Retiring mindset with downmarket

[street]

I sounded like you had a good plan going into ER. Two years of expenses to cover the down times.

I ER when markets were down and uncertainty, but I also had a plan for a long down time. My plan was to have enough money to live my entire life without touching investments. I know that route and planning isn't most would do. They wouldn't want to have that much money available without it being in an investment account. For me it was my plan going forward and I don't worry about money to live life. My investments have taken a seven-digit hit but again my plan wasn't to use those dollars when times turned bad and for a long downward length of time.

My only advise would to just live life and I'm sure your plan was thought out well before ER. You may have to cut back and do a few things different but I'm sure you will survive it.

I was a money worrier all my life, but I found out that there is way more things to worry about than money. I'm so grateful every day to be in good health. It is only money, more to life than money, find your happiness and pounder on that instead of money. You will be fine!!

 

[Koolau]

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 .

Yeah, when you finally DO start to collect SS, you will suddenly feel very financially secure. I thought little about SS - except NOT taking it until 70. Once I took it, it was like "What was I worried about?" It is liberating! You have a major milestone ahead of you and you WILL love it! Enjoy

 

[Lsbcal]

Yeah, when you finally DO start to collect SS, you will suddenly feel very financially secure. I thought little about SS - except NOT taking it until 70. Once I took it, it was like "What was I worried about?" It is liberating! You have a major milestone ahead of you and you WILL love it! Enjoy

I took SS early and that was in 2012 at the tender age of 64. Otherwise we would have sold investments that did very well in the recovery of equities. Since we are in a bear market we *might be* approaching a similar period. So just mentioning this as it could be an alternative to waiting until 70 for some. Depends very much on your circumstances.

 

[daylatedollarshort]

Yeah, when you finally DO start to collect SS, you will suddenly feel very financially secure. I thought little about SS - except NOT taking it until 70. Once I took it, it was like "What was I worried about?" It is liberating! You have a major milestone ahead of you and you WILL love it! Enjoy

Pensions and SS cover most of our annual retirement expenses and it does feel secure. We still have an under 1% withdrawal rate but I try to get that to 0% as much as I can by optimizing our expenses every year. We have a long list of projects on how to reduce overhead and every year tackle a few from the list.

 

[GaryInCO]

I have a significant mortgage, but rental income covers that. The payment jumped $500 a few months ago (taxes jacked up and escrow fell behind) but I'm still covered (just) and hopefully it will drop back down a bit when the escrow catches up.

I'm still w*rking part-time, which is more than covering my expenses. I reach FRA in a few months and I'm trying to decide if I should pull the trigger on it, or w*rk for another few years. It's a pretty easy gig, just a week or so per month, and it pays well. Seems like a no-brainer to hang onto it, but I don' *wanna* ...

 

[Bamaman]

The equity downturn of 2022 does get on my nerves, but I try to not pay much attention to it. I'm just fortunate to have made it to age 72 without having to make withdrawals out of my Rollover IRA.

We're fortunate to have paid for houses. With a mortgage, my standard of living would certainly have suffered.

We just travel locally--virtually going to no cities within 150 miles of us. And we also try to not drive anywhere a couple of days a week. We never visit Walmart.

Now if I could just stay out of Dollar General I'd be good.

 

[a60dan]

We put aside at least 3 years worth of cash and ultra short term bonds (VUSB) before I retired at the end of 2021.

As my 0.4-0.7% CDs mature, they are renewing 3-4% this past month.

The bonds have dropped some, but nothing like the rest of the accounts which are VTI, VXUS, BND, BNDX. VUSB is still generating income.

We briefly talked about delaying our cross country trip in our travel trailer in late April.

We quickly returned to the plan and stuck with the plan. We don’t know how long our health will hold out so we’re traveling while we can.

Paying $6.50/gallon for gas in Barstow CA was painful.

44 nights in 16 states over 7000 miles meeting all kinds of people was priceless.

As of today, we’re still on or slightly under budget for 2022.

I’m surprised at how little I’m worrying about the money right now.

 

[NW-Bound]

The S&P is currently down to 80c on the dollar, compared to its high.

In 2002 and 2009, the S&P bottomed out at around 50c on the dollar. That was scary. More scary for me in 2009 than in 2002, because I was closer to retirement in 2009.

I don't think we will see anything like that again (knock on wood). If it happens again, I will not be as scared. I am better financed now, but most importantly I am older now and have other things to worry about.

 

[youbet]

I am older now and have other things to worry about.

+1

 

[audreyh1]

Was I the only one shaking my head 2019, 2020 (even with that short extreme dip), 2021, wondering how it could keep going up and up and up? I expect not.

Honestly same shock in 1999 when I retired. I felt like things would blow up soon enough back then and they really did.

 

[Koolau]

Was I the only one shaking my head 2019, 2020 (even with that short extreme dip), 2021, wondering how it could keep going up and up and up? I expect not.

Honestly same shock in 1999 when I retired. I felt like things would blow up soon enough back then and they really did.

Heh, heh, sorta like retiring end of '05 and experiencing '08 and so on. I THINK I've learned to ignore the dips (and the run ups) but it's cost me since I've kept my equity allocation relatively low. Still sleeping well, so I guess I'm doing something right. YMMV

 

[DrRoy]

I have been through plenty of bear markets, and know that they end. I also am overfunded, and need less than 3% of my reduced portfolio/yr.

 

[marko]

I have been through plenty of bear markets, and know that they end. .

+1
My lesson was "the end of the world as we know it" in 2008. Then March of 2009 came along, and..........

 

[simple girl]

Retired almost 3 years ago in late 2019 with 3 years' worth of living expenses in cash/CD's ("buckets"), at ages 51 and 56.

