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Old 06-29-2008, 01:55 PM   #141
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ikubak, my question was before I knew you were still contributing. I was anxious to see a portfolio that had done very well. But congrats on staying pretty much even.

On the OP about feeling panic. Yeah, it is a stomach churning feeling when you worked for 40 years to accumulate and just 6 months into retirement 11% of that nest egg is gone.

Another few weeks like the past 2 and FIRECALC might show much less chance of 4% SWR survivability.

EDIT: Cleared some errors in spelling.
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Old 06-29-2008, 04:08 PM   #142
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Several posters have said how they would me more upset if they were retired in this downswing . I'd be more upset if I was still working and seeing my contributions immediately go into negative terriority .
Ahh but not if you look at the big picture over time. This is the time for accumulators to be actively investing as those equities purchased now have more growth potential then the ones bought Oct 07. As William Bernstein in 4 pillars put it: "Young investors should be down on their knees praying for a bear market". Unfortunately the flip side to this is that for newly retiring investors the bear market is anathema unless you have a plan to deal with it.

FWIW factoring in new $ and what I started with jan 1/08 I'm -5.7% in my portfolio (80:20 stocks:bonds) YTD.

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Old 06-29-2008, 04:24 PM   #143
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I did not realize that so many retirees on this forum are still earning enough money to benefit from buying in at low market.

My plan has 3 year bucket of fixed income/MM (cushion, not for investing further), 50/50 equity/bond, diversity in both across US, Intl, EM and ST, IT.

What am I missing that does not have me thrilled to see a great "buying" opportunity as a retiree with no employer income?
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Old 06-29-2008, 04:37 PM   #144
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What am I missing that does not have me thrilled to see a great "buying" opportunity as a retiree with no employer income?
A lot of extra money?
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Old 06-29-2008, 04:40 PM   #145
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ikubak, my question was before I knew you were still contributing. I was anxious to see a portfolio that had done very well. But congrats on staying pretty much even.

On the OP about feeling panic. Yeah, it is a stomach churning feeling when you worked for 40 years to accumulate and just 6 months into retirement 11% of that nest egg is gone.

Another few weeks like the past 2 and FIRECALC might show much less chance of 4% SWR survivability.

EDIT: Cleared some errors in spelling.
Don't you miss the Carter years with 15% FDIC money market accounts? It would have made things so simple.
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Old 06-29-2008, 04:51 PM   #146
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A lot of extra money?
Exactly, why would a retiree that is invested, "with a plan", have enough cash available to enjoy this magnificent event we are seeing, fire sale?

Boglehead/Bernstein retirement advice suggests choosing an allocation that suits your risk aversiveness and following an index fund, low fee portfolio.

Wonder if this will be considered a great buying opportunity if the DJIA hits 8000 in a couple of months? Market timing is the new mantra.
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Old 06-29-2008, 05:01 PM   #147
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Don't you miss the Carter years with 15% FDIC money market accounts? It would have made things so simple.
Funny you mention that cause I don't recall many folks back then claiming that a 4% SWR was a panacea.

I think the OP has very good reason to wonder whether the DJIA ends next week up to 12,500 or down to 10,500. Either could happen.

So a nest egg of $2,000,000 in hand on 8-Oct-2007 would have shown a FIRECALC of 100% at 4% SWR.

If Friday next has a 10,500 dow, that nest egg would equal $1,750,000 and a FIRECALC of 80% or so.

Nothing to panic about, only numbers. Just hold the course.
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Old 06-29-2008, 05:17 PM   #148
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I am not sure you understand the real meaning of a Safe Withdrawal rate.
Remember FIRECalc and similar actually run a scenario when you retire in 1929 and watch the Dow drop from 381 to 44 in 1932 or retire in the 70s with a flat stock market like the 70s with double digit inflation. Now many withdrawal rates fail during those two periods part of the 95%, but some AA survive.

Right now we are in a garden variety bear market no where close to a 50% decline.
I know if you hold on the market should come back and that is what SWR is based on. But in Japan the stock market didn't come back in 18 years and is still down 65%, just pointing out anything is possible.

If my portfolio was down 50% and I started with a 4% withdrawal rate, I'd likely cut my withdrawals in half (along with my standard of living) before I'd take out 8% of the current balance on a prayer of a rebound. I think that is the weakness of calculating SWR's from risky portfolios. Emotionally most of us wouldn't continue to take out the 8%, we would cut out standard of living, hopefully to restore it later on. A 4% SWR is a fine concept as long as the portfolio is holding up.

