Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 03-05-2013, 11:37 AM   #21
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,412
Quote:
Originally Posted by JoeWras View Post
Well, no pension. And I have to pay for H.I. Those provide ways to not sleep.

Then this morning on Squawk Box, the panel was making all sorts of noise about how we need to reduce SS benefits. More lack of sleep ahead.
No pension here and I do have challenges getting HI, pay an exorbitant price. I sleep well because my downside here is quite well defined, so there is nothing more or new to worry about on those fronts. I also stopped working 12/99, just as the recession and stock market decline of '01 and '02 were getting underway. My portfolio took a major hit. Recovering from that is what led me to see I didn't need to go back to work and could retire.

The one big difference is I stopped listening to cnbc in that same time period and did focus more on a couple of financially oriented forums. That really helped me.
__________________

__________________
MichaelB 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 03-05-2013, 11:39 AM   #22
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by MichaelB View Post
No pension here and I do have challenges getting HI, pay an exorbitant price. I sleep well because my downside here is quite well defined, so there is nothing more or new to worry about on those fronts. I also stopped working 12/99, just as the recession and stock market decline of '01 and '02 were getting underway. My portfolio took a major hit. Recovering from that is what led me to see I didn't need to go back to work and could retire.

The one big difference is I stopped listening to cnbc in that same time period and did focus more on a couple of financially oriented forums. That really helped me.
In many ways, CNBC is simply the financial equivalent of 24-hour cable news. Merely reporting the financial news objectively, factually and without spin won't get ratings. You have to make people cheer, scream at the TV, "spin" the economic news and whip them into an emotional frenzy (one way or another) to keep them watching for more than a few minutes at a time.
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-05-2013, 12:10 PM   #23
Full time employment: Posting here.
Tyro's Avatar
 
Join Date: Aug 2012
Location: Upstate
Posts: 699
Quote:
Originally Posted by Andre1969 View Post
I guess this scenario also shows why it can be good to have several years of living expenses in something conservative.
This seems to contradict what I just read in Withdrawal Strategy Thoughts..Comment?:
Quote:
Originally Posted by pb4uski View Post
Bonds and other investments that throw off income in tax advantaged accounts and investments that throw off less income in taxable accounts.
The "safe" several years living expenses would be in a taxable account, right? Or the taxable acct. has to be large enough to to be divided between several years living expenses PLUS all the equities (which above, will have lost value during the bad years).

I'm befused.

Tyro
__________________
Yeah well, that's just, ya know, like, your opinion, man. ~ The Dude
Tyro is offline   Reply With Quote
Old 03-05-2013, 12:14 PM   #24
gone traveling
 
Join Date: Mar 2007
Posts: 559
Quote:
Originally Posted by haha View Post
If/when adjustments to SS net come about, age is going to be least important or perhaps a not at all important.

It is a political problem; who is it easy to whip up hatred for, the old or the affluent?

First comes taxation changes- very easy to sell. I have never paid less than 85% on my SS payments, but there are many threads on this board made up of well off people about keeping a low tax rate on SS payments. Next comes some sort of "adjusted AGI fiddling" and tax surcharges. Also an easy sell, because once again the losers will be the hated rich. Sometime changes will be made to SS and Medicare tax rates, though there is resistance to this because this might make the good folk in white hats- the low earners- pay more. The cap on what is taxed may be raised, and non-wage income also subjected to SS tax. Another good one, since those nasty richies who have the audacity to have "unearned income" will be the victims. And don't forget those nasty peole who made the mistake of going to work in private industry, and getting those obscenely huge 401K balances, they deserve punishment.

Along the way some fancy footwork may be required to kep carried interest and other perks of the truly rich exempt from SS taxation. But trust our hard working politicos. Since a nice slice of this wage gusher gets diverted directly to them, it will be preserved.

