The financial crisis of 2008, uncertainty, and change in plans

[Gone4Good]

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Originally Posted by REWahoo Based on my personal experience I suspect you are correct. My gut and my mind were severely conflicted during those dark days but I knew the only chance I had of not being like one of those folks in the article was to ride it out.

I imagine that anyone who hadn't spent many years preparing themselves emotionally and intellectually for the volatility didn't stand a chance. Even many who had found their faith and resolve badly tested.

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Originally Posted by Where Are the Customers' Yachts There are certain things that cannot be adequately explained to a virgin either by words or pictures. Nor can any description that I might offer here even approximate what it feels like to lose a real chunk of money that you used to own.

[martyp]

I lost a "chunk" of my 403b in the 2008 crash. However, I had enough remaining that it didn't deter my decision to ER 15 months ago. Both my wife and I have good pension plans and health care to live off of. My plan is not to touch the 403b money for the next 10 years (I am 56 right now). I don't have that money in the stock market. I am waiting for the next election to think about investing again.

[ejman]

I had the good fortune of starting my investment "career" in January of 1987 by converting a good chunk of money I had painfully saved during my overseas work into stocks and stock mutual funds. Of course, the crash of October 1987 promptly followed. This crash was notorious for having a single day drop of over 20%. In my terror at loosing most of my hard earned money I went into "shut down mode" and did absolutely nothing. I was paralyzed by fear. Low and behold this was a short lived crash and in a year or two it seemed like it had never occurred. With that bit of information in my bonnet subsequent crashes - 1990, 2000-2003, 2008-2009 were much easier to handle and I just kept plugging along.

Been retired for 10 years now and NW is highest it's ever been but I'm sure the dance of crash/recovery/crash will continue indefinitely it's how we respond that's critical. For me, sticking to an AA that became progressively more tilted to to bonds as I aged proved crucial. Now at 55% equities with wide 10% band before rebalancing.

[TrvlBug]

We rode it out, harvesting losses for tax purposes. Still have years worth of losses to offset gains. Greatly reduced our cash accounts to take advantage of buying opportunities and postponed my retirement by 2 years to pump more $ into our accounts. The job became too stressful so I pulled the plug last fall.

[Danmar]

Quote:

Originally Posted by REWahoo Based on my personal experience I suspect you are correct. My gut and my mind were severely conflicted during those dark days but I knew the only chance I had of not being like one of those folks in the article was to ride it out.

Agree. ER'd in 2006. What I learned was don't sell when the market is down. In my case the risk was even higher as I had several million dollars of employee option gains that evaporated. This would have had a severe effect on my retirement. Just waited it out and everything worked out. Didn't get what I hoped but got a lot more than I feared.

[scrabbler1]

Because I left my job and ERed during the late 2008 slide, I had some nervous moments as well as some opportunities to change directions in my AA I might not have had otherwise.

The first nervous moment was having to wait longer than usual for my former company's quarterly evaluation of its stock price at the end of September. That was right around the time I was going to annouce my resignation effective at the end of October. The announcement took place a day later and was not nearly as bad as I feared it would be -it dropped only about 1% which was next to nothing when you think of how everything else was dropping at the time.

When I left the company at the end of October, I had about a 2-week delay between receiving my proceeds from my liquidated 401(k) and ESOP accounts and reinvesting them into their targeted Fidelity accounts and funds. The price on the big bond fund had been dropping, so I was hoping it would drop some more or at least not go UP while I was waiting.

I also had a chance to change the AA of the rollover IRA which at the time was about 53/47 in favor of stocks. When I met with my Fidelity rep, we spoke about this. While he did not offer any concrete suggestions, he did give me a few things to think about regarding the overall AA in both my retiement and non-retirement accounts. I decided to stay put with the 53/47 split and I do not regret that choice [my typical AA in the 401(k) had been 55/45]. I have since done some small rebalancings in both the IRA and taxable accounts, mostly in the IRA, so my basic "buy low, sell high" philosophy remains intact. Both the stock and bond portions of my portfolio have rebounded nicely, especially the stock side. And my NW is at an all-time high despite not having worked for the last 3 years.

