Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 06-23-2014, 06:56 PM   #21
Recycles dryer sheets
dand76's Avatar
 
Join Date: Mar 2013
Location: SE Washington
Posts: 52
I've been analyzing the same question with my spreadsheets. Except I get really nervous when it tells me that my nest egg would drop to 40% of the original value. I wouldn't be comfortable at all with it disappearing completely.
__________________

__________________
dand76 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-23-2014, 11:39 PM   #22
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,863
I'd be pretty happy to play chicken with SS. You'll be able to decide each year how your portfolio is doing (maybe better than expected). No need to rule anything out yet. If things turn south, then start taking SS before 70. Age 73 gives you a three year buffer, which is not too bad. My only big concern would be having the portfolio available to support any big emergency spending. If a three year buffer looks too slim, then start SS a little earlier.
__________________

__________________
Animorph is offline   Reply With Quote
Old 06-24-2014, 12:00 AM   #23
Recycles dryer sheets
 
Join Date: Nov 2005
Posts: 355
For you, consider waiting until later to decide.

My personal preference is to wait to get the larger, inflation protected amount. I have no fear of any sudden changes in the payout. Elected officials won't let that happen 'cause they like to stay elected. One of my parents lived to age 92 so I may need the income later, much later.
__________________
heyyou is offline   Reply With Quote
Would you take this risk of maybe running out of assets?
Old 06-24-2014, 12:12 AM   #24
Thinks s/he gets paid by the post
 
Join Date: Jun 2014
Posts: 1,035
Would you take this risk of maybe running out of assets?

Quote:
Originally Posted by jebmke;

We are about due for a drop -- it could happen tomorrow or it could be months or years away. 50-60% haircut would be normal.

50% drop is far from normal. How many times had that happened, twice?

A 10-20% drop is normal and "healthy".


Sent from my iPhone using Early Retirement Forum
__________________
dallas27 is offline   Reply With Quote
Old 06-24-2014, 12:13 AM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,449
Quote:
Originally Posted by dallas27 View Post
50% drop is far from normal. How many times had that happened, twice?
Yes, twice within the last 12 years.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 06-24-2014, 12:30 AM   #26
Thinks s/he gets paid by the post
 
Join Date: Jun 2014
Posts: 1,035
Quote:
Originally Posted by NW-Bound View Post
Yes, twice within the last 12 years.

I can't agree with that statement, see link. That said, i would love if stocks went on sale like that more often.

http://247wallst.com/investing/2011/...t-collapses/2/

And it was thrice. Peak to trough, which is sandbagging it, really.


Sent from my iPhone using Early Retirement Forum
__________________
dallas27 is offline   Reply With Quote
Old 06-24-2014, 10:46 PM   #27
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,677
I don't see the risk in this plan.

You don't have to "declare" that you'll take SS at 70 and have to stick by that decision.

See how things go and make a decision based on the reality of the moment. I would definitely keep some money on hand for emergencies (ie. not wait till my portfolio was depleted before applying for SS)

This is a plan, not a commitment.
__________________
walkinwood is offline   Reply With Quote
Old 06-24-2014, 11:10 PM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,449
Quote:
Originally Posted by dallas27 View Post
This article lists the 2000-2002 decline as the 7th, at 34% loss. However, they use the Dow Jones Industrial which is only 30 stocks. A better measure is the S&P 500 which encompasses something like 80% of the market.

My own daily record shows that the S&P 500 was 1527 the week ending on Fri 3/24/2000, and 777 on 10/09/2002. That was a drop of almost 50%.

Note that in the 2000-2002 rout, the S&P dropped more than DJ because the former has more tech stocks. The NASDAQ, being loaded with dotcoms, fared the worst. It dropped from 5048 to 1114, for a loss of 78%. As of this writing, 14 years later, the NASDAQ is only 4350, still short of its peak in 2000.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 06-25-2014, 05:16 AM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,983
Quote:
Originally Posted by jebmke View Post
Where was your money when the bottom fell out in '08-09? If you had money in equity and the market dropped by 50%, how would you feel? Would you buy more at lower prices or run for the hills?

We are about due for a drop -- it could happen tomorrow or it could be months or years away. 50-60% haircut would be normal.
Not to minimize the potential impact, but "normal?"
Attached Images
File Type: gif 164.gif (39.4 KB, 30 views)
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 06-25-2014, 07:14 AM   #30
Thinks s/he gets paid by the post
 
Join Date: May 2014
Location: Utrecht
Posts: 2,213
Quote:
Originally Posted by Lisa99 View Post
Would you take a risk like this?... running out of money is super scary but it does answer the question of longevity risk and if all of your income is coming from SS then the stock market vagaries are no longer an issue.
Who do you trust more, the market and your ability to invest or the government and its ability to keep its commitments to retirees?

In any case, do a yearly evaluation.

I'd trust most governments to honor existing commitments, but not trust them enough that they won't fiddle around with low-balling COLA and such.
__________________
Totoro is offline   Reply With Quote
Old 06-25-2014, 07:26 AM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,328
We are more interested in avoiding portfolio depletion and having multiple independent income streams, including investment income, in retirement so we would not run down the portfolio. If we are still working part-time at 62 we will most likely delay for income tax and ACA subsidy reasons. Our spreadsheet has us not working and both taking SS at 62 so that is the default plan with working optional.

We also do not trust the government to not lower SS's COLA or cut benefits in other ways. I think multiple income streams provide the most security for us.
__________________
daylatedollarshort is offline   Reply With Quote
Would you take this risk of maybe running out of assets?
Old 06-25-2014, 09:09 AM   #32
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
Would you take this risk of maybe running out of assets?

Quote:
Originally Posted by Midpack View Post
Not to minimize the potential impact, but "normal?"

