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Old 01-09-2012, 10:27 PM   #41
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Hmm... I started work and bought my first home in 1980. Inflation was bad, really bad, but I was not scared as what we have just been through. Why?
Because you were busy working and enjoying the pride of home ownership for the very first time perhaps? In other words, you were too busy being "distracted" with your life to be concerned with the possible ravaging effects of inflation.

For some reason, the recent downturn didn't scare me all that much. I too was distracted. One of my parents died, then I was laid off, then my other parent died. On top of that, there were 2 infusions of cash into my portfolio - a smallish one from my severance pay, and a fairly sizable one from my share of my parents' estate. Both of these cash infusions helped keep the value of my portfolio up so that I didn't have to pay too much attention to my recent investment returns. By the time I started paying attention, things were getting significantly better.

Let's hope they don't get worse again anytime soon......
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Old 01-09-2012, 10:29 PM   #42
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As I mentioned, the primary reason for my (choke!) 9.8% withdrawal rate in 2007 and the almost as bad 7.9% in 2008 was the motor home I bought. I signed the purchase agreement in late July of 2007, a few weeks before the market hit an all time high - and W2R "wheed!" us down into what would become the great abyss.

Had I known then what I know now, I'd probably still be tent camping...

So now you understand the source of my leanings towards frugality! Ah, if you only knew what I know.... gaze into my crystal ball.....
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Old 01-09-2012, 10:36 PM   #43
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Because you were busy working and enjoying the pride of home ownership for the very first time perhaps? In other words, you were too busy being "distracted" with your life to be concerned with the possible ravaging effects of inflation.
That's a possibility. However, I do remember reading about people "investing" into collectibles like rare stamps, gold, arts, etc... Fuel costs were high, and people were talking about burning newspaper for heat. Solar water panels were popular for a while. There were lines at gas stations due to gas shortage.

But, still there were no soup lines, no 25% unemployment, no CCC like during the GD... Nor do we have those now.
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Old 01-09-2012, 11:12 PM   #44
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Hmm... I started work and bought my first home in 1980. Inflation was bad, really bad, but I was not scared as what we have just been through. Why? Was it because having an income allowed me to keep up with inflation? However, I do not remember hearing or reading about retirees facing hardship like everybody did during the GD.
Now that you mention it...

DW and I bought a house in 1981, mortgage rate was (hold onto your hats kiddies!) 17% !!!! That was 'blended' down. But it was adjustable, and so every month that mortgage went down, down, down. And since I had money from the sale of my townhouse for a good down payment, and we were both working, the payments were affordable. And in the mean time, since inflation was high, I was getting in the range of 10% raises, and promotions. I really don't recall other major expenses raising that much though, so it wasn't painful.

I remember figuring that with mortgage rates at historical highs, and the economy slowing, that something had to break. So I guess I had enough confidence to feel good about going with an adjustable rate. Fortunately, it was interest rates that 'broke' - had it been something else, I can't say I had a good plan 'B'. But we had >20% down and could handle the payments at the starting rate, so we weren't too far out on a limb.

Retirees on SS were getting COLA, right? So maybe they were OK. Oh yeah, CDs were paying over 10%.

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Old 01-09-2012, 11:25 PM   #45
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Now that you mention it...

DW and I bought a house in 1981, mortgage rate was (hold onto your hats kiddies!) 17% !!!

Retirees on SS were getting COLA, right? So maybe they were OK. Oh yeah, CDs were paying over 10%.

-ERD50
Yes, I also remember patting myself on the back for "landing" that 14% fixed-rate 30-yr mortgage, when later buyers had to cough up 17%. Even for quite a few years later, pundits talked about how we would never ever have single-digit mortgage rates again!

I refinanced twice before selling the house in 1986. Yes, I did get a special "one-time" raise after starting work for 6 months. I was told that new hires were getting paid more than people starting out 1-2 years earlier, so the company was making amendment to bring everybody's pay up to make it fair.

Then, the recession of 81-82 hit, because of the Fed's effort to combat inflation. And there was lay-off, which I was spared, thank goodness.

Oh man, it's been 30 years already. I feel old.
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Old 01-10-2012, 12:02 AM   #46
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No, but since we are living off post-tax savings til full retirement age of 66, SS will serve to gross-up deferred IRA distributions which will generate ordinary income for tax purposes. IIW, SS will pay my income taxes when I switch from tax-free dollars to taxable dollars. The left-overs will be discretionary income.
I assume you have begun Roth conversions or else considered and rejected that idea. I have looked at Roth conversions as a tax "smoothing" gambit. Obviously, not for everyone. YMMV
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Old 01-10-2012, 08:36 AM   #47
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Am I the only one to find Firecalc graphs not helpful ? To me the graph below does not say much...
The graph is not supposed to be the focus, the text summary above it is the point. And for folks with a technical interest, the graph gives a broad visual confirmation. Clearly shows the range of possibilities is a broad distribution vs a few bunched up outcomes. FIRECALC is a great tool IMO, that's all it's intended to be.
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Old 01-10-2012, 08:45 AM   #48
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And for folks with a technical interest, the graph gives a broad visual confirmation. Clearly shows the range of possibilities is a broad distribution vs a few bunched up outcomes.
I like to look at the one line that shoots up almost to the sky, transforming my modest portfolio into a small fortune and think to myself "Please be this line, PLEASE be this line"
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Old 01-10-2012, 08:48 AM   #49
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I like to look at the one line that shoots up almost to the sky, transforming my modest portfolio into a small fortune and think to myself "Please be this line, PLEASE be this line"
Don't we all!
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Old 01-10-2012, 09:04 AM   #50
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Before I retired, I ran my numbers through FIRECalc all the time. Not much since. A great tool when planning though. Now I just concentrate on the good life and roll the dice.
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Old 01-10-2012, 09:40 AM   #51
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REW,

