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Old 07-11-2008, 06:08 PM   #61
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We were just 5% away from "our number" at the peak last fall.
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Do you change your "number" each year to take into account you are 1 year closer to no taxes, 1 year closer to Medicare, inflation factor etc? just curious as we don't have a "number" as such. I update the budget on what I expect we need to live on and then run claculators such as Firecalc.
We pay our bills out of a single checking account. Every few months, I update a spreadsheet with all the deposits we have made into the checking account each month. That is a close approximation of our spending which requires adding maybe two numbers a month instead of dozens of numbers, and I've been too cheap to repurchase Quicken yet again. I then adjust for any taxes we have paid, and for a few other expenses that should significantly change in retirement (things we expense, medical savings accounts, etc). The spreadsheet has a column that sums the last 12 months, giving our current yearly basic spending. Alas, that column almost always increases, both from inflation, and from new luxuries once sampled.

I take that number, add an estimate of our taxes in retirement, an allowance for health insurance, an allowance for car replacement, and a long-term house maintenance allowance. The grand total is my quick approximation of "our number" with minimal changes to our lifestyle.

When 4% of our portfolio is greater than that estimate of "our number," I expect to revisit all the popular retirement calculators, and to double check all my allowance calculations, to reassure myself it really is time to FIRE.

The reality is that we "could" retire now, but we would need to be more frugal than we have been over the past few years. Since I would like to be less frugal instead of more frugal, I'll at least hold out for a 4% withdrawal rate.

In truth, given our combined life expectancy, a 4% withdrawal rate is pretty aggressive by FireCalc standards. However, I still have retirement scenario notes that pre-date the Trinity study, which assumed a 10% withdrawal rate should be sustainable. Ah the bliss of youth. Right now, I'm just not willing to use a number below 4%. I would rather adjust spending if 4% proves too aggressive. I did try to convince myself that 2% inflation adjusted, plus 3% of portfolio value would do it, as discussed on this board awhile back. However, I ultimately decided that exceeded my risk tolerance. So for now I'm stuck on 4%.

All the years I've been planning for retirement, my safe withdrawal rate assumptions have kept going down, my "number" has kept going up, and my portfolio has been trying to catch up, with occasional down drafts. For awhile before I married, I had enough to retire as a single person, I just couldn't also fund my girlfriend/now-wife's retirement as well. She didn't think she should keep working for a few decades after I retired. Unfortunately, she didn't even have an IRA until I gave her one for Xmas.

At this point, the portfolio swings really dominate our net worth situation. We are still adding some money each year, but it is hardly material. The increases in "our number" also keep us working. If we had skipped a vacation last year, we might be retired now. However, while I was willing to LBYM on a temporary basis, now we are wrestling with "the rest of our life." So we will keep working to avoid drawing down the portfolio during the current bear market, and hope the next bull will propel us into retirement.
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Old 07-11-2008, 06:28 PM   #62
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.
Down is a heckofvalot more likely than up and for some time as well
If you truly believe this, and are willing to act on that commitment, you can make yourself a heck of a lot of money. Just go 100% short instead of 100% long, and don't just do it in US $ funds, as the $ is also very suspect in that scenario.

I think what makes this scarier than other bear markets is the financial system aspect, that is it is a big difference between the dot.com era where companies with no real products went under and the underlying fear that we have if our financial system underpinnings (think Fannie, Freddie) become insolvent.

I guess the question is how this relates to other times in the past, for example the savings and loan crisis.
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Old 07-11-2008, 08:59 PM   #63
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.

I am comforted by having at least 8 years in cash to cover living expenses, and that could probably last 12 to 16 years with part-time work. That is a big cushion I think and it gives me comfort. Holding this much cash was part of my plan, a plan to deal with a bad case scenario.
Good planning. Bad case, 1966-1982 = 16 yrs.
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Old 07-11-2008, 09:00 PM   #64
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I'm intensely interested in the perceptions of ya'll. What do you guys think is going on? I just can not grasp how anyone can see good times just down the road. What forces that will counter the fundamental problems? Why are things really not that awful?
I agree with you completely, Barbarus. Things are coming apart quickly. IndyMac bank closed today (and yes, folks are making light of it in another thread - although I think its not the least bit funny), the DOW down 22%, Freddie and Fannie on the ropes, Lehman about to implode, the dollar sinking again..

Yes, I think the DOW goes back to 14000 by years end!

Seems to me people here can't see the forest through the trees. (Oh, its just IndyMac bank - the FDIC will cover it). The govt will bail out Freddie and Fannie - with over 5T in held or "covered" loans.

