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Is it really so bad to FIRE during a recession?
Old 06-05-2008, 07:14 AM   #1
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Is it really so bad to FIRE during a recession?

As my FIRE timer winds down (OK, it's still a little vague but it is still ticking ), one scenario is that things will be economically similar 6-12 months from now to how they are now.

At that point, the nest egg won't be quite as fat as I might have hoped but I would have been buying-in low for a year or more. I'd have plenty of cash on hand because that was the plan right along. No debts, probably a fun but modest part-time gig a couple days a week. I can weather 10-15 years without selling stocks if need be. Health insurance is assured, albeit on my own very heavy nickel. Plan to downsize but that can wait a few years.

I know the pundits say the scenario-from-hell is to retire smack into a recession or long bear market. I understand the arithmetic, but somehow it doesn't seem so bad (unless there's a serious once-in-a-century depression).

Am I missing something?
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Old 06-05-2008, 07:35 AM   #2
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Am I missing something?


Assuming hell gets refrigeration and you eventually do retire, it would appear you are wearing both a belt & suspenders, two pairs of pants, and coveralls reinforced with duct tape. The only thing missing might be super glue.
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Old 06-05-2008, 07:54 AM   #3
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Old 06-05-2008, 07:58 AM   #4
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Old 06-05-2008, 08:01 AM   #5
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...plenty of cash on hand...No debts, probably a fun but modest part-time gig a couple days a week. I can weather 10-15 years without selling stocks if need be. Health insurance is assured...
That's a lot of bases covered. I think the biggest weapon in your arsenal is the fact that you have enough cash built up to weather 10-15 years of bad times without being forced to eat the "seed corn".

My nature is to not worry about "what if something goes wrong", but to believe that something will go wrong and prepare to deal with it. Sometimes I concoct the perfect storm scenario and scare the hell out of myself. When my imagination gets to the point where the only solution is digging up the gold and canned goods cache I know I've gone too far.

Sometimes you got to have faith.
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Old 06-05-2008, 08:01 AM   #6
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As my FIRE timer winds down (OK, it's still a little vague but it is still ticking ), one scenario is that things will be economically similar 6-12 months from now to how they are now.

At that point, the nest egg won't be quite as fat as I might have hoped but I would have been buying-in low for a year or more. I'd have plenty of cash on hand because that was the plan right along. No debts, probably a fun but modest part-time gig a couple days a week. I can weather 10-15 years without selling stocks if need be. Health insurance is assured, albeit on my own very heavy nickel. Plan to downsize but that can wait a few years.

I know the pundits say the scenario-from-hell is to retire smack into a recession or long bear market. I understand the arithmetic, but somehow it doesn't seem so bad (unless there's a serious once-in-a-century depression).

Am I missing something?
I'd say GO FOR IT!

IMO it is very unlikely that this bear market will last 15 years longer; that is an almost unrealistic fear. Being cautious, I think about these things too but I know that after 15 years of living the good life, I can cut back if need be. When you downsize, that might several more years of the good life before you have to think about selling any stocks, too.

The thing is, it's bad to retire in a bear market if you don't have much slack in your financial plan. You have that slack. I am assuming that your computations involve a reasonably conservative (retirement type) AA.

Another thing in your favor is that your occupation is always in demand. So, you can always work a few more hours later if you need to, instead of working lots more hours now when you don't.
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Old 06-05-2008, 08:06 AM   #7
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My nature is to not worry about "what if something goes wrong", but to believe that something will go wrong and prepare to deal with it. Sometimes I concoct the perfect storm scenario and scare the hell out of myself.
I do that too. I have been assuming for many years that in 2010, the market will plummet. (My ER is planned for the end of 2009). Inflation will soar to at least 30%. Social Security will crater. The housing market will crash.

Well, a lot of that has begun to happen (not SS yet, but just wait, and probably inflation will reach its full potential after the elections). I'm not worried, and in fact my portfolio's earnings have been surprisingly good this spring, given the lousy market, and way more than I will need in ER.
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Old 06-05-2008, 08:07 AM   #8
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Am I missing something?
Yes; regardless of your portfolio, every day you decide not to retire is another day that you loose doing what you want to do (assuming you rather not be at your current j*b).

Life is finite. Sometimes you have to look at your time left as having value, day by day. Every day you "loose a little".

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Old 06-05-2008, 08:15 AM   #9
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Sounds like you are well set to me.

Its worth noting that the real historical portfolio killer wasn't a bad recession. It was the combination of a lousuy economy plus high inflation in the 1966-1982 period. I think that nasty outcome can be reasonably hedged with some commodities added to the portfolio and some flexibility on your part (willingness/ability to work a bit if necessary).
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Old 06-05-2008, 08:22 AM   #10
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Rich,

Let me start by admitting that it has been my habit to be ready, aim, aim, aim... fire. I have not pulled the trigger because of the current economics but... I realy admire those that make the jump and hope to do the same myself soon. While there are dangers in the increased chance for failure (Monte Carlo is still just a guess albeit an educated one) - I feel that adjustments down the road if required could keep things on track. I'm 54 and could go back to w**k if I had to. It is great to see that you have no mortgage - I have a few more years to pay mine off and plan to downsize but hate to face the current housing decline. Wether it is going back to work or to adjust spending I feel that options are still open. With a buckets or similar stategy (that you appear to be using) to help position your assets giving you a lbuffer of stable funds to see you through this rough patch.

