With stock market crash, can you still retire?

[finnski1]

The checkbook.org food basket compared identical groceries from store to store, so it is not eating cheap, just paying less for the same food.

According to the Society of Actuaries, a 65-year-old male today, in average health, has a 55% probability of living to age 85. You might not miss the money if you are dead, but for those of us who want to leave money to family it is a key consideration on when to take SS. - https://www.rate.com/research/news/retirement-expectancy.

This discussion is on can you still retire with the stock market crash, not when to take SS. Yes, I can still stay retired, in large part because I don't overpay for good and services, like groceries.

For many of us, when to take SS has less of a budget impact than where we shop for groceries. We've gone over this a million times in past threads. What most people in the wait until 70 camp forget to add is a probability factor. Sure, you make more at age 70 if you wait to collect, but your probability of being alive at 70 or beyond the payback period is not 100%. That is the actuarially neutral part. Yes, if you live to be 110 you will likely to come out ahead if you wait to collect, but there is also a higher probability you will collect $0 if you wait until 70 because you might be dead.


Checkbook.org says a household can save up to $3K a year just by changing where they grocery shop in our area, so factors like that have more of an impact on a retirement budget than when to collect SS. Saving $3K a year at 4% over 40 years comes out to over $300K.

I'm pretty sure that most of us waiting to 70 are well aware of our possible demise. The payback for waiting from 62 to 70 is 82.5 not 110.
DW and I have no heirs. Our SS benefits are very similar so no big change in survivors total benefit. Waiting to 70 makes sense for us.

 

[cyber888]

I’m retiring on Friday of this week. Portfolio is down ~1.1M from the height, but my thinking is that this is the very best time to retire. I don’t need ALL of my money, just a little bit every month, and I am confident the market will recover long before I need the vast majority of my $.

Down 1.1M ? well, I guess you have a lot more if that represents only 20%, so no problem.

 

[TripleLindy]

The payback for waiting from 62 to 70 is 82.5 not 110.

Another great stat! I’ve only recently discovered this site, so forgive me if I’m rehashing material that’s been discussed ad nauseam. I’ll dig in deeper as the decision date approaches. Since we’re relatively young from a retirement perspective, I’m sure we’re fine financially (Vanguard shows 97% probability of portfolio survival with both of us living to 100 - highly unlikely) but next year I’ll start tapping into our retirement savings for the first time and it’s a bit scary. But what I’m reading here is that time is the real currency that I should be considering.

 

[daylatedollarshort]

I'm pretty sure that most of us waiting to 70 are well aware of our possible demise. The payback for waiting from 62 to 70 is 82.5 not 110.
DW and I have no heirs. Our SS benefits are very similar so no big change in survivors total benefit. Waiting to 70 makes sense for us.

I didn't say the payback period was 110. I said people living to 110 would have a huge difference in benefits by deferring. Conversely, the people who die before 70 will have a big difference in their estate by claiming early, because otherwise their benefits would have been $0. You have around a 50% chance of being dead before the payback period, which isn't a coincidence, it is the actuarially neutral part in action.

You might be aware of your possible demise, but the math is presented time and time again here about coming out ahead just because one is going to, or has waited to age 70 to claim, without factoring in the probability of future mortality, the draw down of the portfolio in the meantime, or the lost opportunity cost of investing the early SS benefits. Even many if not most articles on when to claim Social Security omit mortality probabilities, let alone other factors like the looming trust fund issues or possible future tax changes. I ran the numbers for an average benefit couple through opensocialsecurity.com awhile back and there just wasn't that much difference in total benefits at the different ages.

 

[Hank]

Because I was greedy or too eager to grow the asset, I have invested all the 401k/IRA in QQQ, which dropped a lot (20% or around $500k)

Maybe you made some money on the way up?! Doesn't that count?


I would unload the QQQ and either put all of in VTI or the global Vanguard worldwide equity fund. Even if you you lost 20% of your pile I would move it to a more forgiving allocation. But that's just me.

 

[Luvtoride]

By using the “bucket plan” strategy my timing/ decision to retire soon is not impacted at all by the market downturn (not sure I’d call it a “crash”.).
Funds we would need in the early years of retirement are safely in a MYGA coming due soon which will get us to SS start age of 68 (calculated based on a health/ mortality model).
I don’t anticipate needing any stock market exposed funds for at least 6 years from now which will about coincide with RMD age.

 

[big-papa]

I gave notice earlier this year that I'm retiring but would stay on long enough to help find my successor and get that individual trained. Not there yet, and of course I'm happy that I'm still receiving a paycheck and paying relatively low medical premiums from my employer in the midst of market turmoil.

But...

