC in the summer in New Orleans, anyway? Pioneers didn't have it.

Anyway, retirement has been wonderful. The market did nothing but thrive from 2009 until this past year, and it gave me a really good start, financially speaking. I think you will be fine.
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Old 01-09-2016, 04:51 PM   #5
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Just remember that the market isn't really down yet, it is still high in historic terms. (Chart of Shiller PE10) The CAPE is now at 24.35, the historic median and mean are about 16-17, which would be an S&P 500 level of about 1300.
The PE10 has been above its historic averages since the late 80's except for a brief period in 2008-2009. Anybody who retired in that period has done so in an up market. Folks wondering if they have enough saved up, or if their allocations are right, should run the numbers and a "gut check" of how things would look if their equities declined by about 30-40%, to the historical average, and stayed there.

Just call me "Mr Sunshine." Or H***s .
I haven't read much about the Shiller PE10 besides knowing what it is...so please keep that in mind.

However, it seems like the index has been above the long term average for about the last quarter of its time in existence - except for the '08-'09 timeframe mentioned above. In that time, the world economy (globalization) and accounting standards, among other things, have changed drastically.

Doesn't seem like the index takes those factors into account.
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Old 01-09-2016, 07:20 PM   #6
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However, it seems like the index has been above the long term average for about the last quarter of its time in existence - except for the '08-'09 timeframe mentioned above. In that time, the world economy (globalization) and accounting standards, among other things, have changed drastically.
You might be right, maybe "it's different this time." Some observations:
-- PE10 is still the most popular yardstick for assessing stock valuations.
-- The PE10 method even works well in different economies--developed and developing. Some of these are changing a lot more than the US economy has.
-- If the PE10 is now permanently higher than it was previously, then it means US investors will henceforth have lower dividend yields from their stock investments. That in itself would be bad news for those who are retiring, given the historically important share of total returns that have been due to dividends.

I believe PE10 probably remains relevant. We've had declining bond yields for a long time. Once interest rates return to normal and bonds are providing higher returns, investors will have more attractive options outside the stock market and we'll see if stocks revert to levels closer to their historic levels.
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Old 01-09-2016, 07:41 PM   #7
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Whether CAPE is a good measurement or not, we are due for a bear market one of those years. Those occur at least once a decade. The average drawdown is about 35%. Stock market kinda ends up in the same ballpark.


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Old 01-09-2016, 07:50 PM   #8
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...I was ready for it and contemplated some extreme ways to save money if necessary. For example who needs to use electricity for AC in the summer in New Orleans, anyway? Pioneers didn't have it.
Pioneers did not live long either. They certainly did not expect to live to 100 like many posters here. So, it's not funny when one does not have AC.
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Old 01-09-2016, 07:52 PM   #9
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Starting retirement when the market is down or up makes no matter. What matters is when your needs require you to make withdrawals from your stash. If you retire and do not have to remove cash from your accounts to live on, what the heck?
+1

This is totally the way I look at it. How can I get upset if the market is down when it gave me 6 years of almost 18% annual return in the years just before I retired. Come on!
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Old 01-10-2016, 06:24 AM   #10
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Ok, shame on me LOL. I do check the Shiller CAPE routinely. I also look at the 20 week and 52 week moving average on the SP500.

I do think that the timing MAY matter for some, especially non-sophisticated investors. Hopefully, I'm not in that category.

Firecalc says I'm fine, even at higher expenses than we'll need.
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Old 01-10-2016, 02:43 PM   #11
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I can say from experience that retiring at the end of a bull market (99) is psychologically hard. You are using to have both a paycheck and a rising portfolio valuation. Suddenly, no more paycheck and the value of your portfolio is also shrinking.

That said a 1 week sell of isn't exactly a bear market.
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Old 01-11-2016, 06:46 AM   #12
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Yes, this is why my wife and I decided to keep part-time consulting gigs going. I have witnessed several people who retired at times when the market was peaking (2001, 2007) and then watched their portfolios drop definitively while needing the money. In all these cases, they ended up going back to work part-time until their portfolios recovered, but they admitted that they did not fully realize all that they wanted out of retirement. Additionally, I am not confident that the ACA will survive so we are budgeting based on no subsidy. So, all that said, I felt we should be preemptive in this regard especially with the labor market being tight right now and providing opportunity to make some nice money in part-time work. We are sitting on a lot of cash, so if the market continues to slide we will dollar cost average in along the way. If we go into a recession keeping our skills sharp will help us, nonetheless, we might find ourselves without the part-time work but at least we made hay while the sun shines.

