Retiring mindset with downmarket

[retire48in2018]

We had 2 years of cash. So we think we are prepared. (Retired at 51, now 52).


But seeing such a down market in year 2 of retirement is tough.

It’s not a mental thing - it’s a heart thing. When there were market swings in past - while working and contributing to savings - no biggie.

Now ….

We will stretch the money until market recovers, but we find ourselves thinking too much about the down market before we force a change of subject.

Practically speaking - we throw ourselves into more hobbies, time with family, etc. I look less often at brokerage accounts. We verbalize to each other the steps we have taken and measures that we have in place (cash saved up, lowered budget, etc).

I am surprised at how much we think about it - and not be at peace - for those moments.

What do you do - practically speaking - to try and keep peace?

 

[TripleLindy]

I was thinking of the same thing. To me, it’s a psychological issue. For example, I find myself reading the Cheapskate thread more instead of Blow that Dough. Our portfolio, while taking a hit, still shows 95% probability of survival with both my wife and I living to 100, and that includes a spending budget higher than actual. Yet, the market downturn still weighs on me. Around mid-year next year, we will be withdrawing from our investments for the first time since retirement, so that makes me nervous.

In terms of keeping peace, I keep reminding myself just how fortunate we are to retired while still healthy and able to enjoy life. We’ve pulled back on spending just a bit, but not only because of the market, but also because of some wacky situations with things like car pricing. My wife’s SUV is 21 years old, but only has 105k miles and is in wonderful condition. We are planning a long road trip and if car pricing wasn’t out of control with over MSRP pricing, we’d probably be in the market for a new one.

 

[COcheesehead]

I retired in 2020 right in the middle of the pandemic. I prepared so many lists and spreadsheets to calm my nerves, but once I pulled the trigger things just all fell into place. I really only reference one spreadsheet now - a master dashboard of all our finances - that keeps me grounded.
I also looked for ways to increase cashflow. Now is a great time to look at fixed income. Our bond ladder now throws off 50% more than it did when we retired. I also picked up a fun job working 5-7 days a month at a local winery. It gives me all the social contact I want, plus puts some extra blow the dough money in my pocket.
My wife did the same thing. She does some freelance photography on the side.
Keep an eye on finances, but don’t let life pass you by either.

 

[DawgMan]

Understand. I suppose it depends to some degree on if your plan was sound when you retired and how you accounted for contingencies. I retired earlier this year anticipating some level of market correction/looming recession. In my case, I ran allot of traps on "what if" scenarios and have allot of levers to pull depending on this or that. As an example, I set up a 10 yr individual bond ladder to effectively ride out 10 years of bad equity returns. Probably overkill, but it appeals to my "what if the $hit hits the fan" scenario. However, this still keeps me about 70% invested in equities. Despite seeing my balances down from end of 2021, I am oddly at peace.

Maybe consider some level of a bond ladder beyond 2 years of cash?

 

[COcheesehead]

Understand. I suppose it depends to some degree on if your plan was sound when you retired and how you accounted for contingencies. I retired earlier this year anticipating some level of market correction/looming recession. In my case, I ran allot of traps on "what if" scenarios and have allot of levers to pull depending on this or that. As an example, I set up a 10 yr individual bond ladder to effectively ride out 10 years of bad equity returns. Probably overkill, but it appeals to my "what if the $hit hits the fan" scenario. However, this still keeps me about 70% invested in equities. Despite seeing my balances down from end of 2021, I am oddly at peace.

Maybe consider some level of a bond ladder beyond 2 years of cash?

I did a ten year ladder as well - bridging us to social security at 70. It really does provide peace of mind.

 

[HenryD]

Our original date was 2025 and I've been hoping for the downturn would happen before then, so I guess I got my wish there. We had thought about bringing the RE date up to 2024 but now we'll be digital nomads 2023-2025 instead. Technically it's reverting to the original, but 'feels' like a sneaky OMY. I'm OK with it since at least we'll be traveling. FireCalc still has us 100% in 2025, 95% in 2024.

