riding out the storm - r u battening down the hatches?

[Achiever51]

I retired in Dec 06 and so far, the only thing that has me really concerned is the housing market (what housing market) here in SE Michigan.

Our plan was to sell this house -- waaaay too big for just two people and three dogs --- and downsize in late ''07 or early '08. Unfortunately the market didn't simply drop, it disappeared, and our house is now assessed for more than $100,000 less than we paid for it ten years ago. Had we sold in '06 --- when we actually had someone approach us and make a legit offer -- we could have sold for about $100,000 MORE than we paid for it! Bummer. I know. Woulda, coulda, shoulda.

And since we expected to sell our house by this point, we weren't terribly concerned about holding an adjustable rate mortgage. Well, if we don't sell this house by February, 2010 the ARM will reset to who knows what level so we are debating what to do and when to do it.

Except for the housing debacle, I am very very happy to be retired. IF I had stayed at MegaCorp (assuming I didn't die at my desk, that is), I probably wouldn't be employed today anyway as my former employer has cut more than 25,000 jobs since I left. And since I got out on a negotiated settlement that ultimately paid me much, much more than I would have received in ordinary circumstances, I know I made the right choice.

As for hunkering down, we are questionning our expenses a bit more before pulling out the checkbook. I have renegotiated lower rates for property and auto insurance and since I have more time to do so, I do shop for bargains more than I did while working.

I vividly remember the gas shortages/market problems in the early 70s; the market drop in '87; and the tech crash in 2000 -- and with parents who survived the Great Depression -- I know that this, too, will pass. Sooner rather than later would be nice.

 

[shotgunner]

I know I am in a good position and hope to stay in one. I have a part-time job that grosses about 30K for 20 hours a week. I have a commitment through 6/30/09. My home is paid off and the cost of living in it all tax and utilities is $800 a month. I can live nicely on a net of 30K a year. I am confident my vehicle will last another 5 years. My house was totally remodeled top to bottom in 2006. I am giving great thought to cashing out approx 11% or my outside retirement account equities. That will give me a cash/bond position that I can live off for a solid 10 years without any work at all. That will take me to age 62. Holding off on purchasing new Harley that I would have like to have bought this fall.

 

[REWahoo]

The REW household (living entirely off our nest egg) hasn't done anything significant in the way of expense reduction - yet. The one action I am seriously contemplating is starting my SS benefits in a couple of months when I turn 62. I had planned on waiting until I could draw full benefits at age 66 but the current market direction has given me incentive to reconsider. That $20,000 a year is becoming more and more enticing as I watch our nest egg melt away.

 

[Dawg52]

The REW household (living entirely off our nest egg) hasn't done anything significant in the way of expense reduction - yet. The one action I am seriously contemplating is starting my SS benefits in a couple of months when I turn 62. I had planned on waiting until I could draw full benefits at age 66 but the current market direction has given me incentive to reconsider. That $20,000 a year is becoming more and more enticing as I watch our nest egg melt away.

Mine melted by 8% last month alone. After today's drop, I'm down 13.6% YTD. Sucks. But I do receive enough interest from cd's/bonds and stock dividends to live on. Hopefully the company's I own won't cut their dividend or worse, go out of business.

 

[Cattusbabe]

DH and I are in about the same situation as Cyclinginvestor. If anything we are padding the emergency funds a bit otherwise no real change.

 

[Moemg]

The only changes I've made is to ratchet down the remodeling to only necessary items . My tile from h--- will be staying covered by a new area rug . We've also cut back on travel , instead of a New England cruise we are doing a trip to Savannah .

 

[Bestwifeever]

We battened down a year ago as sort of a trial to see how lbym and low-risk we could go in anticipation of ER. Not a lot left to batten, but should be okay. And if not, hey, we'll make the kids take care of us til they've reimbursed us for their college

 

[Bimmerbill]

Paying off my bills more aggressivly. Selling some of my firearms to do so, but may buy some more! They are money in the bank, or safe in my case. Plus, in case the world goes to hell, or zombies attack, I'll be ready...

Soon to pad my EF too.

 

[haha]

I am surprised by calm we are after today's drubbing

I came back this afternoon after being gone through the mid-day. Yikes! This is getting way more serious than I had anticipated. Buy something cheap? Oh wait, it just got a whole lot cheaper!

I am unfortunately low on cash, but what I do have I am spending buying some stocks wih 0 debt, for less than half of what I sold them for within the year! Doesn't matter, they jsut keep going down.

Maybe we are going to get a depression, but unless it is a really really bad one, a lot of these stocks seem like they are already there.