Our financial system is finally cracking after nearly three decades of unsustainable government and personal debt. As I said last year, when the DOW was setting new highs and I was scared to death to invest (never did, other than a market-neutral fund and international bond) we have lived far beyond our means for far too long...

Now its unwinding. I'm not so worried about when to jump back into the market these days - I'm more worried about preserving what I have. I even question how many bank failures must occur before the FDIC says "sorry, but we never anticipated this..."

I hope I'm wrong, but this just smells awful. IndyMac closed on Friday. Is there any big news pending Fannie or Freddie?

Helicoper may spark a big rally with another 1/2 point cut Monday morning of course, that would send the dollar further tumbling), but they've already expended most of their powder, and it will be short lived.

Enough of my bloviating. Nobody answered Barbarus's question: other than blind faith buy-and-hold, what can you possibly see that portends a sustained stock market rally?
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Old 07-11-2008, 09:27 PM   #65
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I agree with you completely, Barbarus. Things are coming apart quickly. IndyMac bank closed today (and yes, folks are making light of it in another thread - although I think its not the least bit funny), the DOW down 22%, Freddie and Fannie on the ropes, Lehman about to implode, the dollar sinking again..

Yes, I think the DOW goes back to 14000 by years end!

Seems to me people here can't see the forest through the trees. (Oh, its just IndyMac bank - the FDIC will cover it). The govt will bail out Freddie and Fannie - with over 5T in held or "covered" loans.

Our financial system is finally cracking after nearly three decades of unsustainable government and personal debt. As I said last year, when the DOW was setting new highs and I was scared to death to invest (never did, other than a market-neutral fund and international bond) we have lived far beyond our means for far too long...

Now its unwinding. I'm not so worried about when to jump back into the market these days - I'm more worried about preserving what I have. I even question how many bank failures must occur before the FDIC says "sorry, but we never anticipated this..."

I hope I'm wrong, but this just smells awful. IndyMac closed on Friday. Is there any big news pending Fannie or Freddie?

Helicoper may spark a big rally with another 1/2 point cut Monday morning of course, that would send the dollar further tumbling), but they've already expended most of their powder, and it will be short lived.

Enough of my bloviating. Nobody answered Barbarus's question: other than blind faith buy-and-hold, what can you possibly see that portends a sustained stock market rally?
Cyclone,

How is your ammo,fresh water, and food supply going? Im doing fairly well here. Have a enough ammo to hold out for a few weeks of sporadic fire fights . Water is good if we ration properly. However we cant take on too many stragglers. Food is good to go. Lots of animals in the neighborhood. Hang tough my comrade.
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Old 07-11-2008, 09:30 PM   #66
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Enough of my bloviating. Nobody answered Barbarus's question: other than blind faith buy-and-hold, what can you possibly see that portends a sustained stock market rally?
[Disclaimer: I have some of the same feelings about the melting financial system as you and am concerned that things could get a lot worse...but]

I remember a great quote (and I wish I could remember from who), that goes along the lines that in the stock market it is easier to talk about and see the things that can go wrong than the things that can go right.

When I started investing in 1978-1980, there were so many things wrong: inflation, high unemployment, the post-vietnam era, nuclear arms race, botched up embassy hostage rescue,... Does anyone remember Business Week's famous "The Death of Equities" cover from 1979?
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Old 07-11-2008, 09:42 PM   #67
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Very few investors can accurate time the rise and fall of equities prices, especially day-by-day, but even a simple barbarian, (vis. moi), can see that there are unprecedented dislocations occurring and there is little in the short term to change the situation for the better.
.
.
.
I'm intensely interested in the perceptions of ya'll. What do you guys think is going on? I just can not grasp how anyone can see good times just down the road. What forces that will counter the fundamental problems? Why are things really not that awful?
I personally don't see anything unprecedented going on. I don't know how old you are, and I'm not a depression survivor or anything, but even in my 30 years of investing I've seen financial institutions fail, real estate markets drop and stagnate, equities go down and stay down for a while, stars align, and a total eclipse of the sun.

And then when I wasn't looking, things got better.

This situation sucks, as have all previous crappy situations. People who took big chances get hurt, and people who trusted greedy companies and politicians to take care of them get hurt. Others manage to deal, some profit, and truly the vast majority just walk on.

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Old 07-11-2008, 10:00 PM   #68
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Cyclone,

How is your ammo,fresh water, and food supply going? Im doing fairly well here. Have a enough ammo to hold out for a few weeks of sporadic fire fights . Water is good if we ration properly. However we cant take on too many stragglers. Food is good to go. Lots of animals in the neighborhood. Hang tough my comrade.
My fresh water is fine - I own no ammo - and my stomach is freshly fed with a nice steak dinner tonight. Of course, the same could be said for many in Argentina, Russia, Thailand...and of course, that 3rd-world rat hole, Japan.

