Retiree Poll on The Financial Crisis

[W2R]

I am not retired yet (so I did not vote), but do plan to retire next November. My investments are pretty much in place. I would have voted "worried but no impact", I guess, though "all of the above" would apply depending on my mood du jour.

Looking at my dividends for the past half year, and assuming no change in portfolio size (yeah, I know....), on just dividends and not dipping into my cash reserves I will be able to spend over 40% more after ER than I have been spending on average during the last few years.*

BUT - - We may not have hit bottom yet. Also, who knows - - dividends might be cut a lot, too, and that could reduce my projected income. So, I will probably try to keep my spending down if the market continues like this, just in case. This is for emotional, not financial reasons since it will allow me to feel like I am doing something about market effects on my portfolio. If the market continues to recover, I'll spend more.

* The exact amount depends on my tax rate. As always, I am only counting on 70% of all income being left after taxes, which is probably way overly pessimistic. And yes, I am not spending much right now but I am used to that and anyway I don't have a lot of time to shop or enjoy my purchases due to w*rk. And, I didn't count the money I gave my daughter a couple of weeks ago for her wedding and/or honeymoon, since we agreed that is a one-time expense.

 

[Martha]

I am seriously worried about my relatives that must work and have jobs that may be lost because of the recession.

 

[W2R]

I am seriously worried about my relatives that must work and have jobs that may be lost because of the recession.

Absolutely!! I'm even really worried about people that I don't even know who must work and who might lose jobs. I know first hand what it is like to need work and have no job and that is terrible. However, I didn't think that was relevant for this particular poll so like others, I didn't mention that. Maybe I was wrong.

 

[freebird5825]

I am seriously worried about my relatives that must work and have jobs that may be lost because of the recession.

this is very similar to the conditions when i graduated from college in 1980. it wasn't pretty. but people who want to work will always find something. let's hope things improve.

 

[tryan]

Quote:
Originally Posted by Martha
I am seriously worried about my relatives that must work and have jobs that may be lost because of the recession.

yeah, same feeling for my tenants ... need them to stay employed, too.

 

[Midpack]

I am seriously worried about my relatives that must work and have jobs that may be lost because of the recession.

Me too, my advanced-middle-aged single sister works at Citi...ouch.

 

[harley]

I'm not sure that the pension vs. individually financed FIRE issue really matters that much. I don't have a pension, all my income comes from my various investments. I am required to manage those investments, but that process isn't all that onerous. I have a decent income pretty much guaranteed by my well diversified investments. If things were to go to hell enough that I couldn't count on that money (after exhausting my multi-year cash supply first), I doubt very much that most non-gov't pensions would be worth much. I also suspect that in the above situation gov't pensions wouldn't be all that dependable either. We'd be looking at a total chicken little collapse. The gov't would be printing money 24x7, while claiming 3% inflation for the COLAs.

I voted slightly worried with a small decrease in lifestyle. My worry is for my family and friends, especially my DD who is just starting out. However, like Freebird said, things aren't all that much different than in the early 80s, when I was starting out myself. If you want to work, there's usually something available. And as I remember, after those first few tight years the raises got bigger to counter inflation, and opportunities were everywhere for those willing to step up.

My decrease in lifestyle is mostly just emotion/common sense. When things get tight, it never hurts to tighten the belt a bit. Who needs to eat out 5 times/week? It just creates a little leeway, which I can use to help out DD and DGD if things go way south for them.

JMO.

 

[Midpack]

I'm not sure that the pension vs. individually financed FIRE issue really matters that much. I don't have a pension, all my income comes from my various investments. I am required to manage those investments, but that process isn't all that onerous. I have a decent income pretty much guaranteed by my well diversified investments. If things were to go to hell enough that I couldn't count on that money (after exhausting my multi-year cash supply first), I doubt very much that most non-gov't pensions would be worth much. I also suspect that in the above situation gov't pensions wouldn't be all that dependable either. We'd be looking at a total chicken little collapse. The gov't would be printing money 24x7, while claiming 3% inflation for the COLAs.

Having a COLA'd pension & retiree health care would sure reduce risk. Pensions pretty much remove longevity and investment return risk. Those of us with self-managed retirement nest eggs pretty much have to plan on inferior returns and beyond average longevity or face plan failure.

Inflation risk, which you identify, hits SIRE & FIRE equally --- not a distinction IMHO.

We're all in trouble if there's some sort of catastrophic economic failure though, so a moot factor.

 

[Moemg]

. And, I didn't count the money I gave my daughter a couple of weeks ago for her wedding and/or honeymoon, since we agreed that is a one-time expense.

Congratulations on your daughter's wedding . I cried when I took my daughter to try on wedding gowns . It was so emotional . I also contributed a lump sum and bought the dress ,veil & tiara . Money well spent . The next one time expense will be outfitting the nursery .