I don't know how you can say that the current market is a garden variety bear market. It could end tomorrow or it could fall another 50% bringing PE's down to the low teens which is not completely out of the question. Was the 90's a garden variety bull market? Markets don't always follow past patterns.
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Old 06-29-2008, 05:33 PM   #149
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I don't know how you can say that the current market is a garden variety bear market. It could end tomorrow or it could fall another 50% bringing PE's down to the low teens which is not completely out of the question.
I need a drink.
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Old 06-29-2008, 05:58 PM   #150
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Given that, how do you respond to price movement? For example, what have you done or will you do now?

I respond to price movements by not being willing to lose too much. I think the idea of a stop loss order fits my way thinking even though that causes me anxiety at times and is not a holy grail. I really only want higher yielding investments since they provide some level of safety.

I'll admit I don't know where to go right now and have too much money just sitting idle waiting for an opportunity but losing money is high on my list of things to be avoided. Inflation is eating away at that money. I still see stock markets as overvalued based on historical measures especially now that earnings are falling. Is that market timing? Maybe but I prefer to buy bargains. They are always out there, but not easy to find.

I have started increasing my exposure to market risk with bank loan funds, REITS, preferred stock funds and some higher yielding out of favor blue chips as they are on sale right now. Time will tell if that works out. I might even buy a SPIA with up to 50% in the future as the return on that investment looks marginally appealing to me.

My views are not in line with what you see on this forum for the most part. I already have as much of a nest egg as I feel I need and am not willing to put my future at risk unless what I am buying looks reasonably priced. Not losing money comes first for me. While trying to be safe, inflation is especially worrisome for me since the rate of return on fairly safe investments hasn't kept up with inflation for a very long time now.
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Old 06-29-2008, 06:29 PM   #151
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I know if you hold on the market should come back and that is what SWR is based on. But in Japan the stock market didn't come back in 18 years and is still down 65%, just pointing out anything is possible.

.
Closer to home, the NASDAQ is 50% off it's high in 2000. Will it ever come back? The DOW really isn't that good of an indicator , when a stock starts floundering it is replaced with a more robust stock. If the original DOW stocks were still used, where would the DOW be today?
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Old 06-29-2008, 07:32 PM   #152
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I don't want to create work for you, but it might be time well spent to sit down and more accurately total up all of your expenses and your dividend / interest income. Completing that exercise quarterly or once every six months shouldn't take more than a few hours a year, and I really think that it would go a long way towards setting your mind at ease.
I created an Excel spreadsheet with my current budget as a baseline. Then I have another column where I show "after retirement". For each category, I try to estimate what will happen with each expense. Some will stay the same, some go away, some increase. Using this method I feel pretty good about my ability to estimate expenses post ER.

Here is an old example that I did about 3 years ago. The "retirement increased spending factors" are helpful. They indicate that I expect some expenses to increase by certain percentages. For example a 90% factor indicates I think I'll spend 10% less or more than current.

As you can see at the bottom, I've estimated that we can live on about 60% of what we make today. While this may seem low and go against many financial analyst recommendations...please remember that our house will be paid off and that currently between my wife and I we contribute about $40,000 to retirement savings...so simply by not having to save anymore there is a huge reduction.

Note also that I do an inflation adjustment calculation to see what those expenses may look like at retirement.

** Note I have deleted some of the info to protect my privacy...so you may not be able to get the numbers to add up.

ATTACH]3880[/ATTACH]
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Old 06-29-2008, 07:40 PM   #153
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I need a drink.
Not to worry, that will also be too expensive to do in the near future.

Seriously, we have the extreme positions that the stock market*always* comes back and other situations like NASDAQ being 50% of its value from 8 years ago and the Nikkei at 35% of its value from 18 years ago. For someone within striking distance of retirement (or in retirement), these are nightmare scenarios.

I certainly picked the wrong decade to stop drinking.
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Old 06-29-2008, 07:41 PM   #154
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Closer to home, the NASDAQ is 50% off it's high in 2000. Will it ever come back? The DOW really isn't that good of an indicator , when a stock starts floundering it is replaced with a more robust stock. If the original DOW stocks were still used, where would the DOW be today?
I mostly watch the S&P and Wilshire since that's where most of my money is invested. It's been a rough ride since last October.
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Old 06-29-2008, 07:50 PM   #155
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Seriously, we have the extreme positions that the stock market*always* comes back and other situations like NASDAQ being 50% of its value from 8 years ago and the Nikkei at 35% of its value from 18 years ago. For someone within striking distance of retirement (or in retirement), these are nightmare scenarios.
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Old 06-29-2008, 08:23 PM   #156
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Don't you miss the Carter years with 15% FDIC money market accounts? It would have made things so simple.
After inflation what was the real return?