I wonder how many of them said "don't worry, be happy", or better yet - "buy and hold" before they saw themselves wiped out.

Comrade.

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When I started investing in 1978-1980, there were so many things wrong: inflation, high unemployment, the post-vietnam era, nuclear arms race, botched up embassy hostage rescue,... Does anyone remember Business Week's famous "The Death of Equities" cover from 1979?
Several huge differences. In the 70's we still had some semblance of caring about fiscal balance. That was before "tax cuts are always good" and " deficits don't matter". Deficits do matter - as do delinquncies - as the banks and brokerages are finding out now.

Plus, even in the late 70s, we were a net exporter. Yep, back then we actually produced and sold goods the rest of the world wanted and paid for. Imagine that - a net influx of foreign money to support our industries and standard of living. Now we require 700B/yr to buy our treasuries, and directly finance our opulent lifestyles.

Our debts are past due, and the collection agencies are calling...

...too bad many of them are American banks, brokerages and investment banks that are bound to find out that we can't pay, and they are insolvent.

I don't want to argue this any further. Its much more fun to talk about workplace BS...
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Old 07-11-2008, 10:07 PM   #69
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...too bad many of them are American banks, brokerages and investment banks that are bound to find out that we can't pay, and they are insolvent.
I wouldn't be surprised to find out that some banks end up owing more money than they can pay; to themselves, through an intermediate bank.
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Old 07-11-2008, 10:10 PM   #70
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"I don't want to argue this any further. Its much more fun to talk about workplace BS.."

Promise?
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Old 07-11-2008, 10:12 PM   #71
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Our debts are past due, and the collection agencies are calling...

...too bad many of them are American banks, brokerages and investment banks that are bound to find out that we can't pay, and they are insolvent.

I don't want to argue this any further. Its much more fun to talk about workplace BS...
I'm not arguing, just trying to discuss possibilities, and that it isn't all one sided, and that the future is complex and unknown.

If you think we are, as a nation, insolvent, what are you doing about it? Have you gone completely to cash? If so, what currency? (As the government may try to print our way out of this.) Are you short the market? What are you doing?

Do you think that that US can go down quick, big time, without taking the rest of the world with it?
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Old 07-11-2008, 10:18 PM   #72
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This thread desperately needs Uncle Mick....

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Old 07-12-2008, 01:18 AM   #73
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My fresh water is fine - I own no ammo - and my stomach is freshly fed with a nice steak dinner tonight. Of course, the same could be said for many in Argentina, Russia, Thailand...and of course, that 3rd-world rat hole, Japan.

I wonder how many of them said "don't worry, be happy", or better yet - "buy and hold" before they saw themselves wiped out.

Comrade.



Several huge differences. In the 70's we still had some semblance of caring about fiscal balance. That was before "tax cuts are always good" and " deficits don't matter". Deficits do matter - as do delinquncies - as the banks and brokerages are finding out now.

Plus, even in the late 70s, we were a net exporter. Yep, back then we actually produced and sold goods the rest of the world wanted and paid for. Imagine that - a net influx of foreign money to support our industries and standard of living. Now we require 700B/yr to buy our treasuries, and directly finance our opulent lifestyles.

Our debts are past due, and the collection agencies are calling...

...too bad many of them are American banks, brokerages and investment banks that are bound to find out that we can't pay, and they are insolvent.

I don't want to argue this any further. Its much more fun to talk about workplace BS...
On another thread, I posted a graph of national debt as a % of GDP, essentially we are well within our "trading range" for debt over the last 100 years. It's funny to me that people are able to factor in nominal vs. real dollars in their own FIRE calculus but not with the national debt.

This doesn't seem as bad as the S&L crisis of the late 80's, or the stagflation of the late 70's (which I barely remember being born in '74).

I'm betting long and strong, I think the next 24 months are the best buying we are going to see in 20 years in the stock market. And I'm putting my money where my mouth is!
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Old 07-12-2008, 03:52 AM   #74
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laurencewill, if you are looking at the debt of the US gov., that is one thing. What's also out there is personal debt (particularly mortgages and HELOC). In the '70s/'80s debt was something like 80% of a person's yearly salary on average, and now it's 135% or more (and some other countries' citizens are worse).

