Not as chilled as the rest of you - need advice

[harley]

They get really PO'ed if you dip them in the whiskey to sterilize them between bites.

 

[Ready]

The OP did not state what percentage of total savings is in equities, so it's hard to understand the impact of this market drop.

If I was within a few years of retiring, I would likely have no more than 55% in equities, and would be whittling down to 50% around the day I finally quit and stop generating income. I like the idea of starting retiring off with a low exposure to equities and building it up a bit over time, maybe to 60% as the years go on. It helps to reduce the sequence of returns risk at the beginning of retirement.

But without knowing more specifics, it's hard to give advice here, other than "stay the course..."

 

[Fermion]

There has to be some fallacy with that method. If you eliminate the sequence of returns risk by not being in the market, you have to add on some longevity risk or something to balance things out.

So you reduce the risk that the market crashes right when you retire, but you may run out of money in 35 years instead of 40 years. Something like that.

What if all of the gains you will ever see in the market happen to fall within the first ten years of your retirement and you miss them?

 

[frayne]

Hey, you stole my sig line!

Guess we will have to share !!!!!!

 

[papadad111]

There has to be some fallacy with that method. If you eliminate the sequence of returns risk by not being in the market, you have to add on some longevity risk or something to balance things out.

So you reduce the risk that the market crashes right when you retire, but you may run out of money in 35 years instead of 40 years. Something like that.

What if all of the gains you will ever see in the market happen to fall within the first ten years of your retirement and you miss them?

Exactly ! I'm very heavily weighted in equities. FIRED in April and at just 46 I traded off sequence of returns risk for longevity risk.

I'm down 12% from all time highs earlier this year - equates to 7 or 8 years of living expenses in about a week -poof - paper losses. But, over the past 3 days I put a substantial portion of my cash to work and bought more ...

Dividends are hard to ignore in a near zero rate environment as long as the underlying assets eventually get back to par which they will eventually.

It's scary.

In past I held during 1987. Held during 2000 and happened to be I "in cash" during 2007 and 2008 . Problem was , it took me until 2013 to start going back into the market. Wish I'd have gone in sooner. Timing things is just too hard to do. Now that were fired I am nervous but also believe this is not the end of the world and is a long long overdue " real" correction and we may see 20 percent before all said and done. But I also hope we recover within 2-3 years !

 

[marko]

FWIW, at 10PM tonight the Dow futures are up 250.

Doesn't mean a lot I know, but....

 

[growing_older]

from our perspective, if we had've cashed out before a/the drop, that money would've been in our hands...that was OUR money.......and now it's not.

The problem with this little voice running through your head is that you didn't really know when to sell before the crash. Now that a drop has happened, the voice is saying that was the time, but until that drop you might have just as easily cashed out before a big up move, or before a big sideways followed by a slow climb up the wall of worry. The worry and regret doesn't play fair with what was known before the fact vs after.

 

[Nemo2]

The problem with this little voice running through your head is that you didn't really know when to sell before the crash. Now that a drop has happened, the voice is saying that was the time, but until that drop you might have just as easily cashed out before a big up move, or before a big sideways followed by a slow climb up the wall of worry. The worry and regret doesn't play fair with what was known before the fact vs after.

Oh, we realize it's selective thinking/viewing.......but it's a nagging, finger wagging, selectivity nonetheless.

 

[Major Tom]

I don't know if this helps any, but when the market is going down, I try to avoid checking my balance. I usually wait until we've had a few up days before looking. That way, even if the balance is lower than the last time I checked, at least it's not as low as it was. Conversely, when the market is going up, I check my balances much more frequently. I wouldn't want to go for too long without checking my account, in case there are any issues with it, but what's the point in watching the carnage in near real-time and just making yourself feel bad?