 

[W2R]

Thanks, Moemg. I am so happy for both of them! He proposed to her about a month ago on top of the Space Needle in Seattle, with the lights of the whole city below them and the stars above, which I thought was SO romantic. He even had the ring and did the whole bended knee thing, and the ring actually fit.

I told her she could spend the money on a fancy wedding, honeymoon, new car, partial down payment for a house, or whatever. She is absolutely dying to go to Japan for their honeymoon, but they are discussing it. I flew out to Oregon two weeks ago to see them, and it is fun to be around people who are so happy!

I don't know if they plan to have kids, or not. (They haven't even set a date for the wedding, yet.) But if they do, then I guess I can afford a crib. Imagine me, "Granny W2R"!!

 

[mickeyd]

In a couple of years from now we'll all look back on 2008 and claim that we rode it out with no emotions and stayed the course. Some will have lied to themselves.

 

[haha]

In a couple of years from now we'll all look back on 2008 and claim that we rode it out with no emotions and stayed the course. Some will have lied to themselves.

It seems that most of us, maybe even all of us, have not been net sellers of stock during this downturn. As for emotions, no shame in being shaken up by some of these huge drops.

Ha

 

[Bikerdude]

I'm not really worried even though I won't be able to do some big ticket items until the market comes back. Worst part is I'm not getting any younger so the timing of this setback sucks and to add insult to injury I didn't even need to have as much in equities as I had. Let that be a lesson to ya Sonny.

I have a pension and will collect SS next year. Between the two they will provide 60% of my normal living expenses and my portfolio should kick off enough to more than cover the remaining 40%. So now I just wait to party.

 

[Notmuchlonger]

In a couple of years from now we'll all look back on 2008 and claim that we rode it out with no emotions and stayed the course. Some will have lied to themselves.

I have emotions. I was so frozen with fear I stayed with my original plan. Maybe years from now Ill wish I [-]panicked[/-] made the smart move and went to cash.

 

[Moemg]

What bothers me that during the tech boom I started feeling uneasy and bailed out of the high flying tech stocks so how come I did not see it coming this time ? Was it just greed that motivated me to stay put or overconfidence in the market ?

 

[ziggy29]

What bothers me that during the tech boom I started feeling uneasy and bailed out of the high flying tech stocks so how come I did not see it coming this time ? Was it just greed that motivated me to stay put or overconfidence in the market ?

It sounds like what you did back then was more a matter of rebalancing away "sector risk" than a matter of market timing. A rebalancing to avoid being too overweight certain sectors and asset classes is part of prudent asset allocation.

But the difference is that in the 2000-2002 bear market, asset allocation worked well -- while techs and large caps stunk up the joint, small caps and REITs were up sharply. Gold miners doubled. Emerging markets held their own and those who were properly diversified in '00-'02 avoided getting mauled by the bear.

In this Ursa Major, pretty much everything except cash and Treasuries have gone down together, so it feels like "asset allocation has failed." I think that's what got almost everyone badly hurt this time -- other than the flight-to-safety assets I mentioned above, diversification hasn't much helped.

 

[FIRE'd@51]

What bothers me that during the tech boom I started feeling uneasy and bailed out of the high flying tech stocks so how come I did not see it coming this time ? Was it just greed that motivated me to stay put or overconfidence in the market ?

What made it harder for me this time was that I had become used to the large and growing dividends from the financial companies. When you coupled that with the favorable tax treatment that dividends have been getting since 2003, it became hard to sell them. I figured the high dividends would let me ride out a downturn. How wrong I was!

Also, unlike 2000, the P/E's never went crazy due to wild price increases. It's just that for the financials, the E went away very quickly.

 

[NW-Bound]

About financial stocks, my wife worked for one, and left in 2006 due to job pressures. So, I advised her to sell out all of her company stock in her 401k. I myself have no financial stocks among my individual equities, except what was in some of my MFs. Later found out after the fact that some of them got lots!

Then, sold some more of other stocks and MFs to raise cash, and thought that was enough. It was really a tsunami, and you thought you would be safe standing back 300 ft from shore!!!

Anyway, harm is already done, and I am hanging on. As I mentioned before, I lost 50% in the 2000-2003 crash, and then came back by changing strategy. I've been down only 30% this time (so far!), so can take it better than most. I've seen people losing 30% this time and already crying murder.

PS. I'd like to add that some foreign markets went down a lot more than ours. This is a world-wide problem, not isolated to the US.

 

[template]

I've been retired for 7 years. My wife's job seems secure. We're pretty frugal and our life style was affected more by the skyrocketing gas prices than decline in the stock market.

Due to the plunging stock market and lower CD rates, our net worth is down about 4% from its peak. I don't feel too bad about that when I read about the plight of some of my friends and neighbors.

We keep most of our money in CDs, US Govt savings bonds, stable value funds, etc. I had reduced our exposure to the stock market a few years ago because I have a lower risk tolerance than most folks. So glad that I did that now, though I had doubts back then that I would be missing out on the stock market profits others were celebrating.

