Emotional Support for Recent Early Retirees

[Jerry1]

I retired a few years ago and this is the worst so far. My general nature to to do something. However, I’m holding firm so far. As others have said, I’m trying to focus on the cash and bonds. I have plenty for probably 10 years without including any of their income. By then, both DW and I will be collecting SS, extending the time even further when I may have to sell some stocks. I really should just stop looking at my account.

OP, unless you used the last decade of market run up to hit your number AND your number had no cushion, you’ll be fine. Stick around, this group is very helpful in calming my nerves and I expect you’ll find the same. Also, keep in mind, we’re still above 2018 closing numbers. You didn’t think you’d get to keep all of 2019’s returns, did you?

 

[Go-NoGo]

Turn off TV news, switch off CNBC and don't check balances of your portfolio obsessively. Stay the course - the markets will come back, there is a lot of money of the sidelines waiting..

 

[harllee]

I was an early retiree in 2008. I had an aggressive stock allocation--too aggressive I later decided. I also had a lack of cash. I lost sleep but held on through it and did not sell (but I must admit I did not buy either!). After the recession was over I decided that my asset allocation philosophy was too aggressive for me so I changed it. Now at age 68 my allocation is 40% equites (total stock market) 40% bonds (total bond market) and 20% cash (CDs and money market). I know I have missed some gains over the years but this is the right allocation for me. I have not even checked the balances this month--I am not concerned at all. My advice to the OP is after the market comes back to its senses (may take a while) the OP should get an asset allocation that is right for you--that does not keep you up at night or worry you.

 

[Eucerin]

This is our strategy too. We're holding a a bit more even, and that's our fully loaded spend - which will have less travel this year...Much as I hate to the total numbers decrease, it's not a loss until you sell it as one.

Same here. We have 5 years of living expenses in the CDs. This strategy does provide sense of peace in this difficult time

 

[scrabbler1]

Yes agree with FLsunFIRE! I focus on the income and not on my paper net worth.............

Income is more important to me, too. But the ACA offers a somewhat perverse incentive - keep your income down so your ACA premium subsidy goes up. At the very end of 2019, I had to find a way to reduce my income without drastically changing my AA so I could resume getting the ACA subsidy I had stopped getting the last few years. My income had risen to throw me over the ACA cliff due to, ironically, the booming stock market.

 

[Dtail]

Stay the course.
Remember that the 4% SWR guidance for retirement readiness is based on the worst scenarios in history, which include the 60's stagflation, the great depression, etc.

Another reference is the 2000 year retiree was hit with the stock market losing monies for 3 years at the start of retirement, plus another bear market in 2008 and from a historical sequence of market performance, this retiree is still doing fine and especially fine if the WR% is 3%.

I retired 2.5 years ago and the net portfolio increase is under 5%, so SORR is still very much in play.
Take a deep breath and continue enjoying life.

Adding to my post above.
Some of our Fixed Income is in Taxable CD's, which at 3%+ I am not giving up. Our other Fixed Income which is in a 401k is a Stable fund with a current high yield.
Thus about 1.25% of our withdrawals will be from stock, but I am okay with that, as it also supplies our low cost ACA premiums with tax subsidies.

 

[Rianne]

Good thread. Looking at FIREcalc, first entries, our portfolio was obviously much higher. The start date of the higher portfolio factors in down turns such as this one. If I enter current portfolio as today's start date or to be safe, take it down an extra $200K as start amount, does FIREcalc give a completely different scenario. How often does it update the market changes?

We have not touched our portfolio and don't plan to for @ 2 years, provided DH consulting stays intact. Many future meetings have been canceled, so I'm not sure how long he can remain getting paid.

 

[Out-to-Lunch]

OP, you said you retired a year ago, right? I am not saying that this is not gut-wrenching, but the markets are STILL higher than what they were a year ago. You felt okay to retire at that point, right? You should be fine.

Really, I think the market run-up over the last 8 months was just as crazy as this current drop.

 

[jebmke]

Just run FIRECALC to see all the corrections that have taken place showing 4% WR was 95% safe. Just look at what the market did before and after 1987, 2000, 2008-09 and how those who did nothing fared. Odds are you’ll be fine based on your WR etc., some/many here who retired just before 2008 can tell you...

I retired Dec 31, 2007. We had purposely glided down to a 40/60 allocation to avoid worrying about things. I had 10 years to cover before pension started. Social security phases in this year and again in 2023. I did a lot of tax loss harvesting in 2008-09 while re-balancing.

 

[38Chevy454]

Turn off TV news, switch off CNBC and don't check balances of your portfolio obsessively. Stay the course - the markets will come back, there is a lot of money of the sidelines waiting..