While, supposedly, the world's financial markets were in turmoil/freefall/experiencing a bloodbath today, or whatever other piece of choice hyperbole our beloved news sources decided to use, I cycled to the Post Office to return some slipper socks I had bought on eBay (the vendor sent me 2 left feet). I also visited a local business owned by friends and shot the breeze with them for a while. Then I read a message from a neighbor on Nextdoor.com whose kitty had died and had free cat food to give away. I cycled over to her house to pick it up and in doing so, found that she lived in a very unusual looking building that I have long noticed. She told me it was built for a weird cult in the late 60's, about whom there is a documentary. Interesting, as I had often wondered about that place. Apparently, some rather strange and sad things happened in it. Then, with free kitty food in hand, I fed our local neighborhood street cat and spent a wonderful half-hour with him. I also took delivery of some radio parts and spent some time sorting them into my parts bins. I bid on a fantastic vintage radio part on eBay - and won the auction. Went out, had a burrito, came home, drank a glass of wine, and napped on the bed with my youngest kitty curled up in between my knees for an hour or two.

That's how I'm planning to "get through" the market downturns - by doing the same kinds of things I do every day, and not buying into the drama. If it helps, look at a chart of what the market has done over, say, the last 10 years. That should help you feel a lot better.

 

[Big_Hitter]

My advice, turn off the boob tube and go play golf, take a bike ride, or go fishing. The ups and downs of the markets are just the natural voice of the process that you can't control.

great advice - passive investors need to chill out and let it go - otherwise any attempt at market timing will just make it worse

 

[Meadbh]

I don't know if this helps any, but when the market is going down, I try to avoid checking my balance. I usually wait until we've had a few up days before looking. That way, even if the balance is lower than the last time I checked, at least it's not as low as it was. Conversely, when the market is going up, I check my balances much more frequently. I wouldn't want to go for too long without checking my account, in case there are any issues with it, but what's the point in watching the carnage in near real-time and just making yourself feel bad?

That's what I do too.

 

[Dog]

Thank goodness I was hiking in the mountains all day yesterday oblivious to the day's events. Didn't hear about it until the morning news today.
I'll be busy running errands all day and then back hiking in the mountains tomorrow.
I just retired one year ago, and this downturn in the market scares me, so it's best for me to stay busy and thankfully hiking is cheap.



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[TimSF]

I am surprised by my emotional reaction to this sell-off - 2 years into my early retirement - compared with sell-offs during my work years. I am much calmer now. Before - especially those last few years of working - a sell-off would mean "Gee, I now have to work 2 years or 6 months or 18 months at this terrible job to make up for the losses in my portfolio and hit 'my number'..." Now, the sell-off simply means a little belt-tightening perhaps and reallocating assets at the appropriate time. No sweat.

 

[heeyy_joe]

I was nervous. I went shopping. In Home Depot I saw A Chinese man spend money.

I feel better now.

 

[Lawrence of Suburbia]

Apparently the OP's asset allocation is too much in stocks ...?

I was actually enjoying this last week, seeing it as stocks beginning to go on sale. Given my age and vulnerabilities, I've got my allocation (approximately) 1/3 stocks, 2/3 short-term bonds and some cash ... I have enough set aside that with S.S. I could survive for a decade without touching the stock portion (were I to retire now.) I am also working to stay in a situation where all I have to withdraw annually is 2.4%.

 

[steady saver]

I can't even begin to thank each and every one of you for your thoughts, advice, humor and liquor recommendations... =D

My Internet service went down (after the market closed...) and I couldn't respond yesterday. I plan to reread each one of your comments.