Ha

 

[Dawg52]

I am surprised by calm we are after today's drubbing

Maybe we are going to get a depression, but unless it is a really really bad one, a lot of these stocks seem like they are already there.

Ha

Not really calm, just numb to the whole thing. I guess moving happy hour up to midday has helped. Oh yes, I hate the word depression. Give me another cold beer.

 

[Khan]

I had decided, before this debacle, to start taking money from my retirement accounts starting next year. After 20 or 30 years, things have to be replaced/renovated.

 

[Budman]

I am very concerned about the DOW being down by 26% since its high of 14198. It seems that most days are down days lately. I am contemplating delaying retirement for a short while until the market recovers. Retiring into a recession should be avoided. There is a lot of fear out there right now just like there has been in some of the recessions I have seen in the past. I am confident that the markets will come back after the uncertainty of the bailout is removed and the presidential election happens. But to be on the safe side, I may delay retirement that would otherwise begin on Jan 1, 2009. Dang I hate saying that.

 

[Purron]

I guess moving happy hour up to midday has helped. Oh yes, I hate the word depression. Give me another cold beer.

In the words of the great Jimmy Buffett, "It's always 5 o'clock somewhere"

 

[dex]

Lazy,
Let me know if you want me to start another thread on this.
++++++++++

All this talk about delaying retirement brings up the question:
Do those people have two years of spending in cash or cash equivalents?
Do those people have another two years of spending in a short term bond funds?

++++++
Planning for retirement should look something like this
2 years of spending in cash equivalents
2 years of spending in short term bond funds

The make up of investments should be guided by cash flow considerations
Spending needs
Less social security
Less pension
Less other sources - non investment income
Equals amount needed from investments*
*The lower the percentage of spending the higher the percentage of stock funds
*If it is a high percentage of spending then a conservative investing approach would be indicated

 

[FIREd]

After being really anxious earlier this week (I was ready to run for the hills), I am a bit more cool-headed today. Maybe it's the meditation, maybe it's the beer, I don't know. Anyways, I have done some reading and I am bit less pessimistic about the future. Sure the situation is still very serious, but I also realized that this is not 1929 America and that the great depression II is probably not in the cards (well if congress finally gets its act together and takes steps to unlock the credit markets that is). The run up in the dollar tells me that I am not the only one being optimistic about America's ability to get out of this mess. At least in America we know there is a problem. I think that Europe just got its wake up call on Monday. Europe will have to start cutting interest rates soon, which is bullish for the dollar, and I think that Europe has more budgetary constraints that will prevent it from intervening on a grand scale like the US is proposing to do. I believe that this could ultimately make their recession worse.

So I decided to take advantage of today's drop in the market to buy more shares of WVELX and VWINX. Last time they were so cheap was 5 years ago, nice dividends and lots of quality, American companies. I also harvested some tax losses on foreign funds. That's the offense. On the defense side, we are padding our EF and slashing expenses (about 10% YOY). We also checked with DW's company to see how much cold hard cash they have on hand. They seem to have enough liquidities (cash and ultra short bonds) to cover 4-5 years worth of operating expenses. They anticipated the credit crunch and got out of long term investments last year. It is a great relief to know that they don't depend on bank loans to make payroll. Fingers crossed.

 

[harley]

Our homes are both located in the Washington DC suburbs and I gotta tell you the market is brutal right now. Foreclosures have skyrocketed and prices are falling fast. On the one hand, we have thought we should sell before prices fall more, but the buyers seem to have vanished.
.
.
.
Plus, the job market is still very strong in the DC area and, hey, people gotta live somewhere, right?

If you are anywhere near the beltway, I suspect there will be a nice jump in the market after the election. I lived in Arlington for 25+ years until last year, and with every new administration there was a housing market upswing. All real estate is local. Timing the market is allowed.

I am unfortunately low on cash, but what I do have I am spending buying some stocks wih 0 debt, for less than half of what I sold them for within the year! Doesn't matter, they jsut keep going down.

Maybe we are going to get a depression, but unless it is a really really bad one, a lot of these stocks seem like they are already there.

I am very concerned about the DOW being down by 26% since its high of 14198.

While 26% is a fairly good amount, I'm of the opinion that the market was vastly overvalued at it's high, and I still think it's overvalued historically. I know it's painful to watch, but if you've got either a job or a number of years of cash to live off, you should be fine. I'm still hoping for somewhere in the mid 9000s. THAT would be a buying opportunity. And I suspect the market would make progress from there after no more than a couple years. I know the xpurts are saying the sky is falling, but I swear we've been here and worse before. Of course, what do I know?

 

[W2R]

It is not likely that the economy would delay my retirement, but then I have never retired before and I am a little concerned that I might make some crucial error in planning. I have been spending too much time trying to imagine worst case situations so that I can plan for them. Nothing real could even touch the economic disasters I have imagined.