Lastly, I think it's imperative that one has a diversified portfolio beyond Equity's such as Real Estate, Bonds, Cash, etc. I would not trust my retirement solely on the Stock Market.
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Old 01-11-2016, 09:10 AM   #13
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...I was ready for it and contemplated some extreme ways to save money if necessary. For example who needs to use electricity for AC in the summer in New Orleans, anyway? Pioneers didn't have it.
Pioneers did not live long either. They certainly did not expect to live to 100 like many posters here. So, it's not funny when one does not have AC.
I didn't use AC during the summer here for at least one year back in the accumulation phase, due to LBYM efforts; my AC had cratered and needed to be completely replaced, which is very expensive. So does that mean I am going to die younger than otherwise? I think not. You get tough. At least here in New Orleans, you adapt to the warmer temperatures, so it doesn't seem nearly as hot as it does when one is used to AC and it breaks. It may be different out west.

When I was a child, nobody had AC. My mother, for example, never had AC until around 1958, when she was almost 50 years old and yet she lived until she was almost 98. So, it DOES seem funny to me that some in New Orleans now believe they cannot possibly survive without it.
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Old 01-11-2016, 09:41 AM   #14
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I wonder how many people actually end up retiring at a market bottom, if the only determining factor is their net worth reaching a certain point? To throw out a hypothetical case, let's suppose I was going to retire when I hit $1M. Well, if I had $1M at the market bottom of 2008/2009, I would've had $2M, if not more, at the peak in 2007 (I lost a bit over half between 10/07 and 11/08). But, backtracking further, if I would've had $2M in 2007, that would have mean I most likely hit $1M back in 2003-2004, or maybe even before the 2000-2002 turmoil, and would have gone out back then.

Anyway, on FireCalc's main page, it shows three different scenarios...1973, 1974, and 1975. The 1973 scenario ran out of money after 19 years. The 1974 scenario was still solvent after 30 years, but down enough I doubt it would have gone much further. And the 1975 scenario looks like it bottoms out around the '82-83 recession timeframe, but hasn't lost much, and from then on skyrockets, although the '00-02 timeframe does take its toll. IIRC, the stock market was pretty flat for most of '73 and then cratered towards the end, stayed down for '74 and bottomed out late in that year, and then started to rise for '75.
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Old 01-11-2016, 09:51 AM   #15
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So, it DOES seem funny to me that some in New Orleans now believe they cannot possibly survive without it.
If I lived in NO, Houston, etc, I'd give up a LOT of other things before giving up air conditioning. Running the AC enough to bring down the temps >and< humidity in a few rooms costs less than $2 per day. I can't think of much else I could buy with that money that would improve my life as much.

I suppose most people could survive without AC in the hot, humid south, but unless things were truly desperate (e.g. I have no money for food) I can't see that I'd ever do it.
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Old 01-11-2016, 10:24 AM   #16
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I believe PE10 probably remains relevant. We've had declining bond yields for a long time. Once interest rates return to normal and bonds are providing higher returns, investors will have more attractive options outside the stock market and we'll see if stocks revert to levels closer to their historic levels.

Agreed. "This time it's different" thinking is a classic bubble symptom, and it concerns me that the PE10 metric is often derided as needing revision. Perhaps so, but I'd be wary - and prepared.
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Old 01-11-2016, 10:25 AM   #17
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When I was a child, nobody had AC. My mother, for example, never had AC until around 1958, when she was almost 50 years old and yet she lived until she was almost 98. So, it DOES seem funny to me that some in New Orleans now believe they cannot possibly survive without it.
Technically you could survive, although I wouldn't call it thriving. Not between May and September anyway.

I lived in Houston 40 years and there is absolutely no way I'd live there without A/C, unless I was conscripted or something.

If you look at the population growth of Houston, you will find that it coincidentally exploded around the same time as the general availability of central A/C.


There is a reason they have a tunnel system downtown - to keep from sweating your clothes off walking to lunch.


My ancestors weren't meant to live in that type of environment I guess.
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Old 01-11-2016, 10:54 AM   #18
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OK, so I guess the consensus is that I'm a tough cookie. I never thought of it that way. Actually that is kind of a compliment, I think, so thanks.
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Old 01-11-2016, 11:10 AM   #19
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The market is down, the market is up. But I got to thinking about how you begin your post "It's better to retire when..." :

You still have your health;
You have other things you want to do besides your current job.
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Old 01-11-2016, 11:10 AM   #20
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OK, so I guess the consensus is that I'm a tough cookie. I never thought of it that way. Actually that is kind of a compliment, I think, so thanks.
no doubt - so was the lady that lived across the street from us in an unairconditioned 1920s house when we lived in the heights in the 90s


she sat outside on the front porch a lot
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