Good post, thanks for sharing. Don't feel bad, even though I'm not retired yet, last year I had to take a distribution from my IRA to pay my property tax. The cost of sending DD to private college is exceeding my after tax $ and income stream. This situation may keep me working a little longer than planned
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Old 01-10-2012, 09:56 AM   #52
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Well, I like the graph. Somehow it makes those possible failure cases very real.
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Old 01-10-2012, 09:58 AM   #53
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Well, I like the graph. Somehow it makes those possible failure cases very real.
I sure hope you're referring to the FIRECalc graph, not mine...
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Old 01-10-2012, 11:03 AM   #54
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REW,

Good post, thanks for sharing. Don't feel bad, even though I'm not retired yet, last year I had to take a distribution from my IRA to pay my property tax. The cost of sending DD to private college is exceeding my after tax $ and income stream. This situation may keep me working a little longer than planned
Lots of good, less expensive college right home in College Station or Austin, as well as other state schools. Repatriate your assets!

Ha
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Old 01-10-2012, 11:12 AM   #55
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Even though my portfolio shows a decline in value after inflation, FireCalc shows an slight improvement in odds, from low 80ís to low 90ís. Not sure how meaningful, and ot is a bit difficult to dig back to the original data. I know my portfolio value then and now, and I have some interim year end numbers, but have to estimate some lump sum withdrawals for college expenses (7.5%) and real estate (7.5%).


Firecalc





My portfolio YE (rebased to 100)


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Old 01-10-2012, 11:28 AM   #56
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Very nice Michael. Looks like you weathered the two periods of "market unpleasantness" in very good shape.

You feeling bulletproof yet?
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Old 01-10-2012, 11:37 AM   #57
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The trend of my projected withdrawals as a percentage of my beginning of year balance is similar - higher in the early years and lower once my pension kicks in at age 60 and lower still one SS kicks in at 70.
Mine too. I'm still a ways out from retirement, and things will probably change between now and then, but my projected withdrawals look like this right now:

Age
60 6.8%
61 7.3%
62 7.8%
63 8.5%
64 9.3%
65 9.3% <- small pension begins
66 10.4%
67 2.1% <- my SS begins
68 2.2%
69 2.3%
70 2.3%
71 2.4%
72 2.5%
73 2.6%
74 0.0% <- wife's SS begins

From 74 onwards, SS and pension covers 100% of projected expenses. My projected IRA balance is still quite high at that point, so as I get closer I may need to go back and tweak my spending higher so I don't die with a lot of money sitting around (no heirs besides my wife).
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Old 01-10-2012, 11:51 AM   #58
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Very nice Michael. Looks like you weathered the two periods of "market unpleasantness" in very good shape.

You feeling bulletproof yet?
Bulletproof - no. More like beat up. And there were some sleepless nights, and probably more ahead. But the real lesson for me is, despite all the math, graphs, failure rates and safe withdrawal calculations, risk is better appreciated after the market falls 50%, and safety is not a percentage but how one acts and reacts when that happens or things just go bad.

This though has led me to lighten up on the budget stress, increase the withdrawal rate, and try to chill a bit more.
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Old 01-10-2012, 01:59 PM   #59
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Bulletproof - no. More like beat up. And there were some sleepless nights, and probably more ahead. But the real lesson for me is, despite all the math, graphs, failure rates and safe withdrawal calculations, risk is better appreciated after the market falls 50%, and safety is not a percentage but how one acts and reacts when that happens or things just go bad.
I just retired 6 months ago, but I wonder if I may have to relearn that crucial investing mindset (underlined) again. I was fully invested in '87, '00 and '08 and never came close to bailing - but part of the "discipline" may have come from knowing I still had income to build assets again and could always stay working longer. Without the latter option, it may be more difficult to mentally withstand the next big downturn, won't know until it happens. Where I was at least 80:20 most of my working life, I'm close to 50:40:10 now, hopefully that will help me stay the course.

Thanks for posting your progress too, great thread. I'd post my progress, but there's not enough history yet...
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Old 01-10-2012, 02:28 PM   #60
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I just retired 6 months ago, but I wonder if I may have to relearn that crucial investing mindset (underlined) again. I was fully invested in '87, '00 and '08 and never came close to bailing - but part of the "discipline" may have come from knowing I still had income to build assets again and could always stay working longer. Without the latter option, it may be more difficult to mentally withstand the next big downturn, won't know until it happens...
Based on my single (so far) experience, it truly requires an act of faith to stay the course when the market pulls the drain plug on your only pool of assets. And some might say you have to believe in miracles to stick to your rebalancing strategy when what you are selling has been going up and what you are buying is in free fall.

It ain't easy...
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