From time to time I calculate what my withdrawal will be if today was the day that I started retirement and began withdrawing from my portfolio. And while it's a little bit lower than it was when I did the calculation in January of this year, there's still plenty of margin above our total spending level. Some of this of course is simply having enough invested over time, but some of it is also mitigated by my withdrawal method.

Not changing my plan at all.

cheers.

 

[freedomatlast]

Since retiring 3 years ago, my cash flow has increased, largely due to the market downturn. My dividends from mutual funds have risen steadily and my cash which amounts to about 7 years living expenses, is now returning more than 3.5% instead of significantly less than 1%. And having a cushion of cash means I don't need to sell equities at a loss. All's good so far.

 

[harllee]

Since retiring 3 years ago, my cash flow has increased, largely due to the market downturn. My dividends from mutual funds have risen steadily and my cash which amounts to about 7 years living expenses, is now returning more than 3.5% instead of significantly less than 1%. And having a cushion of cash means I don't need to sell equities at a loss. All's good so far.

Me too. I am not paying much attention to my asset values but my income has increased, interest and dividends have increased and I am expecting a decent increase in SS. My expenses have not increased much--I don't eat out much, I don't buy much, gas prices have come back down, own a paid for home. Grocery prices are up some, that is about it.

 

[Lawrencewendall]

Since retiring 3 years ago, my cash flow has increased, largely due to the market downturn. My dividends from mutual funds have risen steadily and my cash which amounts to about 7 years living expenses, is now returning more than 3.5% instead of significantly less than 1%. And having a cushion of cash means I don't need to sell equities at a loss. All's good so far.

I'm thinking you need to reassess your investments. The following is NOT theoretical but my historic dividends:
2017 9.68%
2018 15%
2019 7.5%
2020 4.5%
2021 10.86%.

 

[harllee]

I'm thinking you need to reassess your investments. The following is NOT theoretical but my historic returns:
2017 9.68%
2018 15%
2019 7.5%
2020 4.5%
2021 10.86%.

He was talking about dividends, not total return

 

[Lawrencewendall]

He was talking about dividends, not total return

Sorry, these are my dividends. I don't even look at total returns.

 

[harllee]

Sorry, these are my dividends. I don't even look at total returns.

So you had dividends of over 10% in the past year? Wow, how did you do that?

 

[Lawrencewendall]

So you had dividends of over 10% in the past year? Wow, how did you do that?

I've posted before (as well as my holdings) and others think I'm crazy. We are into October and future projections are 15.91% annual going forward. My crystal ball is out for repair but I can only positively say what historic dividends have been. Stop listening to the talking heads on major news. There are TONS of places to put money that are >9%. Oh, drop the FA that is taking money off your plate to add to theirs.

Here's my update:
AGNC (13.87)
BRSP (10.81)
BRW (13.64)
CGBD (10.10)
CLM (25.53)
DX (11.47)
ECC (15.27)
GNL (13.20)
HRZN (11.34)
IVR (26.81)
JRI (9.98)
LIFZF (12.97)
MFV (11.12)
NEWT (17.06)
RITM (12.44)
OPP (18.21)
ORC (19.01)
OXLC (17.93)
PDI (13.72
PHT (11.43)
PSEC (10.68)
RIV (16.56)
RVT (11.32)
XFLT (14.65)
YYY (12.20)

 

[Poopycat]

I’m watching my investments closely because I have targeted August 1, 2023 as my retirement date. I had planned to do it this year but I unexpectedly received an interesting job opportunity in late July 2021 and decided to suck it up for two more years. I may stay til Feb 2024 because that’s when bonuses are paid but I really just want to stop working.

Anyway, yes, my net worth has dropped but because my investments are in rather conservative assets right now, I’m happy that the drop hasn’t been as much as expected. Certainly not anywhere near what I experienced in 2020. I think I can mentally handle the fluctuations better than I could in 2020, and I still think I’ll be more than ok to retire. My bigger concern has always been availability of health insurance vs. net worth, so I’m hoping that the ACA stays in place for the foreseeable future.

 

[freedomatlast]

I'm thinking you need to reassess your investments. The following is NOT theoretical but my historic dividends:
2017 9.68%
2018 15%
2019 7.5%
2020 4.5%
2021 10.86%.

Interesting comment since I never stated what percentage in dividends my equities were returning. I'm not at all interested in switching to investments that force me to take taxable income called dividends in the neighborhood of 10 to 15%. I don't need nearly that much to live very comfortably. I figured someone would try to turn my comment into a "which is better, total returns or dividends" thread, but that subject has already been beaten to death, so just not going there. Glad high dividend income vs. total return works for you.

 

[MarieIG]

Hi, I have planned to retire in the next 5 years until the crash of stock market this year.