 

[FLSUnFIRE]

I go with the flow better than I thought I might.... I can't control the market and I can't get my job back anyway (like I'd ever do that... I've experienced freedom, I'm spoiled!). I planned and I pulled the trigger and it's time to trust the 20+ years of FIRE planning. Do I like it? No. If the market rallied 50% would I spend a bit more, probably. I'm a little tighter than I might otherwise be but certainly not suffering for it and have pretty modest desires and am happier and more content than I've ever been. I'll be selling to replenish my cash later this year regardless of what the market is doing so no value to me worrying about it. Once I sell, I won't make any market transactions (other than HSA contribution) until the end of 2023 so what the market does for the next 12 months is irrelevant to my daily life and causes me no stress. I watch it because it is interesting. If the market is still down in year 3-4, I may start some contingency planning depending on what the numbers look like.

 

[COcheesehead]

This guy has some really good podcast content on retirement.
https://www.rogerwhitney.com/

He recommends 5 years of liquid assets at the beginning of retirement.

 

[audreyh1]

I do know that it took me about 2 years after retirement to get comfortable with living off investments alone.

I retired in 1999 so we entered an almost 3 year bear market in early 2000. However, due to various positions and averaging into the market we were never under a cash crunch nor did we have to reduce our expenses, so I can’t advise you on that part.

 

[joesxm3]

I was cash heavy when I retired in 2016 and still have at least five years expenses liquidity in taxable accounts. Part way into the downturn I started to increase equity allocation, too soon. Even being cash heavy I am down almost 20% from my ATH.

I ran lots of spreadsheets and baked in a 15% loss in my first RE year. Not rocket science, but close enough for me.

Since retiring I keep a close eye on things, but have given up worrying. I figure I probably have enough and it is impossible to guess where inflation will go or how long I will live. So, what happens happens.

I am trying hard to position for minimal taxes from IRA and to increase equity to be more normal so I get a decent ROI over the next 20 years in case I survive that long.

 

[freedomatlast]

I have between 6 and 7 years of living expenses in cash. Cash flow is better now based on higher interest rates for the cash. I don't check balances on the equity accounts very often. Even with the market pullback, the NW is still substantially higher than when retired in 2019.

 

[daylatedollarshort]

We had 2 years of cash. So we think we are prepared. (Retired at 51, now 52).


But seeing such a down market in year 2 of retirement is tough.

It’s not a mental thing - it’s a heart thing. When there were market swings in past - while working and contributing to savings - no biggie.

Now ….

We will stretch the money until market recovers, but we find ourselves thinking too much about the down market before we force a change of subject.

Practically speaking - we throw ourselves into more hobbies, time with family, etc. I look less often at brokerage accounts. We verbalize to each other the steps we have taken and measures that we have in place (cash saved up, lowered budget, etc).

I am surprised at how much we think about it - and not be at peace - for those moments.

What do you do - practically speaking - to try and keep peace?

TIPS and I bonds are doing well right now with high inflation, and the yields on individual nominal bonds have been increasing.

 

[Montecfo]

I take heart in having a long runway with no need to touch stocks, low SWR and lots of expenses being discretionary.

Also selective buying of beaten down stocks.

 

[pacergal]

OP-- I hear you about the uneasy feeling. DH and I reassure each other frequently that we started retirement with a good plan and remain on track.
And we lived., worked , and invested during many downturns, and the subsequent upturns that followed.
Our plan included what ifs. We can readjust our budget.
I run firecalc every once in a while for reassurance.

If you had a good, solid plan, trust it and go on with your life.
If you are finding yourself unable to sleep or too uneasy, perhaps a look at your investment strategy or asset allocation is warranted to reduce your risk tolerance to "able to sleep well"

 

[W2R]

We had 2 years of cash. So we think we are prepared. (Retired at 51, now 52).

But seeing such a down market in year 2 of retirement is tough.

It’s not a mental thing - it’s a heart thing. When there were market swings in past - while working and contributing to savings - no biggie.

Now ….

We will stretch the money until market recovers, but we find ourselves thinking too much about the down market before we force a change of subject.