[NW-Bound]

I was able to lighten up a bit in 2008, and bought some stocks at bargain prices in 2009. But then, I harvested the gains a bit too soon, and had to buy back again at a higher price in late 2009. Oh man, market timing optimal rebalancing is tough.

Still, I now have more than at 2007 market top, but a big part of it was because of my part-time income that kept me from drawing too much from my stash.

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Originally Posted by DFW_M5 Sounds familiar, we held pat during the great downturn and started buying more individual stocks in March 2009. I'm still kicking myself over all the Apple shares I bought then and then proceeded to sell them off too soon.

[Gumby]

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Originally Posted by Lagniappe My original plan was to RE in April 2010. The through the crisis I continued to contribute and rebalance. New date is April 2012. So the financial crisis moved my plans out two years. That doesn't seem so bad, but I must confess there were moments when it felt like I would never get there.

Same here. We let our investments ride and did not sell, but still needed to add two years on to our planned retirement date to compensate.

[MBAustin]

The downturn actually helped me with the decision to ER. When I looked at how our investments did during the downturn and calculated that even at the low point it could have supported our expenses with <4% WR, I realized that it was time to stop accumulating and let someone else have my j*b.

We've more than recovered all of our losses even though we have been spending from our portfolio for more than a year. One thing we did immediately when I ER'd was to stop reinvesting dividends and capital gains in our taxable accounts and use that income first, so while future growth is slowed, it doesn't deplete the principal we've accumulated.

[W2R]

In retrospect, the financial crisis was a good test of my asset allocation. I even bought instead of selling when the market was down. Who would have thought that such a timid, terrified, naive investor could be that brave? What a great thing to find out about oneself, and what a big confidence builder. Buying low gave my portfolio a little boost right before my 2009 retirement, and earlier this week my portfolio was the largest of my lifetime.

Delay retirement? Well, yes, apparently this was the case for a few. But I think that also, some of those who didn't adequately prepare for retirement blame the recession instead of their poor preparation, to save face.

[NW-Bound]

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Originally Posted by W2R ...earlier this week my portfolio was the largest of my lifetime...

and then, you posted a "Wh***" to taunt me, and might have suffered a bit of pull-back too.

[W2R]

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Originally Posted by NW-Bound and then, you posted a "Wh***" to taunt me.

Actually, it got higher than that a few days after my Wheee!!! thread. My all time high so far was on Thursday, the 15th. Yes, I keep track of my all time high and low (starting in the summer of 2008) in my Excel spreadsheet.

In 2008-2009, we patiently and sympathetically listened to so many that were despondent, selling low and going all cash, returning to work, and predicting doom and gloom forever.

So now that the market is high, I think it is time to feel good , smile, and celebrate.

[Moemg]

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Originally Posted by W2R Delay retirement? Well, yes, apparently this was the case for a few. But I think that also, some of those who didn't adequately prepare for retirement blame the recession instead of their poor preparation, to save face.

I have to disagree . Say you had a million dollar portfolio in early 2008 and were just about ready to pull the plug when suddenly you had a $600,000 portfolio . Most people are prepared for losses but they losses in 2008-2009 were massive . Lot's of the board members made smart decisions to delay . Sure you can have a nice retirement on $600,000 but it's not the million dollar portfolio you wanted to enjoy the good life .

[NW-Bound]

During this past Great Recession, I was not planning on full retirement because my children were still in college. As I even enjoyed my part-time work, it made sense to "work a few more years" to help them, and to help my portfolio too.

Work was a bit sparse in 2008-2009, but then picked up, and I did not have to draw as heavily on my stash. I would not be truthful if I said that the part-time income did not have a positive influence on my holding a higher equity percentage than I would otherwise.

[LOL!]