There are too many unknowns right now to get a handle on what is really going to happen with our economy. How do we know if our fears for the future are based on reality, or on possibilities that may be circumvented? We don't know who will be President and whose administration will be falling into place in four months, and even the bail-out is still uncertain. World events over which we have no control could also profoundly influence our futures.

So, while I am imagining terrible things and trying to devise alternative plans for them if they should become necessary, I am not expecting these terrible things to actually happen (if that makes any sense). I am optimistic and think that eventually the market will recover, as it always does. Our fears are being whipped up by and manipulated by the media, who stand to profit from our terror.

As for the present, I am in an easier situation than others here - - for me, next Tuesday is payday and either way I am FI. To me the present drop in the market is not pleasant, but has not caused me to alter much. Life is fine (though it will be finer once I can finally retire). I got to work by 6:00 AM, on my lunch break I signed a contract for $1,500 (ouch!) to have my hurricane-damaged tree and stump removed, and then after work grilled some salmon for dinner. Live goes on.

 

[ST in London]

I find the concept of imagining terrible things and being optimistic a bit difficult.

I do think one needs to consider that recession carries a connotation of short term and this one, which I think even the most optimistic person must now admit is upon the US, might be a bit longer than recent past recessions.

It appears to be most probable to me that it will take a minimum of 6 years and likely closer to 10 years to recover. My opinion on this is not far different than the very man himself, Warren Buffett.

My investing will be adjusted accordingly. The UK 1974-78 recession is vivid in my memory. Batten down the hatches, indeed.

 

[freebird5825]

Like freebird, I also ER'd in April '07....but at a much older age....50. Of course I should add a brief disclaimer here also, since I'm currently living off a fully-funded, COLA'd DB gov't pension. Even with that being said, I still don't want to lose any of my @$$ets.......retirement or otherwise.

So I'm just riding out the storm waiting for the break in the clouds....kinda like that guy down in Surfside Beach TX did with Hurrican Ike: I've got a bottle of Jack Daniels tucked away for cooking & 'medicinal' purposes.

hmmmm...i usually do my winter stockup shopping this time of year. i see another item for the list......but i just crossed that age 50 line, Goonie. so does that mean i'm "much older" now too? <loaded question, answer carefully> LOL
ditto on COLAd pension and fixed annuity, so income is stable. cutting spending even more than usual, especially for food. my garden was a real flop. i may have to "force" dh2b to eat less meat!
total portfolio loss is running at 15%. still not freaking out.
All hatches secure, Cap'n.

 

[Goonie]

hmmmm...i usually do my winter stockup shopping this time of year. i see another item for the list......but i just crossed that age 50 line, Goonie. so does that mean i'm "much older" now too? <loaded question, answer carefully> LOL

Regardless of your current age, I'm still much older than you. How's that for answering carefully?

 

[toofrugalformycat]

I do not regret ERing and my behavior is changing a little but not much.
I ERed on April 1, 2000. So I had an immediate trial by fire back then, which may be moderating my emotions on this latest plunge.
DH and I each bought some Vanguard index on the first big drop day, not a huge amount but just sticking to our principles because we knew we'd be out of allocation by the end of the day.
I was already frugal before this started, spending much less than our life plan spreadsheet says we can, and we have at least 5 years cash reserve, but even so when gasoline prices rose we cut down on driving our cars, combining trips and bicycling when possible. I'm going to put up those plastic shrink-to-fit storm windows on a couple of our old leakiest windows to save on heat bills. We normally grow a lot of our food in our garden and dipnet for salmon so our chest freezer is full (hope the electricity doesn't fail!). We buy beans, rice, and oats in 25-pound bags. Having a full pantry is quite comforting.
We were contemplating buying a new car to replace our 20-year-old rice rocket, but instead we spent $500 to make the necessary fixes for it to pass inspection and keep going.
Probably we won't go overseas to travel this winter but we might not have anyway.
One of my friends has had four of her friends die recently, all about our age. She tells me repeatedly that DH and I made the right decision to live frugally, ER and enjoy our lives. I agree with her.

 

[freebird5825]

Regardless of your current age, I'm still much older than you. How's that for answering carefully?

if you ever run for office, you have my vote! LMAO

battening down the spending hatches is reminding me of my shoestring college days... i can't help but wonder how the folks on the lawn tractors "in debt up to their eyeballs" are faring. in any case, from reading all the posts here, we folks are not in danger of that. whew!

 

[Hamlet]

I wouldn't discount the possibility of inflation. This bailout bill, and whatever follows it (stimulus II?) are likely to have inflationary effects. The Senate loaded this up with $150 billion more in tax cuts with no off-setting spending cuts.