Ha

because the ss calculations and maxes and limits are not inflation adjusted the government does not have to do a thing to tax more ss. inflation and time will do it. the AMT kept getting more and more people and so will this
__________________
gerrym51 is offline   Reply With Quote
Old 03-05-2013, 12:20 PM   #25
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by Tyro View Post
This seems to contradict what I just read in Withdrawal Strategy Thoughts..Comment?:

The "safe" several years living expenses would be in a taxable account, right? Or the taxable acct. has to be large enough to to be divided between several years living expenses PLUS all the equities (which above, will have lost value during the bad years).
There's no "rule" that I'm aware of that suggests "safe" investments have to be in taxable accounts.

If anything I think the investments that generate income taxed at ordinary rates (including bonds and cash) are better in tax-deferred accounts, and investments generating income through dividends and long term capital gains -- or no taxable income at all such as tax-free bonds -- are best held in taxable accounts. Not only can you receive income taxed at lower rates with equities (dividends and long term capital gains), but you can also harvest capital losses to offset up to $3,000 in ordinary income each year.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-05-2013, 12:21 PM   #26
Thinks s/he gets paid by the post
JoeWras's Avatar
 
Join Date: Sep 2012
Posts: 2,517
Quote:
Originally Posted by MichaelB View Post
No pension here and I do have challenges getting HI, pay an exorbitant price. I sleep well because my downside here is quite well defined, so there is nothing more or new to worry about on those fronts. I also stopped working 12/99, just as the recession and stock market decline of '01 and '02 were getting underway. My portfolio took a major hit. Recovering from that is what led me to see I didn't need to go back to work and could retire.

The one big difference is I stopped listening to cnbc in that same time period and did focus more on a couple of financially oriented forums. That really helped me.
Yes, reading the collective experience of you and others from 2007 timeframe gives us all some confidence.

As for CNBC, I need to find something else to put on the tube while I prepare for w*rk. Perhaps back to music.

At least on this show it is some truth in advertising. SQUAWK, squawk, squawk! BLAH, blah, blah!
__________________
JoeWras is offline   Reply With Quote
Old 03-05-2013, 12:27 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Quote:
Originally Posted by Stanley View Post
In other words, stay flexible, observe and adjust...
Or, as unclemick might say, "agile, mobile, and hostile"...

Good for linebackers and FIREees...

Quote:
Originally Posted by JoeWras View Post
As for CNBC, I need to find something else to put on the tube while I prepare for w*rk. Perhaps back to music.
I watch Squawk Box, mostly to ogle Becky have some semi-interesting noise on while drinking coffee. Only a few guests are worth listening to; most are talking their/a book...
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Old 03-05-2013, 12:36 PM   #28
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 2,056
Quote:
Originally Posted by JoeWras View Post
Here's some irony. I was too heavily weighted in cash. (Duh-oh! Missed the market run up!) The market has actually brought my portfolio into more of the balance I want with equities. I still have a lot of cash, I don't want to generate any more.
In that case, you might be in a better position to retire than you might think. It'll still be scary going out when the market is at such a peak. However, if a lot of your portfolio was in cash, then you most likely got to your threshold the "old fashioned way", for lack of a better word. Slow and steady.

In my case, I had very little in cash in 2007 As a result, when I bottomed out in the "Great Recession", I lost a little over half of everything. From year end 2007 to year end 2008 I was only down about 42%. But if I measure from my peak of October 2007 to roughly Thanksgiving 2008, I was down a bit over half. The bottom of the "Great Recession" was officially something like March 9, 2009, but I bottomed out a few months earlier.

Since then, I've bounced back and then some, and have cashed out a bit during the upswings and bought back in during the downturns. I feel like I've got too much in cash right now, but I just ran the numbers, and it's only about 12-13%.

I might cash out a bit today. If the market takes a downturn, I'll buy some back. If the market keeps shooting up, then I'll throw it towards the mortgage.
__________________
Andre1969 is offline   Reply With Quote
Old 03-05-2013, 12:44 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,407
Quote:
Originally Posted by JoeWras View Post
.....I guess I just have to keep the faith and stay the course.
Spot on!