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Originally Posted by Moemg I have to disagree . Say you had a million dollar portfolio in early 2008 and were just about ready to pull the plug when suddenly you had a $600,000 portfolio . Most people are prepared for losses but they losses in 2008-2009 were massive . Lot's of the board members made smart decisions to delay . Sure you can have a nice retirement on $600,000 but it's not the million dollar portfolio you wanted to enjoy the good life .

This is an interesting premise. If someone went from $1,000,000 to $600,000 this means they had a 40% loss. To get a 40% loss would mean they held at least 80% equities. If one is just about ready to pull the plug, what are the chances they held 80% in equities?

I wonder if anybody who did not sell and held firm during the Great Recession has any regrets about that decision? It seems that some folks who sold out have regrets, but the folks who did not, do not have regrets or they are not telling.

[rescueme]

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Originally Posted by W2R ...such a timid, terrified, naive investor...

Uh - where did the "pig squeal" come from? ...

[walkinwood]

The article says that she worked for JP Morgan. Maybe she had too big a chunk of her investments in company stock. Not unusual, unfortunately.

I felt this article was just a rehash of things already repeated too often.

We had the distinct privilege to ER just before the collapse. We saw our portfolio fall more than 25% (I've forgotten the exact number, but reported it in a post here). We went back to work for about 9 months in 2010 and our portfolio now is just above our initial ER value.

[yakers]

Quote:

Originally Posted by Moemg I have to disagree . Say you had a million dollar portfolio in early 2008 and were just about ready to pull the plug when suddenly you had a $600,000 portfolio . Most people are prepared for losses but they losses in 2008-2009 were massive . Lot's of the board members made smart decisions to delay . Sure you can have a nice retirement on $600,000 but it's not the million dollar portfolio you wanted to enjoy the good life .

Just a variation on this schedule, retired in March 08, had $770K in Dec 07, $625K in Dec 08, fall of 08 was a terrible time-already retired and portfolio headed south. But didn't sell anything and have recovered. Lost 18.8% in 08. made +18% in 09, 11.2% in 2010, and 3.8% in 2011, now have reached a nominal new high.
I am certain I would have been better off financially working a couple more years but those were some good years to be retired and I'm not giving them back.

[W2R]

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Originally Posted by rescueme Uh - where did the "pig squeal" come from? ...

From being so happy that we no longer have to watch our friends on the board freaking out, selling all, going to cash, and returning to work? I just love the fact that for once we can all be happy and not worry so much. We know the market goes down as well as up, but this respite can hopefully allow us to renew our strength and come back stronger during the next dip.

And yes, I was terrified in October 2008 but not enough to voice that much, or act on it. My AA was apparently just right for me. What a great test of AA right before retirement.

[W2R]

Quote:

Originally Posted by LOL! This is an interesting premise. If someone went from $1,000,000 to $600,000 this means they had a 40% loss. To get a 40% loss would mean they held at least 80% equities. If one is just about ready to pull the plug, what are the chances they held 80% in equities?

If they did, it seems to me that they had to be aware of the risks and the fact that their AA was exposing them to these risks. To me it would seem foolhardy for someone about ready to retire to be 80% equities, but then others are more risk tolerant and aren't bothered in the slightest by losing 40% or more. More power to them, but my risk tolerance was not that high when close to or in retirement, and it would bother me a lot (so my AA reflects that: 45:55, instead of 80:20). Until 3 years before retirement I was 100% equities, but like many I did my homework and adjusted my AA radically as I approached "D-Day" (or is that "R-Day"? )

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Originally Posted by LOL! I wonder if anybody who did not sell and held firm during the Great Recession has any regrets about that decision? It seems that some folks who sold out have regrets, but the folks who did not, do not have regrets or they are not telling.

I am pretty sure that most who did, recovered their portfolio value years ago. Mine was fully recovered before I retired in 2009 and quite a few other members posted their their portfolios recovered before mine did. It's been three years since then, to state the obvious.