I wasn't in jeopardy of selling. The one thing I do have going for me is that I may "feel" reactive but I'm not a reactive seller, thank God. But I think it was seeing those numbers in our Fidelity account go lower and lower that made me panic in the form of "good grief, what if we just retired?" "What if it keeps sinking?" blah, blah, blah. In some ways it is a good exercise for me to help me look at my risk tolerance now, vis a vis a retirement horizon vs my risk tolerance with a long term working perspective in mind. I've always been on the aggressive growth side of stocks. My individual portfolio is 100% in stocks while our 401K is 88% stocks and 12% in a US Debt Index Fund. Another smaller, older 401K account is 100% invested in stocks.
I hate dealing with the 401K options probably b/c I have a better feel for individual stocks than funds. My 401K is down 5% for the year (yikes!!) but even after the bloodbath my individual stocks are up 19% overall. Granted, I'm not sure how to calculate my year to date percentages for my individual stocks so it's not a fair comparison. That is my total % increase since I bought the stocks (which I add to now and then). I just am looking at my Fidelity account and what it tells me.

Someone pointed out that losing 100K was really just like losing $4,000 a year. That one thing made me feel strangely optimistic. We aren't in general big consumers but we do have considerable expenses in maintaining both our modest house in the city and our "continuously being fixed up" farm an hour and a half away. It's a constant mind game b/c selling the farm would be a no-brainer in terms of decreasing expenses but we are wanting to have the option of retiring there for a good 10 years and keep our house in the city rented for cash flow during that time. We are in a highly sought after area of town so it would be easy enough to rent it out and give us the option of moving back to it if we got sick of mending fences, fighting fire ants, and gathering eggs.
I'm getting off topic but what I really wanted to say was thank you all so much.

I will post again and ask my AA questions when I get back from visiting my parents next week, if not before.

 

[clifp]

Someone pointed out that losing 100K was really just like losing $4,000 a year. That one thing made me feel strangely optimistic. We aren't in general big consumers but we do have considerable expenses in maintaining both our modest house in the city and our "continuously being fixed up" farm an hour and a half away. It's a constant mind game b/c selling the farm would be a no-brainer in terms of decreasing expenses but we are wanting to have the option of retiring there for a good 10 years and keep our house in the city rented for cash flow during that time. We are in a highly sought after area of town so it would be easy enough to rent it out and give us the option of moving back to it if we got sick of mending fences, fighting fire ants, and gathering eggs.
I'm getting off topic but what I really wanted to say was thank you all so much.

I will post again and ask my AA questions when I get back from visiting my parents next week, if not before.

Good for you not really being tempted to sell. The next education phase for an investor is to respond to market declines by wanting to buy. Market declines always make me feel like bargain shopper on after Xmas sell.

(Note those of you were around during 2008/09 can skip this post).

The key to feeling this way is to understand that 90%+ of market declines are pure noise and have nothing to do with any type of economic activities.

1. You don't lose anything until you sell.

Now this isn't some trite saying it is reality.
I'm go to strongly disagree with the statement that a $100,000 paper loss means $4,000 less income/year. In means no such thing except for situations like the great depression and the great recession where there was a real economic link between the market decline and the stock market.

Early last week the to total value of the US stock market was just over 20.8 trillion. This means that if you owned ~$208,000 of a total stock market fund, you owned one hundredth million share of all the US public companies.

The biggest of those companies is Apple. Apple sells about 200 million iPhones a year. This means as owner of one hundred millionth of Apple that you are entitled to the profits of 2 iPhone sales each year. (Maybe this makes you feel better about paying Apple's crazy high prices)

Now this last week or so your 208K of total market stock has declined by about 10% to ~$187,000 but your percentage ownership in Apple and almost all the thousands of other companies remains constant. Well maybe the troubles in China mean less iPhone sales in China?

Not according to Apple CEO Tim Cook who said Apple sales in China are doing great. Or take McDonald who sells 75 hamburgers a second or ~2.4 billion a year, your share of MCD means you get the profits* of 24 burger/year. McDonald China exposure is relatively small, KFC is the fast food of choice in China. Now it is true that economic slow in China will have an effect on the short term profits of US companies, but the impact is fractions of a percent, nothing like the 10+% decline we've seen.

Now as somebody in the accumulation phase, this decline is a great buying opportunity. Now perhaps it will get even better in the next few months, for your sake I hope so.