The other thing to consider, particularly since you have so much in cash, is even if we had a 30% drop in equities a la the late 2000s financial recession followed by a recovery, would you even need to access your equities before the recovery occurs? By my reckoning from peak to trough and back was only about 3 years, and a pretty unprecedented three years at that - usually peak to trough and back are shorter periods.

My point is that if you have 3-4 years of living expenses in stable investments and don't need to tap equities, you could be patient and wait it out. While it might be a nerve-wracking wait, history suggests that the dip would be short lived. Even at today's near record high levels, valuations are relatively reasonable and balance sheets are in very good shape.

And if you have some flexibility in your living expenses that makes it better still.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 03-05-2013, 01:00 PM   #30
Full time employment: Posting here.
Tyro's Avatar
 
Join Date: Aug 2012
Location: Upstate
Posts: 699
Quote:
Originally Posted by ziggy29 View Post
There's no "rule" that I'm aware of that suggests "safe" investments have to be in taxable accounts.
I'm not disagreeing with anyone; I'm confused by an apparent contradiction of theories, and seeking clarification. For those of us not yet 59.5 (you may be over 59.5 - I don't know, and that might explain the difference), using TD accounts for the "safe" investments (to live off of while weathering a market downturn) would incur penalties, AFAIK.
__________________
Yeah well, that's just, ya know, like, your opinion, man. ~ The Dude
Tyro is offline   Reply With Quote
Old 03-05-2013, 01:04 PM   #31
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by Tyro View Post
I'm not disagreeing with anyone; I'm confused by an apparent contradiction of theories, and seeking clarification. For those of us not yet 59.5 (you may be over 59.5 - I don't know, and that might explain the difference), using TD accounts for the "safe" investments (to live off of while weathering a market downturn) would incur penalties, AFAIK.
Well, if you're not 59 1/2 this "penalty" (unless you use Rule 72t) is applicable to any kind of distribution from a conventional IRA; it matters not whether it's in stocks, bonds or cash.

Keep in mind also that Roth contributions are always available for withdrawal tax-free and penalty-free as well.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-05-2013, 01:07 PM   #32
Thinks s/he gets paid by the post
JoeWras's Avatar
 
Join Date: Sep 2012
Posts: 2,517
Quote:
Originally Posted by pb4uski View Post
Spot on!

The other thing to consider, particularly since you have so much in cash, is even if we had a 30% drop in equities a la the late 2000s financial recession followed by a recovery, would you even need to access your equities before the recovery occurs? By my reckoning from peak to trough and back was only about 3 years, and a pretty unprecedented three years at that - usually peak to trough and back are shorter periods.

My point is that if you have 3-4 years of living expenses in stable investments and don't need to tap equities, you could be patient and wait it out. While it might be a nerve-wracking wait, history suggests that the dip would be short lived. Even at today's near record high levels, valuations are relatively reasonable and balance sheets are in very good shape.

And if you have some flexibility in your living expenses that makes it better still.
You know what, pb4? You have a very, very good point there. I didn't think about it that way.

I've regretted having too much cash (it snuck up on me). And over the last 2 years have been slowly weighting some to equities. But we're still pretty heavy, so if I did pull the plug, I could let equities ride for quite a few years.

I hadn't thought about it from that angle. That's a really good point. We have about 4 to 5 years worth. We could let the equities ride. I still hope to get equities to 60% while still having that cushion. Assuming no crashes greater than 10%, we can even accomplish that.

You all are making me feel better and less nervous.
__________________
JoeWras is offline   Reply With Quote
Old 03-05-2013, 01:18 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,407
Even if your WR is 4%, 4 years of expenses would only be 16% in stable value investments (cash and short term investments).