Because I was greedy or too eager to grow the asset, I have invested all the 401k/IRA in QQQ, which dropped a lot (20% or around $500k)



It seems that I can't meet the financial goal. Have to work a few years more.




Have learned the hard lesson. S&P500 should be the best choice with bonds.

S&P also dropped, but since you have some years to go, maybe you can pick up some on sale, as you dollar cost average in (and stay calm). Also, look at individual government bonds in lieu of bond funds at the moment. There are a number of threads on that issue.

 

[Flyfish1]

Anyway, yes, my net worth has dropped but because my investments are in rather conservative assets right now, I’m happy that the drop hasn’t been as much as expected. Certainly not anywhere near what I experienced in 2020. I think I can mentally handle the fluctuations better than I could in 2020, and I still think I’ll be more than ok to retire..

The guy who taught me about finances, Todd Tressider, always said "the best time to retire is in a bear market". He went on to say that the best predictor of future market conditions is present market conditions. Meaning the bear will turn to a bull in time and wouldn't you rather go into the first several years of retirement in a rising market than a falling market.

 

[Lawrencewendall]

Interesting comment since I never stated what percentage in dividends my equities were returning. I'm not at all interested in switching to investments that force me to take taxable income called dividends in the neighborhood of 10 to 15%. I don't need nearly that much to live very comfortably. I figured someone would try to turn my comment into a "which is better, total returns or dividends" thread, but that subject has already been beaten to death, so just not going there. Glad high dividend income vs. total return works for you.

Sorry. I misread. I thought your Mutual Funds dividends were 3.5% and missed the part of your cash being 3.5%

 

[underwrite]

I've posted before (as well as my holdings) and others think I'm crazy. We are into October and future projections are 15.91% annual going forward. My crystal ball is out for repair but I can only positively say what historic dividends have been. Stop listening to the talking heads on major news. There are TONS of places to put money that are >9%. Oh, drop the FA that is taking money off your plate to add to theirs.

Here's my update:
AGNC (13.87)
BRSP (10.81)
BRW (13.64)
CGBD (10.10)
CLM (25.53)
DX (11.47)
ECC (15.27)
GNL (13.20)
HRZN (11.34)
IVR (26.81)
JRI (9.98)
LIFZF (12.97)
MFV (11.12)
NEWT (17.06)
RITM (12.44)
OPP (18.21)
ORC (19.01)
OXLC (17.93)
PDI (13.72
PHT (11.43)
PSEC (10.68)
RIV (16.56)
RVT (11.32)
XFLT (14.65)
YYY (12.20)

The first symbol I looked up from your list, ORC, the stock is down 63% YTD and the company looks to be losing a lot of money.

 

[Stormy Kromer]

I started investing on October 10, 1987.

What is this crash you're all talking about ?

 

[aja8888]

The first symbol I looked up from your list, ORC, the stock is down 63% YTD and the company looks to be losing a lot of money.

I think the theory here is to collect enough dividends that you make more on them than what you paid for the stock. Then you are ahead if the stocks go BK.

 

[UnrealizedPotential]

I've posted before (as well as my holdings) and others think I'm crazy. We are into October and future projections are 15.91% annual going forward. My crystal ball is out for repair but I can only positively say what historic dividends have been. Stop listening to the talking heads on major news. There are TONS of places to put money that are >9%. Oh, drop the FA that is taking money off your plate to add to theirs.

Here's my update:
AGNC (13.87)
BRSP (10.81)
BRW (13.64)
CGBD (10.10)
CLM (25.53)
DX (11.47)
ECC (15.27)
GNL (13.20)
HRZN (11.34)
IVR (26.81)
JRI (9.98)
LIFZF (12.97)
MFV (11.12)
NEWT (17.06)
RITM (12.44)
OPP (18.21)
ORC (19.01)
OXLC (17.93)
PDI (13.72
PHT (11.43)
PSEC (10.68)
RIV (16.56)
RVT (11.32)
XFLT (14.65)
YYY (12.20)

I am familiar with a few on that list and hold a few. However, I limit the percentages for each of them to well less than 5% of my portfolio. I currently have PDI and RIV. I wish you the best of luck with your list.

 

[Lawrencewendall]

I am familiar with a few on that list and hold a few. However, I limit the percentages for each of them to well less than 5% of my portfolio. I currently have PDI and RIV. I wish you the best of luck with your list.

I guess I should have explained that the number in parenthesis is the projected annual forward return based on that day's prices and their announced dividends/distributions. The team that I follow recommends 42 (the meaning of life) positions with no more than 3% in any one position. With the exception of CLM (15% position), my holdings for each are <3% in each position. October was an outlier as some of my positions pay quarterly dividends/distributions and October was a quarterly month. I only have 35 positions and 3 of them are indexes.