My thoughts exactly. Media hype making it worse.

 

[Golden sunsets]

Not RE yet but still planning 2020.... 100% equities. Went through the dot-com and 2008 which gives a lot of perspective (and were a lot more fun since I was in accumulation mode!). SWR rate calculations take into consideration lots of ugly years from the past.


Better yet, for some more perspective after this crazy bull we had, pull up a longer chart and look back to where the market was at this level last...we are about where we where in October. How did you feel in October? Why should you feel different (I forget what the doom and gloom scenario was then but I'm sure there was some reason the market was supposed to crash)? What is known about COVID-19 is priced into todays prices (along with a lot of speculation).



Certainly, when times are rocky, it is good to look at your spending and if it makes you feel better, defer some of the discretionary. Doing so may help if you feel that you need to "do something" as spending is something in your control so you don't do something silly (and costly) with your investment strategy because of something outside of your control (short term market performance).


Breathe in, breathe out, turn off the news and don't look at your portfolio.... enjoy your day... Some of us have to w*rk today! (for a bit longer)


FLsunFIRE

UMMM...... You are retiring in 2020 and you are 100% equities

 

[ERD50]

UMMM...... You are retiring in 2020 and you are 100% equities

Well, historically, that's worked out better than holding 35% equities. Why the alarm?

-ERD50

 

[ugeauxgirl]

UMMM...... You are retiring in 2020 and you are 100% equities

Me too, nearly. Well I wasn't before the correction, but I sold most of my bonds and dumped them into the market. I'll be fully retired in 6 months or so. Won't need funds from the portfolio for years so not worrying. Will reverse those trades when the market comes back up.

 

[Tiger8693]

Go read the 2020 thread, it will soothe your fears from what i have seen!

 

[Retire52]

So, I’m not even a year into ER in my early 50s. Things were going great... now this.

Even after the drop, my SWR is about 2.8% and lower when kids leave and SS/pension kicks in.

I’m good still right? A bad sequence of returns can be absorbed?

I’m sure there are many new retirees here who need a hug.

I retired 2 yrs ago. My portfolio is 100% equities. A couple of suggestions, dont look at your NW when its headed south. I only obsess when I'm riding it up [emoji846]. I did this in 99 and 2008 and kept adding to my investments. I dont worry about it since I believe it will go up in the long run.

If concerned about this dip, slow down your burn rate. I have l less cash reserve than you--2 years worth. I will keep spending the dividends, but turned off my withdrawals otherwise. Will also reduce discretionary spending to easily stretch cash to 3+ years.

Read this post from J L Collins--it helps put down turns into perspective. https://jlcollinsnh.com/2012/04/15/...-market-crash-coming-and-dr-lo-cant-save-you/

 

[Bir48die]

Well, let's say it's a lot easier if you're still working when things go down the tube (not to say that they are). Any time we had a pullback I doubled down to take advantage of the upside and that's why I'm lucky enough to have retired early. However I completely understand the anxiety caused by the recent market and it is hard not to count your money. I had this feeling four years ago because as normal the press was claiming a recession was imminent. That being said you just have to believe in your AA and I spend a lot of time ignoring my portfolio until we ride this out.

 

[scrabbler1]

The 2008 market crash was actually a big boost to the start of my ER. It greatly deflated the price of the bond fund I was planning to buy a huge amount of, using the proceeds of the company stock I had to liquidate when I left the company. The (privately held) company stock price, meanwhile, took only a tiny dip during the crash and was evaluated only once every 3 months. This meant I was able to "sell high" and "buy low" all at the same time, quite a killing!


Being able to buy 25% more shares of the chosen bond fund is something I have been benefiting from every month since I ERed because the monthly dividend has been 25% higher, too.

 

[ncbill]

The historical danger to early retirees is retiring in a year before high inflation...e.g. IIRC the 1966 retiree barely survives under the original (based on historical returns) 4% study.

If anything the exogenous shock we're now experiencing will lead to a recession, not high inflation.

 

[ER Eddie]

I've been retired about 8 months. This is the first substantial drop I've experienced, post-retirement, although I rode the roller coaster a few times pre-retirement. It's a little simplistic, but it's true: the market always recovers. You just have to hold out and not panic (sell).

From what I hear, they expect this slowdown to last a couple of quarters. So by August or Sept, hopefully things will be looking up. Of course, no one can predict the future with certainty.

As for this particular bump, I'm a little disappointed. It would've been nice to just coast along with no downturns, just keep watching my hypothetical net worth grow. But who am I kidding. The market always tanks eventually. So I'm not really surprised. It's always something. The market drops, the media freaks out, the sky is falling. But the sky is fine. The underlying fundamentals of our economy are strong; or at least that's what the experts tell me.