I target 1 year of expenses (~3.5% in my case) in online savings and another year in a short term bond fund and sleep well at night.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 03-05-2013, 01:22 PM   #34
Full time employment: Posting here.
Tyro's Avatar
 
Join Date: Aug 2012
Location: Upstate
Posts: 699
Quote:
Originally Posted by ziggy29 View Post
Well, if you're not 59 1/2 this "penalty" (unless you use Rule 72t) is applicable to any kind of distribution from a conventional IRA; it matters not whether it's in stocks, bonds or cash.
Yes, which is why it seems to make sense to keep the safe money to weather market downturns in a taxable account. YMMV.
__________________
Yeah well, that's just, ya know, like, your opinion, man. ~ The Dude
Tyro is offline   Reply With Quote
Old 03-05-2013, 01:23 PM   #35
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by pb4uski View Post
Even if your WR is 4%, 4 years of expenses would only be 16% in stable value investments (cash and short term investments).

I target 1 year of expenses (~3.5% in my case) in online savings and another year in a short term bond fund and sleep well at night.
True. And if one had a 60/40 allocation and it "hit the fan" again, depending on how they chose to draw it down and rebalance, you have (in theory) 10 years of investments outside of equities to draw from before you'd have to touch stocks at low prices. Of course, at that point you aren't really using a true AA model with defined rebalancing, but more of a "buckets" approach and a gut feeling about when it was time to reload the "safe stuff" bucket in the future.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-05-2013, 01:25 PM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,432
And don't forget, med's help during market down turns.

__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Old 03-05-2013, 01:40 PM   #37
Dryer sheet aficionado
 
Join Date: Jul 2009
Posts: 45
Well..

An optimist would say that the economy is great, as good as it can get...

And the pessimist thinks he's right
__________________
Bogie is offline   Reply With Quote
Old 03-05-2013, 01:46 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,017
Quote:
Originally Posted by JoeWras View Post
You know what, pb4? You have a very, very good point there. I didn't think about it that way.

I've regretted having too much cash (it snuck up on me). And over the last 2 years have been slowly weighting some to equities. But we're still pretty heavy, so if I did pull the plug, I could let equities ride for quite a few years.

I hadn't thought about it from that angle. That's a really good point. We have about 4 to 5 years worth. We could let the equities ride. I still hope to get equities to 60% while still having that cushion. Assuming no crashes greater than 10%, we can even accomplish that.

You all are making me feel better and less nervous.
I too have ~5 years' worth of living expenses in cash, albeit in a corporate account. I plan to let my other investments to their own devices during most of that time. They will go up and down, but hopefully will at least be worth what they are now at the end of that time. After the first 5 years of retirement have passed, the risks of running out of money due to an early market crash go down.
__________________
Meadbh is offline   Reply With Quote
Old 03-05-2013, 01:55 PM   #39
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
It depends on what your SWR, your age, and how much head-room are you leaving yourself to make course corrections on the downside.

We ER'd in mid 2008 and had to course correct almost immediately, but we had enough head room to do that (and we worked for a year too). Also, we had decided on a percentage of actual portfolio withdrawal method instead of the traditional inflation adjusted SWR methodology.
__________________
walkinwood is offline   Reply With Quote
Old 03-05-2013, 02:23 PM   #40
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Quote:
Originally Posted by Tyro View Post
Yes, which is why it seems to make sense to keep the safe money to weather market downturns in a taxable account. YMMV.
You can put safe assets or cash anywhere you want. If you have all stocks in the taxable account, sell some shares to get the cash you need. Buy the same shares with the cash in your IRA. With mutual funds you can do this simultaneously at the same price with no commissions. The net effect is that you just transferred cash from IRA to taxable without making an IRA withdrawal, and your AA is the same as it was, minus the cash. Do be carefull to avoid the wash rule if you sell at a loss in your taxable account.
__________________

__________________
Animorph 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


 

 
All times are GMT -6. The time now is 04:37 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.