At some point, I have to imagine that somebody is going to start questioning the government's ability to re-pay all that borrowed money.

Frankly, I think all this talk about the credit markets being frozen are mistaken. The credit markets are looking for a reasonable rate of return for the risk they are taking in lending.

It's the ridiculously low rates in treasuries that are wrong, IMO, not the credit markets.

Many of the post I've read mention inflation - that will not be the issue. The dollar will strengthen - the USA is ahead of the world in this finance problem. It has lowered its rates - the other have to follow. People are buying dollars for safety - look at the FX markets. Commodities should come down because of the economic slowdown.
The issue over the next few years will be low interest rates and low stock market rates of return.

 

[audreyh1]

Inflation will occur. But not in the immediate future! It's well established that pumping money into the system while the private sector is going through a credit crisis/deleveraging like crazy is NOT inflationary.

Two, three, five years from now? Maybe.

Audrey

 

[lazygood4nothinbum]

If anything, we're spending more since I got a job that nearly doubles our income. Somehow, it's different when I know that working is forever optional.

especially now, that’s my idea of safe early retirement planning. gotta job for me?

Let me know if you want me to start another thread on this….All this talk about delaying retirement brings up the question:
Do those people have two years of spending in cash or cash equivalents?
Do those people have another two years of spending in a short term bond funds?...

no problem by me with either directly relevant or even tangential thinking.

even with all pre-advised safeguards in place, i’d think twice about retiring early off a cushy, depression-secure job right before this house vote or ramifications become clear. during threat of extraordinarily tough times, how much power does an “i told you so” have as indictment of perceived poor planning for what likely would have survived normally bad times? nuclear winter is also, hopefully, just (if at all) a once in a 100-year event. so what’s that plan? when does a 3-year cash bucket look reasonably safe or silly? how many early retirees on a 15-year cash bucket look down their noses at those with what could, under just the right circumstances, be a substandard 8-year bucket? who has time to dig a hole in the side of a mountain?

why wouldn’t i have reasonably thought (even while I was thinking under extreme emotional duress at the time) that i could soon enough replenish my 3-year cash bucket with after-tax dollars, not yet invested in the market, within at least two years of trying to sell a house (in a prime location) which i’ve continually priced well below even a falling market so that now it is below where it should have been had there been no bubble at all, yet still no buyers? tough to plan for a terrorist setting off a dirty bomb in your neighborhood; sometimes we’re just taking our chances. meanwhile, as long as i can hold on--with simply a low wage job or hopefully, depending on the severity of this thing, just some cost cuts--i’m not giving it away like i see others do. so how odd to highlight perceived fault with past preparations as an attack of current efforts to remain intact. whatever floats your boat. meanwhile, maybe more appropriate to the winds of the day: reef early and reef often.

Our plan was to sell this…Unfortunately the market didn't simply drop, it disappeared, and our house is now assessed for more than $100,000 less than we paid for it ten years ago

stunning to learn that i’m not in the worst of situations even among those doing better than most, that housing might actually have fared far worse elsewhere. how many could ever afford or might have had forethought that? which bucket should that have gone in, the one ya kick? my sympathies, achiever51.

so sometimes, especially when you can’t control world events, ya make do with what ya got. it becomes less constructive, for the moment, to look at what went wrong and more to find out how to survive from here, just like congress is hopefully trying to do. while the ship sinks is not the time to do a thorough structural inspection of the hull. given enough time, see if you can readily plug the hole. also, it is less important to see what you hit and more important to grab your ditch bag and ready survival. smooth sailing all.

There are too many unknowns right now to get a handle on what is really going to happen with our economy…Our fears are being whipped up by and manipulated by the media, who stand to profit from our terror.

as much as i watch news, i look less at the media which i am well trained to see beyond and which didn’t even know how to explain the nature of this crisis, nor its possible fix, as this unfolded, rather, more at the interviewed economists and at politicians themselves. even if i didn’t have a lifetime’s experience of reading body language, it should have been fairly obvious to the untrained eye upon announcement of the senate vote that they walked up to the podium having had just shat in their pants. since these confidence guys are putting forth to the public such measures to build back the faith of this economy, which most people didn’t even know was falling apart until recently, i gotta suspect the story is bigger & scarier than what even the media reveals. my worst case scenerio, the more wrong i am, assuming this is not the time for paranoia, the safer i'll be.

I find the concept of imagining terrible things and being optimistic a bit difficult.

simple enough, plan for the worst, hope for the best. i’m an optimist in the long-run. though i realize that doesn’t always shine through all my fear-mongering.