We live off of one bucket of cash each year (plus interest on the cash & dividends from our taxable account).

The plan is, each year we replenish the bucket of $ we spent by selling equities, provided they are up. In a down year, the plan is to dip into bucket #2 of cash, (and same for the following year), hoping the market recovers enough by the end of 3 years to allow us to sell from equities without having to sell when they are down hard.

So, that's likely what we'll be doing this year - dipping into "bucket #2".

I don't like it, but this was our plan for downturns, and I am very glad I set it up this way.

That gives me peace of mind. What also helps is knowing our withdrawal rate is low. It's currently 2.44%, and that doesn't factor in hubby eventually getting a partial pension in his 60's as well as SS for both of us eventually.

 

[DawgMan]

Retired almost 3 years ago in late 2019 with 3 years' worth of living expenses in cash/CD's ("buckets"), at ages 51 and 56.

We live off of one bucket of cash each year (plus interest on the cash & dividends from our taxable account).

The plan is, each year we replenish the bucket of $ we spent by selling equities, provided they are up. In a down year, the plan is to dip into bucket #2 of cash, (and same for the following year), hoping the market recovers enough by the end of 3 years to allow us to sell from equities without having to sell when they are down hard.

So, that's likely what we'll be doing this year - dipping into "bucket #2".

I don't like it, but this was our plan for downturns, and I am very glad I set it up this way.

That gives me peace of mind. What also helps is knowing our withdrawal rate is low. It's currently 2.44%, and that doesn't factor in hubby eventually getting a partial pension in his 60's as well as SS for both of us eventually.

I have a similar rules book, however, I set up a 10 year bond ladder (bucket) to accomplish the same thing. However, I retired at beginning of 2022 using my end of 2021 balance as my "marker" (significantly higher than today).

Since you have a 3 year bucket, can I assume you used end of 2019 as your marker with some average annualize growth? If so, then I would assume you refilled end of 2020 & 2021 since equities were up? Additionally, depending upon where 2022 ends up you might still be ahead of your proforma for equities that would allow you to replenish your cash bucket, no?

I have banged this around in another active thread here, but curious to see how people are are implementing similar strategies. Like you, I had a starting WR of around 2.5%, but if I follow my rules it might be a minute before my balances rise above end of 2021 values therefore I am pulling from my bond ladder proceeds perhaps longer (what it is designed for). I have toyed around with re-retiring at the end of this year as my numbers work either way, but am inclined to stay with the original plan even if it takes some time to recover. None the less, its interesting to see how people implement similar strategies and any adjustments made.

 

[YVRRocketSurgery]

I retired this April. It wasn't a hard deadline but it's been my target date for a while so I didn't want to postpone it unless I really needed to.

The biggest factor helping stay grounded is having a staggered retirement with the missus still working. She's a few years younger than me and will likely retire at the same age as I did.

However, we manage our finances separately and combine them for our shared spend so I need to make sure I'm pulling my weight. What's helped me stay grounded during these turbulent market conditions are a few things: I was forturnate to be able to build up a large enough nest egg by my retirement date to support not only my share of our base spend but our stretch target goals. However, my original plan also was to slowly ramp up to our stretch goals over many years until the missus retired instead of going from 0 to 100 during year 1 of my retirement. Combined, I'm starting retirement withdrawing a relatively small percentage of my nestegg while tampering my lifestyle expectations. It kind of feels like status quo.

My taxable account kicks off what I consider a core amount of my retirement income through dividends. I realize dividends can be cut but for now, the steady stream feels like it acts as a nice replacement to my biweekly paychecks.

And as I slowly tap into my retirement accounts over the next few years, I'm setting those up with a bit of a bucket strategy. There's enough cash in those accounts to support what the lower end of what I was hoping to withdraw for the first couple of years when I tap into them.

 

[simple girl]

Since you have a 3 year bucket, can I assume you used end of 2019 as your marker with some average annualize growth? If so, then I would assume you refilled end of 2020 & 2021 since equities were up? Additionally, depending upon where 2022 ends up you might still be ahead of your proforma for equities that would allow you to replenish your cash bucket, no?

Yes, I use the end of 2019 as my marker. I don't have a certain percent annualized growth I set for me to feel comfortable to sell, but due to sequence of returns risk in the first few years of retiring, I would at least want it to be up 4% for the year. I think. Still contemplating!

I actually didn't sell at the end of 2020 because I had squirreled away too much of a cash cushion (overcautious!), and it didn't make sense. Instead, I did a Roth conversion that year of a fund that was down for the year.

I did sell at the end of 2021 to replenish a bucket of cash that I had finally used up completely.

And yes, I'm waiting to see how 2022 shapes up, although I'm doubtful the market will recover fully from the red in less than 2 months. I will have to pull the trigger in December because we manage our MAGI for ACA insurance and thus I will have to create some MAGI by either selling from our taxable account to create cash, or doing a Roth conversion of a down fund.

 

[Koolau]

And yes, I'm waiting to see how 2022 shapes up, although I'm doubtful the market will recover fully from the red in less than 2 months. I will have to pull the trigger in December because we manage our MAGI for ACA insurance and thus I will have to create some MAGI by either selling from our taxable account to create cash, or doing a Roth conversion of a down fund.

Yes and I thought my RMD would be lower this year (because markets are down) but one stock in the 401(k) has gone up enough to cover almost all my losses. Not sure how to feel. (Darn first world problems.)

 

[simple girl]

Yes and I thought my RMD would be lower this year (because markets are down) but one stock in the 401(k) has gone up enough to cover almost all my losses. Not sure how to feel. (Darn first world problems.)

LOL. Yes, indeed, darn first world problems!