Practically speaking - we throw ourselves into more hobbies, time with family, etc. I look less often at brokerage accounts. We verbalize to each other the steps we have taken and measures that we have in place (cash saved up, lowered budget, etc).

I am surprised at how much we think about it - and not be at peace - for those moments.

What do you do - practically speaking - to try and keep peace?

Good idea to throw yourselves into your hobbies, especially the hobbies that don't require you to buy stuff right now. That's what I do, too. I look at my investment accounts every day. I check to see if my SS or pension has come in. I record every penny that I spend, even from cash in my wallet. For me, knowledge is power so the more I know about my financial situation, the more I feel in control of it. YMMV!

Frank and I spend a lot of time together (we don't live together although I bought the house next door to his). We talk about what we would do to survive longer if the economy really did collapse, which we know is unlikely. We talk about how few things we actually need. We have a "Plan B" and a "Plan C" already roughly in mind, although I'm sure we'll never need them. He thinks survivalism is a fascinating topic to research online, and he does come up with some interesting ideas.

My approach is mostly to just spend less. I'm saving to build my nestegg, even in retirement because I want to have enough despite inflation. Right now I don't have to dip into my nest egg because I have SS, mini-pension, and RMD's to live off of (as planned before I retired).

We remind one another that with initiative and as much ingenuity as we can muster, we have already been through some very tough situations that life has thrown at us. And we have come out the other side, unscathed.

Right now I have enough cash to cover 21 years of my average cash spending from my portfolio if that amount does not increase.

However, with inflation, I expect that annual cash spending could possibly skyrocket at some point. Still, if I live on half what I had planned to spend this year, I will have nearly enough left over from this year, to cover next year too. That's a start.

 

[gauss]

I did a ten year ladder as well - bridging us to social security at 70. It really does provide peace of mind.

+1


#1) I rarely look at brokerage balances when markets are down

#2) I have enough in cash or target maturity bond funds to get me through the next 9 years or so (possibly much more depending on spending)

#3) I look forward to age 72 when all of our "permanent" income streams (ie DW and my SS - my pension etc.) will be turned on. At that point should have a fairly small need for investment assets.

 

[Souschef]

Between our SS and small pensions, we have an income of about $71 K, which is covers most of our expenses.

 

[connor77]

This guy has some really good podcast content on retirement.
https://www.rogerwhitney.com/

He recommends 5 years of liquid assets at the beginning of retirement.

This is great. Thanks a lot for posting this!

 

[audreyh1]

The biggest challenge to our retirement was actually during the 2008 financial crisis which occurred 9 years into our retirement. We were fully invested at that point and by the end of 2008 watched our net worth return close where we started in 1999, giving up almost all of the prior growth. Obviously we’d also been living off investments during that time period so that accounted for some of the decline.

Amazingly we stuck to our investment plan. I was a bit bloody from catching a couple of falling knives due to rebalancing during 2008, but thankfully in 2009 things started to turn around and by 2012 we were definitely out of the woods and rebalancing on the way back up.

 

[Koolau]

We had 2 years of cash. So we think we are prepared. (Retired at 51, now 52).


But seeing such a down market in year 2 of retirement is tough.

It’s not a mental thing - it’s a heart thing. When there were market swings in past - while working and contributing to savings - no biggie.

Now ….

We will stretch the money until market recovers, but we find ourselves thinking too much about the down market before we force a change of subject.

Practically speaking - we throw ourselves into more hobbies, time with family, etc. I look less often at brokerage accounts. We verbalize to each other the steps we have taken and measures that we have in place (cash saved up, lowered budget, etc).

I am surprised at how much we think about it - and not be at peace - for those moments.

What do you do - practically speaking - to try and keep peace?

I take it you have no other income (pension, annuity, etc.)? That makes it a bit scary, I would think. I was blessed with a modest pension (and, finally SS at 70) so I don't think a lot about the markets. BUT I too would be concerned about markets, just starting out if I had no income at all. You were wise to stash cash for this time. I'm guessing you will have adjusted just fine by the time the markets turn around. Good luck to you.