 

[CalTex]

I have to admit I’m rattled. While my brain tells me to stay the course and this too shall pass, I can’t avoid the occasional spells of panic (what if this really is Great Depression II!!!). The worst part is my DW. She is much more risk averse than me and is lobbying to dump our equities for cash. It is hard to see her so distressed, even though I’m convinced this would be exactly the wrong move. We are in our mid 50s & 100% self financed with about a 50/50 allocation. Although our income hasn’t changed, the huge hit to our net worth makes many of our retirement dreams (esp. travel) seem implausible.

 

[haha]

I have to admit I’m rattled. While my brain tells me to stay the course and this too shall pass, I can’t avoid the occasional spells of panic (what if this really is Great Depression II!!!). The worst part is my DW. She is much more risk averse than me and is lobbying to dump our equities for cash. It is hard to see her so distressed, even though I’m convinced this would be exactly the wrong move. We are in our mid 50s & 100% self financed with about a 50/50 allocation. Although our income hasn’t changed, the huge hit to our net worth makes many of our retirement dreams (esp. travel) seem implausible.

I understand your uneasiness, especially when your wife is distressed. You may even feel some responsibility, since you perhaps argued for a larger equity stake than she would have preferred.

But look at it this way.Even if the equity markets lost 75% from the top, a top mind you that was not outrageously overpriced, and lost it straight down with no meaningful rallies that you could use to lighten up if you so desired, you still would go down only 37.5 on your 50:50 portfolio, and this is not likely to be permanent.

Only you can know what is best for you, But one idea would be to look at it again when equity prices are higher. Long term you may want an even more conservative AA than 50:50.

Ha

 

[W2R]

I have to admit I’m rattled. While my brain tells me to stay the course and this too shall pass, I can’t avoid the occasional spells of panic (what if this really is Great Depression II!!!).

Actually that sounds pretty calm from where I sit. I don't feel panic but often I think "what if this is many times WORSE than the Great Depression!".

Times were extremely tough during the Depression, but remember that it did not last forever. People survived the Great Depression and some even found their net worth to be greater afterwards than it was before.

We will survive the present economic crisis. With any luck it won't be too many years until we are bragging on the ER-Forum about how we made our millions by investing in XYZ back in 2008.

Although our income hasn’t changed, the huge hit to our net worth makes many of our retirement dreams (esp. travel) seem implausible.

Surely your dreams of travel included some less expensive trips nearby? Now would be the time to think about the bargain basement trips. Even day trips can be fun.

Frank and I had a wonderful time on a one week trip on the week before Thanksgiving, visiting our tentative ER location in southern Missouri. We drove there, and even went to Kansas City for a day on a whim, as well as Lake Stockton, Fantastic Caverns, and any other local attractions that we thought were appealing. The entire week including motels, restaurants, and gas, cost us less than $1000.

And, Moemg, I guess from our discussions on past threads that possibly you might be wondering how we split those expenses up between the two of us so I will say now that we each paid half!

 

[jug]

Not worried about current situation, laddered CD's several years back, but am concerned about possible severe inflation kicking in due to big time bail out. But on other hand, if inflation kicks in, then yield of CD's will go up, so that should help.

In short term, recession for fixed income folks could be good as prices tend to fall. If economy stagnates over long term, could be bonus for us.
jug

 

[albundyz]

I'm 57. Been retired for a year. i took out enough cash to last me for 3 years. I have 2 years of cash for living expenses left. So, I'm not worried right now, but if things are the same in 2 years, I'll be more concerned.

When I retired, I developed two strategies IF money got tight. The first is that I could always go back to work. That's not that bad really. Secondly, I could downsize my house and, thus, reduce expenses. Well, I lucked out. I spotted a good deal. Was able to sell my house (in So Cal) and bought a foreclosed house (in So Cal). I now have no house payment.

I also got a bit lucky. Most of the financial books that you read say that IF you get a lump sum (for leaving your work), you should invest that money immediately. Fortunately, for me, I decided to chicken out and dollar cost average into stocks. As a result, I've lost a lot less money. Currently, we're at 33% of our money in stocks, but some of those investments were made after the stock market already had declined.

I'm hoping that in 2 years, the stock market will start to rebound. Otherwise, it's NO traveling and seeking work as a greeter at Walmart.

 

[unclemick]

Ok ok - one more time - pssst Wellesley.

Or google and do some reading on whatever you can find on the early days of : Wellington fund founded 7/1/1929 in time for the Great Depression.

This decade Wall Street has started to feed the ducks - with dividend oriented funds and ETF's.

Old time religion may make a come back in slightly altered form.

Dividends and interest can be converted into cash - which is almost as good as real money - to paraphrase that legendary guru Yogi Berra.

heh heh heh - I have this personal problem - having been so cheap the first ten, 1993- 2003, years of ER, I've been trying to force myself to raise my standard of living which puts me out of my comfort zone and tends to make me nervous - but I hear you can't take it with you and after 15 yrs of ER I don't seem to be getting younger. .