Quote:
In 1974, Federal Reserve data show that US mortgage plus other consumer debt totaled $627 billion. By 1994, the total debt had risen to $4,206 billion, and by 2004, it reached $9,709 billion.
Rick Wolff, "Personal Debts and US Capitalism"

1974 US personal debt/GDP = $627b/$1,500b = .42
1994 = $4,206b/$7,072b = .57
2004 = $9,709b/$11,685b = .83

see a trend?

U.S. household debt up the most in 20 years - MarketWatch

2005 = $11,500b/$12,434b = .93

USATODAY.com

2007 = $13,825b/$13,841b = effectively 1:1

GDP numbers from here:
http://research.stlouisfed.org/fred2/data/GDPA.txt

Now, you can think that will continue, or not. I say "not".

In researching this, I came across a statement that indicates just how we take this debt expansion for granted:
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The growth of home mortgage debt, including home equity loans, cooled to an annual rate of 3%
Household net worth drops by $1.7 trillion - Jun. 5, 2008

A 3% annual rate of debt growth is "cooling"!
but this is 3% on top of last year's 3% or whatever... this is exponential growth and cannot logically continue.
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Old 07-12-2008, 08:49 AM   #75
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National debt

Those interested in the national debt may find this documentary interesting I.O.U.S.A. Official Website. Get all the info here!
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Old 07-12-2008, 11:07 PM   #76
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Seems to me a primary ingredient of happy semi-retirement seems to be that you don't violently despise your work.

A lot of people (not just on this board) don't have that luxury. I'm grateful that I do.
Exactly. That completely changes people's POV.

I get the impression that many of the people you mentioned who are miserable in their jobs have just "snapped" and decided to retire early regardless of their assets.

So, although many people have retired early(RE), are they really financially independent (FIRE) with income for only a limited number of years?
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Old 07-13-2008, 08:01 AM   #77
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I get the impression that many of the people you mentioned who are miserable in their jobs have just "snapped" and decided to retire early regardless of their assets.

So, although many people have retired early(RE), are they really financially independent (FIRE) with income for only a limited number of years?
For those who "snapped," as you describe them, it may well have been the right decision to quit rather than risk their mental and spiritual health. But it probably takes a bigger leap to adjust to FIRE on less savings than they had been hoping for. Still, with a downward adjustment in expenses, all in all it works out in a surprising number of cases around here.

But to continue working full time and not mind it brings a degree of comfort to me as I move ahead.
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Old 07-13-2008, 08:41 AM   #78
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But to continue working full time and not mind it brings a degree of comfort to me as I move ahead.
The financial aspect was not the determining factor for me. I had reached my "number" well before I left my job. I continued working until I qualified to retire so I could get the medical benefits. I took the pension as a lump sum.

I didn't like my MegaCorp job. I didn't hate it either. It had good and bad parts, but I enjoyed the challenges. I had issues with management and the politics. I felt like I would be happier not working. So far I am right, and I'm not worried by the current economic situation.

I'm not morally opposed to working. I've read the "Do what you want and the money will follow" books and articles. I know a few people who love their jobs, who go home from work and do the same thing for fun and would do the job for free (they say). And I envy them that. You sound like you may be there too.

My problem is, I don't have anything like that. No idea what it would even be. I'm hoping that as I poke around here and there during my FIRE time, I might stumble on something that I love to do. But I suspect that even if I find a way to turn reading for pleasure or hiking into a paying proposition, I won't want to be tied into it for a career. It will be interesting to see. if anything comes along.

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Old 07-13-2008, 11:51 AM   #79
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For those who "snapped," as you describe them, it may well have been the right decision to quit rather than risk their mental and spiritual health. But it probably takes a bigger leap to adjust to FIRE on less savings than they had been hoping for. Still, with a downward adjustment in expenses, all in all it works out in a surprising number of cases around here.
I get the impression that the first years of ER are fantastic for many people. After all, they've escaped their dreaded jobs.

But, I really wonder how things work out towards the later years when making due with less and less could have a major effect on a person's lifestyle. Despite what I read from some people on this forum, when I see older Americans on extremely tight budgets, I don't get the impression of the sheer joy they experienced during their initial retirement years.

Then again, it's not like financial security alone buys happiness. There are many other factors. Given the choice, though...
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Old 07-13-2008, 12:41 PM   #80
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But, I really wonder how things work out towards the later years when making due with less and less could have a major effect on a person's lifestyle. Despite what I read from some people on this forum, when I see older Americans on extremely tight budgets, I don't get the impression of the sheer joy they experienced during their initial retirement years.
I'll bet very few of the older folks you see scraping by ever paid attention to the things we discuss here. Sure, a few FIRE types will be sorry, but their number will be dwarfed by those who stumbled along and never consciously examined the road ahead, never built a plan, just figured things would "work out".
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