I'm sensing alot of emotion (potentially) ruling investment decisions in this thread.

What was your plan for retiring into a bear market? Execute it.

If this ~20% correction/bear is causing angst then you need to adjust your AA and lower your risk. Are you well diversified?

Even with no income there are ways to "buy" into this market. Rebalance, redirect dividends, cut expenses and invest the difference etc...

Of course easy for me to say as I'm ~ 10 years from pulling the plug . I do plan to have several years of living expenses in cash/equivalents and many more years in bonds so won't have to tap equities for a very long time.

DD
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Old 06-29-2008, 08:44 PM   #157
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Don't you miss the Carter years with 15% FDIC money market accounts? It would have made things so simple.
Ahhh, looking at the past through rose-colored glasses.

Do you know what mortgage rates were then?

I got one, blended down to 17% (IIRC) - what a deal - I think the going rate was around 20%. Even though everyone thought it was crazy, I went with an adjustable rate mortgage - they were new at the time, realtor called 'em 'animals'. All but one payment was lower than the previous, so it worked out for us.

But no one back then was thinking that those were 'simple' times, believe me. People were freaking out over the high inflation rates. Every period in time has it's own challenges, deal with it.

25 years from now, someone might say to you - 'oh, the 2000's - what a great time, 5% 30 year fixed rate mortgages, you guys had it made in the shade!'.


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Old 06-29-2008, 08:56 PM   #158
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.

If my portfolio was down 50% and I started with a 4% withdrawal rate, I'd likely cut my withdrawals in half (along with my standard of living) before I'd take out 8% of the current balance on a prayer of a rebound. I think that is the weakness of calculating SWR's from risky portfolios. Emotionally most of us wouldn't continue to take out the 8%, we would cut out standard of living, hopefully to restore it later on. A 4% SWR is a fine concept as long as the portfolio is holding up.

I don't know how you can say that the current market is a garden variety bear market. It could end tomorrow or it could fall another 50% bringing PE's down to the low teens which is not completely out of the question. Was the 90's a garden variety bull market? Markets don't always follow past patterns.
Rock on I think we are in relative rare total agreement. The combination of market drops (my heavy financially weighted portfolio is down 10% over the latest few week plunge) and unexpected expenses has me re-evaluating risk and expenses. I've said in the past that it is silly to blindly use a FireCALC runs to rule your life. That is why I am fan of dividend/income funded withdrawal as opposed to an (arguably) better total return approach. Using SPIA is certainly another option, I am not there yet.

Still when my Muni bond gets redeemed July 1, it will go back into fixed income not the equity market, because you are right I don't know that is a garden variety Bear market. (I thought 97-99 market was a once in a generation market, which is why I took a lot of money off the table Jan 2000)


Nords has said something which I constantly have to remind myself "you already won the game, now we are talking about running up the score". Or as you and Buffett say rule 1 don't lose money!
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Old 06-29-2008, 08:58 PM   #159
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I retired last October so I feel the pain. But I did change my AA at the time so I'm not down as much as I could be. I was up around 12% in 2007 and I'm probably down around 6% in 2008 so far. I have several years of living expenses still in cash and I'm still glad I retired when I did. I'm spending more on gas than I had planned, but if I have to I will either cut back, or more likely get a more fuel efficient car when the time comes.

If times really do become bleak I will simply cut back like everyone else will have to durring hard times. I really feel for the people who are just starting out durring these times. I still have several income streams that I can draw on while I do nothing. When I got out of college in 1980 it wasn't the best of times either, but I was able to get a job and put alittle money away. I'm alot better off now than I was then.

I'm really more concerned with getting my golf handicap down. I seam to be stuck around 7.
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Old 06-29-2008, 09:32 PM   #160
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Several posters have said how they would me more upset if they were retired in this downswing . I'd be more upset if I was still working and seeing my contributions immediately go into negative terriority .
Personally, I can't imagine a situation where I would rather be working than retired. I'm comfortable with my nest egg and my allocations. If civilization ends and money becomes worthless I probably won't make it, but I'm not anticipating that any time soon. I've seen big ups and big downs, and while I like to fantasize about kicking the market's ass, I'm satisfied with my 8-9% over the long haul.

Harley
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