ugh almost ready to give in to panic

[Milton]

I would imagine that my first years in ER will be pretty nerve-wracking until I have shown myself that I can indeed support myself over a long period of time without working. That's a non-intuitive idea for me and the best way for me to believe it will be the reality of seeing it happen.

If you keep track of your annual expenses and contrast them with the annual income produced by your investments, you should be able to see the evidence in pre-retirement.

I have done this for the past several years, and it was encouraging to see a (hypothetical) deficit become a surplus. I certainly don't want ER to be nerve-wracking!

 

[W2R]

If you keep track of your annual expenses and contrast them with the annual income produced by your investments, you should be able to see the evidence in pre-retirement.

That's a good idea! I just did some back-of-the-envelope computations based on my recent quarterly dividends. It looks pretty good, especially considering that 27% of my inheritance is yet to materialize and that I wasn't considering SS or pension income. If I just assume that 2% SWR is OK, that works nicely too.

Still, as a future Missouri resident (hopefully), I have that "Show Me" attitude and I'll feel a lot better when I see it happening. I worry a lot about a variety of things (needlessly, usually), so I will probably stick to a bit of LBYM for at least the first year of ER and not spend more than my dividends until I know what's what.

I have done this for the past several years, and it was encouraging to see a deficit become a surplus. I certainly don't want ER to be nerve-wracking!

I know - - me either! I have SO much more that I'd rather do in ER than sit around and stew about the market.

 

[Dawg52]

For all the doom and gloom out there, I just checked and I am about 1% (on net worth) below where I was at the stock market peak in October. I guess I'll just stay the course.

Must have very little in stocks.

 

[Enuf]

Must have very little in stocks.

Dawg52, I like your golfing pal in the photo.

Yeah, my thoughts exactly, it's hard to find any positive performance in equities. Maybe he/she is still working and ADDING as OAG mentions.

 

[innova]

We could have all converted our portfolios to cash and bough gold at around $620 back in october and then sold the gold when it reached $1000 a couple months back and invested in oil. Anybody here do exactly that? Anyone who did would be up over 100% for the last 9 months.

Sorry, anyone can look back in time and said "Man that was so obvious we're all so stupid for not doing it". At the time, it was anything BUT obvious. Oil looked too expensive at the time and I recall reading stories about people shorting it. They looked like geniuses then, chumps now.

Hindsight really is 20/20. Coulda woulda shoulda.

Must have very little in stocks.

Not everyone here is retired. My NW has never suffered a down month, mostly because I continue to infuse money into my investments. It would take a serious correction to overpower my contributions.

Sitting tight here. I did learn my lesson in 2001-02, when I was 100% in domestic equities. In the years since, I have gone to an approximate 60/40 split and diversified internationally, which has greatly moderated the pain this time.

I hope everyone here reads that particular post as it is the only prudent action to take in times such as these - having a proper asset allocation based on your ability/need/willingness to take risk.

 

[Milton]

I just did some back-of-the-envelope computations based on my recent quarterly dividends. It looks pretty good, especially considering that 27% of my inheritance is yet to materialize and that I wasn't considering SS or pension income. If I just assume that 2% SWR is OK, that works nicely too.

Still, as a future Missouri resident (hopefully), I have that "Show Me" attitude and I'll feel a lot better when I see it happening. I worry a lot about a variety of things (needlessly, usually)

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 will probably stick to a bit of LBYM for at least the first year of ER and not spend more than my dividends until I know what's what.

Sure, that makes sense.

 

[Dawg52]

Dawg52, I like your golfing pal in the photo.

Yeah, my thoughts exactly, it's hard to find any positive performance in equities. Maybe he/she is still working and ADDING as OAG mentions.

Whoooa, not a bad avatar either. Wish I could figure out a way to add to my portfolio without having to go back to w*rk. Guess I'll just have to hope the old market rebounds one day.

 

[ikubak]

Care to share how you achieved that?

My allocation is precisely as "Sheltered Sam" portfolio from Bernstein's Four Pillars. I've lost 11% from peak.