During times like these, I try not to check the news or watch my stock performance. Sometimes I can't help it, but it just gets me emotionally attached to things I can't control, and that's no good.

 

[Rickt]

Originally Posted by Dtail
Stay the course.
Remember that the 4% SWR guidance for retirement readiness is based on the worst scenarios in history, which include the 60's stagflation, the great depression, etc.

Another reference is the 2000 year retiree was hit with the stock market losing monies for 3 years at the start of retirement, plus another bear market in 2008 and from a historical sequence of market performance, this retiree is still doing fine and especially fine if the WR% is 3%.

I retired 2.5 years ago and the net portfolio increase is under 5%, so SORR is still very much in play.
Take a deep breath and continue enjoying life.

+1
We also retired Mid 2017, keeping 3 years expenses in CASH and a 70/30 portfolio. Not losing sleep over the Corona Virus correction. This is not as bad as 4th quarter of 2018 yet!

Cheers.

 

[Golden sunsets]

Well, historically, that's worked out better than holding 35% equities. Why the alarm?

-ERD50

Holding 100% equities at the point of retirement is not conventional wisdom, nor is holding just 35% equities.

 

[ugeauxgirl]

Holding 100% equities at the point of retirement is not conventional wisdom, nor is holding just 35% equities.

I agree, and honestly I know better, but bonds look scarier to me than stocks do. I'll fix it before we actually need money from the portfolio, but we have lots more assets than we need to. I'll probably never be more than 25% bonds, but we have so much and spend within our means, so we'll be fine. I've tested it a zillion different ways. And I've never been very good at conventional anyway. [emoji4]

 

[ER Eddie]

A few thoughts:

1. After the market tanked last week, I was walking outside, and I ran into a neighbor. I told her I was feeling low, "because I lost a lot of money in the market today." She responded, "Well, at least you had money to lose." I said, "Good point!" I felt a little silly. She's probably living on limited means, and I'm complaining that I lost (on paper) a small percentage of my million dollars plus.

I forget how fortunate I am sometimes. Maybe it's good to remember that.

2. If you tend to worry, it might be good to review the concept of "catastrophizing," or imagining worst case scenarios.
https://blog.kevineikenberry.com/per...phic-thinking/

3. With any worry -- assuming there's nothing constructive I can do to avoid the feared outcome -- I like to ask myself, "Do I actually have this problem right now?" The answer is always No. The feared outcome is always just in my head. "Oh God, the market will go into a depression for the next 20 years, I'll have to live like a miser or go back to work."

In the present, though, there is no problem. I'm doing just fine. That's where my attention should be. If, in the future, the terrible thing does actually happens, well, I'll worry about it then. Of course, it hardly ever does.

4. It's all really unrealistic worry anyhow. The 4% rule has been tried and tested, and it's very conservative. This is just part of what is to be expected, the normal ups and downs of the market. All is well.

 

[ERD50]

Originally Posted by ERD50 View Post
Well, historically, that's worked out better than holding 35% equities. Why the alarm?

-ERD50

Holding 100% equities at the point of retirement is not conventional wisdom, nor is holding just 35% equities.

That's true. But it's just my sense that 100% stocks is often met with "OMG!!!!", while 35% stocks might only be met with a few soft comments that that might be too low to keep up with inflation.

For the record, the few people on this forum that are 100% equities seem to have a good grasp of the realities of that, so I think that's fine for them. Personally, though I understand being aggressive, I'd still like to have enough in fixed to weather a typical bear market w/o selling equities. IIRC, that's on the order of 5 years or less, so if you get half of a conservative (say < 4%) WR from divs, that's less than 2% you need from selling, so just 10% in fixed carries you through some bad times, roughly.

-ERD50

 

[DogGone]

For the record, the few people on this forum that are 100% equities seem to have a good grasp of the realities of that, so I think that's fine for them.
-ERD50

As the OP and recent ER I have debated AA and AA in pretax vs taxable accounts and the bucket strategy and whether the buckets should be aligned specifically to the accessible account t types before age 59. I have several Financial Advisor friends and each one has pretty different advice.

As for the 100% equity strategy, especially if the correction goes deeper, there is an argument that bond proportions should be even lower. I found below which I don’t buy into fully but it does give me some pause, given the low interest rates. Scroll down to “Suggested Stock Allocation By Bond Yield”.

https://www.financialsamurai.com/suggested-stock-allocation-by-bond-yield-for-logical-investors/

After this market and the virus settles, if rates are still so low, I may just increase cash and equities and reduce bonds way down to 10%.