Now don't get me wrong the market reaction to some events is perfectly rational like the housing crisis. It is entirely possible the I'm completely out to lunch and China is on the verge of an economic collapse. iPhone sales will slow, as will auto sales (China is the biggest auto market),and KFC will sell less chicken and less rice bowls. If that is the case than your one hundredth million ownership in US companies is worth less and your retirement income truly is lower. But I'm skeptical that world economy has really declined by 10% over the last couple of weeks.

2. Stocks aren't cheap but after the correction they no longer are really expensive either.


*Technically the value of a company is equal to the present value of its future dividends payments not profits but since they are related I'm using profits.

 

[virginia]

My two cents - you've already (based on your initial post), pushed off the idea of retirement from JAN 2017 to a later date - when your DH is already miserable. Why? You can do that forever (and have been for years by your own admission) - keep pushing retirement off. I'd rather deal with the job issue than face the idea of continuing to push off retirement and be miserable for 3 more years. Life's too short.

 

[Senator]

I can say I really did not like the follow-through today. I thought that there was a major capitulation yesterday.

Obviously, some additional sellers showed up with the attitude "If I can only get back to where I started, I am out". And then the selling resumed. Maybe even some short term profit taking was realized.

In the end, it's only money. Anyone entering retirement should be aware that these things have happened in the past, and will happen again. Be prepared. Have enough cushion. Work OMY if you have to to get a solid FIRE plan.

 

[Dash man]

Buy Johnnie Walker Black...or your favorite wine. Ignore the pundits and relax.


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[ziggy29]

I was around 70/30 when the 2008-09 ursa major hit. I didn't get out early (or late) in the bear market, but I held out and Mr. Market turned me into about a 60/40 AA without any rebalancing. Well, I decided 70/30 was a little more risk than I wanted to handle in a really bad market, so I waited for the market to recover until I was close to 70/30 again... then I rebalanced into a range of 55-60% equities. I've found it much easier to weather this one as a result.

 

[RunningBum]

I'm go to strongly disagree with the statement that a $100,000 paper loss means $4,000 less income/year. In means no such thing except for situations like the great depression and the great recession where there was a real economic link between the market decline and the stock market.

Well, a lot of us use 4% or 3.5% or whatever % of assets for withdrawals since it's a lot easier than trying to figure out what the net profit is on 2 iphones and whatever other part of each company we own through a mutual fund.

I don't think you can ignore the $100K paper loss but count a $100K paper gain on a stock surge that may have overshot it's value. Things tend to balance out over time. The market will recover, sooner or later, because the overall trend of the market is upward, along with the US and world economy. But it's not clear whether this was an unwarranted drop that will recover quickly, or a correction to a market that was too high, and will only recover through normal market growth over a longer time.

 

[nash031]

Guess I'm one of the lucky ones - I've been checking my personal capital daily looking for an influx of money for another reason (hasn't hit yet, dammit!) and have been totally non-plussed by the 9% paper losses in total value thus far, though I did *ahem* "tactically rebalance" my TSP into more C and S yesterday...

 

[Tailgate]

I was nervous. I went shopping. In Home Depot I saw A Chinese man spend money.

I feel better now.

quote of the day! thank you!

 

[braumeister]

It may be silly, but I long ago devised a way to ignore market swings like this.

When I reached a portfolio balance I was comfortable with, I decided it would be my benchmark.

Ever since then, whenever I do any sort of projection (FIRECalc, etc.) I use that number as my portfolio.

Over time, my actual portfolio has varied quite a bit, and reached about 123% of my benchmark at its high point. I just ignored that, considering it my cushion against volatility.

The recent dive has brought it back down to only about 111% of my benchmark, so I feel very comfortable ignoring it.

Sure, I could increase my spending commensurate with my actual portfolio, but leaving my benchmark in place lets me sleep like a baby every night, regardless of what the market is doing.