I see 6 out of 15 that are ~50% or greater declines ( rounding up on the 46, 48, 49 declines). Seems not unusual to me.
__________________
photoguy is offline   Reply With Quote
Old 06-25-2014, 09:27 AM   #33
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Eagan, MN
Posts: 3,070
I am planning on SS at age 70.

I am going to make a health assessment every year, or every month, on how healthy I am. Assuming all is OK, 70 is the date. This will help out any surving spouse, assuming I have one. I may get married at 69, just for that reason.

Rental income from 56 until 65. Investment income as needed, but plan on selling rentals at 65 and themn using investment income. Estimated value would be ~1.5M in equity I would roll into a 1031 exchange. I should have ~2M in investments by then too, assuming a reasonable (5%) total return.

Wait if you can, collect early if you must.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is online now   Reply With Quote
Would you take this risk of maybe running out of assets?
Old 06-25-2014, 10:28 AM   #34
Thinks s/he gets paid by the post
RetireAge50's Avatar
 
Join Date: Aug 2013
Posts: 1,121
Would you take this risk of maybe running out of assets?

I think it is reasonable to use a good chunk of your portfolio for income in your early years. But not all as social security alone would not be good.

We plan to lean heavily on our investments for income between age 50 an 65 then later use mostly pensions and SS.
__________________
RetireAge50 is offline   Reply With Quote
Old 06-25-2014, 10:31 AM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,983
Quote:
Originally Posted by photoguy View Post
I see 6 out of 15 that are ~50% or greater declines ( rounding up on the 46, 48, 49 declines). Seems not unusual to me.
And 9 out of 15 are 36% or less. A "50-60% haircut" is certainly possible, but arguably "normal" is 34%...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 06-25-2014, 11:31 AM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,299
Quote:
Originally Posted by Midpack View Post
And 9 out of 15 are 36% or less. A "50-60% haircut" is certainly possible, but arguably "normal" is 34%...
This is just semantics, but this discussion made me curious. 'Normal' is rather fuzzy, but if we look at "plus or minus one standard deviation", then the numbers in that list give us an average drop of 41% and a standard dev of 18%, which is ~ 23% to ~58%.

I don't know that anyone defines one std dev as a 'normal' amount of variation - 'normal' generally refers to the distribution itself. Just one view for comparison, maybe meaningless, but I was curious.

And it also looks like they used 20% as the definition of a bear market, so that automatically eliminates all the < 20% drops from the data-set, so a 'normal' bear would be expected to be greater than 20% with that limit applied (unless every bear was exactly 20%).

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 06-25-2014, 11:52 AM   #37
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 882
Quote:
Not to minimize the potential impact, but "normal?"
True; "not unusual" would have been a better term. As an early retiree, I don't leave more in equity than I would miss terribly if 50% +/- disappeared and never came back (in my lifetime).

By "miss terribly" I mean, if it would change my lifestyle/spend rate.
__________________
jebmke is offline   Reply With Quote
Old 06-25-2014, 12:15 PM   #38
Recycles dryer sheets
 
Join Date: May 2014
Location: Yuma AZ
Posts: 270
Rough numbers:

If I stick with an assumption I'm not working to earn a living after reaching age 62, I've never ran a spreadsheet where it made sense to hold of on turning on the promised SS payment.

If I'm 62 and don't need the SS money until age 70, that's 8 years of SS money I can put into investments.

$1,628 - Age 62 monthly payment
$2, 279 Full retirement age (age 66yr 2 mo) monthly payment.

50 months between earliest retirement & full payment age.

$81, 400 (if the cash is just stuffed into a mattress)

$651 monthly difference in the payments.

If I at full retirement age I just pulled $651 out the mattress each month, the cash would last 125 months (10 years 5 months). So if I take SS at the earliest date, just stack the cash without interest or investment, and start spending it later, I'm 76 and 7 months before I "break even".

If I die anywhere between age 62 & 76yr 7mo, there's a pile of cash there for the heirs that otherwise would not exist.

If the early cash is invested at 4% interest, the break even point becomes age 81 or so.

If I use the early cash to pay off the mortgage on a small rental property I have some pocket cash from the SS at age 62, and by age 66+ I have "free and clear" rental income that exceeds the full SS payment difference.

Yes, I know there are those who dislike rentals. I prefer that risk to the risk of SS disappearing.
__________________
unno2002 is offline   Reply With Quote
Old 06-25-2014, 01:20 PM   #39
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,573
Quote:
Originally Posted by ejman View Post
What if SS gives everybody a 25% haircut as SS publications been clearly stating for several years now it will do when the trust fund runs out?
EJ, would you mind telling us in which SS publication you saw the 25% haircut?
__________________
Rustward is offline   Reply With Quote
Old 06-25-2014, 01:36 PM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
braumeister's Avatar
 
Join Date: Feb 2010
Location: Northern Kentucky
Posts: 8,630
I'm not ejman, but you'll find it here:

http://www.socialsecurity.gov/OACT/TR/2013/tr2013.pdf

In the first five pages of the pdf you'll see the whole overview of the future situation.
__________________

__________________
braumeister is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Running from or running to? Unpaintedhuffhines Life after FIRE 25 04-23-2013 10:29 AM
I think I'm FI...maybe not, maybe so...um I dunno! panhead FIRE and Money 18 11-19-2012 12:40 PM
Need advice, would you take this risk? nkdude FIRE and Money 26 10-06-2008 02:58 PM
Maybe the Oil Price Tide Will Be Running Out For A WHile haha FIRE and Money 7 08-12-2008 12:34 AM
What Assets Are At Risk When Trustee Is Sued? Danny Other topics 15 03-20-2006 06:10 PM

 

 
All times are GMT -6. The time now is 03:17 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.