I'm riding this out but am interest in your allocation for future moves.

I am down 1% mainly because I am still working and maxing out retirement accounts. If I were not working and contributing, I estimate the loss would be 8 -12 percent from the peak. My allocation is around 80 -20. When the market is bad, everybody with stock holdings suffer, but if you are still buying, it's not too bad. I don't know how I will feel when I retire. Maybe I'll adjust the portfolio to be more conservative.

Nice golf partner!

 

[utrecht]

I am down 1% mainly because I am still working and maxing out retirement accounts. If I were not working and contributing, I estimate the loss would be 8 -12 percent from the peak. My allocation is around 80 -20. When the market is bad, everybody with stock holdings suffer, but if you are still buying, it's not too bad. I don't know how I will feel when I retire. Maybe I'll adjust the portfolio to be more conservative.

Nice golf partner!

You know there is an excel formula that will tell you exactly what your portfolio returns are even when you are making regular contributions, right? You shouldnt have to guess that you would be down 8-12 percent if you werent making contributions.

All you are saying is that you lost all of your contributions plus 1% since the high point, but you cant really use that measure to compare to anything to see how your portfolio is doing.

 

[Rustward]

I am down 1% mainly because I am still working and maxing out retirement accounts. If I were not working and contributing, I estimate the loss would be 8 -12 percent from the peak. My allocation is around 80 -20.

It just seems to me that if you quote a percentage up or down over some time period you should exclude the effect of any contributions made (or distributions taken) over that period. There are so many variables -- how much did you contribute, what percentage of the portfolio was that, what was the effect of the additional contributions performance on the total...

Thanks for clearing it up.

 

[Nords]

We're also not hearing a whole lot from the folks who like to arb a mortgage.

I'm waiting for IJS to pay its next distribution.

I was kinda hoping that'd happen in July, but it might not be until October...

 

[ikubak]

You know there is an excel formula that will tell you exactly what your portfolio returns are even when you are making regular contributions, right? You shouldnt have to guess that you would be down 8-12 percent if you werent making contributions.

All you are saying is that you lost all of your contributions plus 1% since the high point, but you cant really use that measure to compare to anything to see how your portfolio is doing.

I didn't realize this would cause such a stir. In my original post, I stated: <<For all the doom and gloom out there, I just checked and I am about 1% (on net worth) below where I was at the stock market peak in October. I guess I'll just stay the course.>>

I'm not attempting to do a precise analysis of my stock market returns. I am just stating that for all the bad news, being down 1% on my net worth from the peak isn't so bad, nothing more, nothing less.

 

[Moemg]

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 .

 

[ikubak]

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 .

I think I would dislike being retired and seeing the downswings more, but not having been there, who knows. My net worth is lower than it was in October, but just last month, I hit a new net worth high, so I don't feel like my contributions immediately go into negative territory. I also know the market is going to go up and it's going to go down, and I don't know when it's going to go in which direction. I focus more on monthly income and monthly spending (things I can control) and let the automatic investments (403b, 401K, Roth, Pension) continue on autopilot. I am still 5+ years away from retirement.

 

[rogersteciak]

... 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.

You might want to set up a cashflow spreadsheet by month and keep it updated on a daily (expenses), weekly (investments), and monthly (dividends) basis. You can always project future values for these numbers by using your postulated rates for inflation, investment returns, and dividend growth.

It took me a bit of work to set up my spreadsheet initially because it forced me to think through all of the financial issues I might encounter, but the spreadsheet is easy to maintain and it keeps me current on my financial situation virtually in real time (i.e., I overwrite the projected numbers for the current month by the actual numbers as I get them).

The whole process is so automatic for me now that I wonder how I ever survived before personal computers, electronic spreadsheets, and online banking came into existance.

 

[Enuf]

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.

 

[DblDoc]

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.

DD

 

[Enuf]

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?

 

[Razor]

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?

 

[Razor]

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.

 

[Enuf]

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.

 

[Enuf]

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.

 

[RockOn]

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.

 

[Dawg52]

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.

 

[RockOn]

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.