 

[Dash man]

We’ve always kept at least five years living expenses in “safe” money. It’s still uncomfortable watching our equity investments dropping 7 figures this year, approaching ten years into retirement. But dividend and interest income combined with my social security and a small non-cola pension give us most of what we need. Food inflation has the most affect on us since we don’t drive much, own our homes, and are on Medicare. Landscape maintenance has gone up along with other home maintenance services we’ve used. We delayed a kitchen/bath remodel until things turn around.
I can’t say I haven’t had any anxiety, but I do realize how well off we are compared to most. We also haven’t started DW’s social security yet, which will be a nice benefit when she takes it.

 

[GravitySucks]

I retired in an up market and still was overly concerned. I imaging in a market like this I'd have had many more sleepless nights.
Agree with the bond ladder advice that was given. My bond ladder was 8 years and I've let it drift down to 5 and will keep it there as it brings me to SS @ 70. That's helped me relax at difficult times.
Does your AA match your personal risk profile? I thought mine did at 80/20 but a minor market drop proved me wrong. Tough to tell this year with both stocks and bonds down and inflation ripping a chunk of your FI away.
Best of luck, things will (probably) get better.

 

[COcheesehead]

A reasonably secure cashflow: a bond ladder, a pension, rental income, a part time gig, etc that provides a base level of income goes a long way when you are in the first years of retirement and the market does what it is doing.
My ladder literally funds about 130% of our needs until age 70. Equities can bounce all over and though I don’t like seeing it, it really doesn’t matter to us.

 

[Lsbcal]

We had 2 years of cash. So we think we are prepared. (Retired at 51, now 52).


But seeing such a down market in year 2 of retirement is tough.

It’s not a mental thing - it’s a heart thing. When there were market swings in past - while working and contributing to savings - no biggie.

Now ….

We will stretch the money until market recovers, but we find ourselves thinking too much about the down market before we force a change of subject.

Practically speaking - we throw ourselves into more hobbies, time with family, etc. I look less often at brokerage accounts. We verbalize to each other the steps we have taken and measures that we have in place (cash saved up, lowered budget, etc).

I am surprised at how much we think about it - and not be at peace - for those moments.

What do you do - practically speaking - to try and keep peace?

Well what do I do? Hmmm. Tell DW to spend less? But life is too short to cut back a lot and I planned for a down market. But true, it is very unpleasant.

Practically with investments I look always for opportunities. Nowadays it is in individual TIPS with positive yields guaranteed. And staying in cash other then TIPS and iBonds.

I always mark to market. I get it over with by looking at my spreadsheet total and living with the reduced portfolio. That's just the new reality. I also created a chart that shows some very rough bear markets in the past and update our current market relative to that backdrop. Soon I'll post an update here: https://www.early-retirement.org/forums/f44/how-does-this-decline-compare-to-previous-recessionary-ones-114071.html

Bear markets are slow drip tortures. If we enter a bad recession then this could get lots worse. We are about 300 days into this bear market. Some have lasted out to as far as 750 days (year 2000). And let's forget about 1929.

Just live and breath and have fun because it will all be over with too soon.

 

[jollystomper]

When my numbers first indicated FIRE, we only had about 2 years of cash to cover expenses outside of my planned pension. I worked until I built up a cash buffer of around 5 years. It was based on, among other things, my expectation of when to take SS, and my research at the time showed that rarely is the "market" down over a 5 year period. My goal was to not to have to sell equities to cover expenses for at least 5 year.

Building that buffer was one factor that helps at these times. I have been retired for 4 years, and the market (at least the S&P 500) is still up 40% from that time. An associated factor was that we overestimated our expenses, especially health care premiums. At the time there were many stories saying a couple not eligible for any ACA subsidy might be paying over 120K in premiums the 5 years before Medicare, and I took that to heart. In actuality we have had to pay less than a third of that. "Our "buffer' has logically grown, even with the impact of inflation, to about 8 years. And I have not started taking SS yet, where I will get the max payout. For those (and other) reasons it is easy for us to ignore the current market noise and enjoy retirement life .