From your post you seem to really enjoy being able to help others - if not through your job then I would not be surprised to see you using your talents in the community. Your success, planning, and saving certainly gives you many options!
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Old 06-05-2008, 08:48 AM   #11
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Buy a dozen of ounces of gold and an acre or two of rural farmland. Put the rest of your money in some conservative fund like the Permanent Portfolio Fund and you won't worry about having to sleep late at night.
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Old 06-05-2008, 08:51 AM   #12
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Assuming hell gets refrigeration and you eventually do retire, it would appear you are wearing both a belt & suspenders, two pairs of pants, and coveralls reinforced with duct tape. The only thing missing might be super glue.


Conversation around a table 10 or 11 years from now on a very Public golf course, with a group of 40 somethings trying to pick 10 players to represent their course in a traveling group:

"How about Rich?" "Rich"? "Yeah, I'm sure you've seen him around here before. Hits the ball really well, and has those old beat up clubs and shoes.

"Oh yeah, used to live in Tampa, right?"

"That's him. He was a very successful doctor for years in the Tampa area, before he retired".

"Get outahere".
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Old 06-05-2008, 09:03 AM   #13
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Yes; regardless of your portfolio, every day you decide not to retire is another day that you loose doing what you want to do (assuming you rather not be at your current j*b).

Life is finite. Sometimes you have to look at your time left as having value, day by day. Every day you "lose a little".

I've used this cartoon more than once. It says it all...

- Ron
Good point and good cartoon.

These are the thoughts we sometimes have when a relative or good friend dies, but then we tend to forget.

Life is about the pursuit of happiness, not the pursuit of money. Money is just a tool used to help achieve happiness.
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Old 06-05-2008, 09:20 AM   #14
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Rich,

I believed I had a sound FIRE plan in place and pulled the plug one year ago. Frankly, as the market plunged and inflation increased, I grew a little anxious. But a sound plan is a sound plan and, absent a depression, I should be fine.

It looks to me like you are superbly positioned for FIRE -- just do it!
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Old 06-05-2008, 09:21 AM   #15
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Rich, FIRECalc tells you you're OK, right? So that suggests you can survive something like the great depression. And I bet you padded your expense estimates a bit, "just to be safe". And you're probably not including your part-time income, "In case I change my mind." And in the grimmest of circumstances, you're highly employable. And in the meteor-strikes-the-earth scenario, you even have skills that would keep you going in a barter economy.

I assume your wife is taken care of should something happen to you.

I don't think I'd worry about retiring into a recession if I were you.

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Old 06-05-2008, 09:29 AM   #16
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Maybe better to retire in a recession than a little while before a recession--we all seem to be more realistic and cautious than when I first started reading these boards about four years ago.

Your cash position sounds like it would see you through a recession and into your golden years. Ten to fifteen years is a long time and in your profession you know health and life are not guaranteed to any of us.
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Old 06-05-2008, 09:43 AM   #17
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I fully retired last October, remember the market high's, and it sure beats working. I just made sure I have enough in cash to ride things out for awhile and made sure I had some cushion in my budget.

I would worry more about waiting to long and then not be able to enjoy life. Work takes up way to much time.
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Old 06-05-2008, 11:04 AM   #18
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Assuming hell gets refrigeration and you eventually do retire, it would appear you are wearing both a belt & suspenders, two pairs of pants, and coveralls reinforced with duct tape. The only thing missing might be super glue.
and...

Quote:
Originally Posted by Jarhead* View Post
Conversation around a table 10 or 11 years from now on a very Public golf course, with a group of 40 somethings trying to pick 10 players to represent their course in a traveling group:

"How about Rich?" "Rich"? "Yeah, I'm sure you've seen him around here before. Hits the ball really well, and has those old beat up clubs and shoes.

"Oh yeah, used to live in Tampa, right?"

"That's him. He was a very successful doctor for years in the Tampa area, before he retired".

"Get outahere".
You both had me laughing out loud right in the middle of a critical neurosurgical procedure on a VIP here in Tampa. I gotta stop browsing the forum in the operating room... Why, I had no idea I'd catch just a little flack for that post.

So, everyone seems to be saying not to worry. Let me mull that over for a year or two - probably things will change by then, and I can add another layer of protection. You never know...
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It isn't so much a recession or even a crash
Old 06-05-2008, 11:36 AM   #19
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It isn't so much a recession or even a crash

but an extended period of poor performance. I analyzed SWRs by Year, and 4% is good most of the time. There are a few times when higher SWRs are possible, when the market is really cheap, but it takes a decade of poor performance to make it cheap. The problem is while a higher SWR becomes possible, portfolio values are down at the same time. The market was cheap around 1920, 1950, and 1980 (and 2010?), but it never stays cheap long.
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Old 06-05-2008, 12:07 PM   #20
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Keep going Rich, someone has to pay for my SS and medicare. (heh)
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