Greater LBYM inspired by falling market?

[BigNick]

If the savings take a big hit and the WR gets up to >3% then yes, we'll cut back.

I'd be interested to know if anyone is cutting back even though Firecalc said that their proposed WR would have survived 100% of previous historical sequences - which would include, for example, retiring in late 1928.

To cut back in those circumstances would suggest (if analysed rationally, which is presumably what we are trying to do by using Firecalc or similar tools!) that people are looking to be even more secure than "worst possible case".

Here's the take which I've decided on (while editing my signature to remove 50K from the portfolio, but uprating the w*rk pension pot since DW and I have another year's worth of contributions in it): if the Dow drops to 9K, then compared with a month ago, we will be about 120K down. But firstly, the stocks part of the portfolio probably isn't going to be needed for drawdown any time soon, and secondly, one of the uses of the portfolio could be to buy a home for retirement - we're currently paying 1500/month in rent, which is the equivalent of 450K immobilised at a 4% WR. And since the home we buy may well be in an area where prices are falling as a result of the downturn, we might very well get that for 330K. All hot air, of course, but it helps me sleep better.

(Of course, I could give myself a further morale boost by evaluating my signature in US$ rather then Euros... but I reckon that a Euro in France buys about the same as a $ in the US, so this reflects my situation better for US readers. In case anyone's interested. )

 

[Alan]

I'd be interested to know if anyone is cutting back even though Firecalc said that their proposed WR would have survived 100% of previous historical sequences - which would include, for example, retiring in late 1928.

Since we ER'ed at 55 and have planned for a 40 year survival, 3% is the target WR for us, particularly during this first 10 years. After that we'll have (hopefully) another 4 income streams coming on-line in the form of SS for DW & I, UK SS for me, and a DB pension from a former employer.

Of course, these are only just plans, and I really don't know if my nerve will hold if we get close to that 3% self imposed ceiling, or if we'll start cancelling vacation plans etc.

 

[MichaelB]

Not us. If I suggested to DW that we should cut back because of investments, she would just "suggest" I go back to work. We'll stick to the plan.

 

[WhoDaresWins]

In answer to the question posed "Not really.". At least, not yet. I do admit to feelings of apprehension, though, that have translated into banishing any passing fancies for the acquisition of totally unnecessary bits and bobs. I had not planned any really large purchases this year or next in any case.

I plan to continue to spend the same amount in my daily life as I am still w*rking, got a substantial raise at the beginning of the year. I did increase my cash position since 2008 by stuffing more of my take-home into a short term bond fund and checking for ready access. And I also sold some stock a couple of months ago to lock in some gains. I rid myself of one big loser of a fund then too (which has only gone down further) and will have long term capital losses to carry over for a couple of years on my taxes.

 

[donheff]

It's a little late for us. We have already booked our flights and hotels for a trip to Seattle and Vancouver. We may refrain from spending too much there.

DW and I are leaving for Italy at the end of the month and have a trip to Kenya and Tanzania booked for February. But they are paid for and we still plan to bank a bit from the 2011 withdrawal in the "rainy day fund." If things get bad enough that rainy day could come I suppose.

 

[rescueme]

No reduction in any area.

That's what a retirement budget (and a healthy retirement cash bucket) are for ...

The market can do its thing...

 

[JBmadera]

yes, we had the enhanced "austerity" discussion this past weekend. we are cutting back by about 10%....no NFL Sunday ticket for me...:-(

 

[sheehs1]

I am rethinking the purchase of that 2nd sound front home we have a contract on. We are able to get out of the contract anytime up to August 26th. We will probably cancel the contract if the seller doesn't come down on the price by the amount of repair work needed. We've had the inspection and have the numbers for repair as quoted by a general contractor..etc.
Still ...not sure whether to get out of it or not. It will tie up some money but it does generate 10% gross return thru rentals...IF renters don't go away!. Mortgage rates are low, price is relatively low so the other side of my brain ....says...continue on.

Other than that, haven't started cutting back regular expenses....but even if we wanted to...not sure where we would cut. Like others here....I am starting to get that "feeling" of "oh no, I don't "feel" positive about things now". Things feel like they are on a precipice and any move in the wrong direction could send markets way down.

 

[REWahoo]

DW and I were talking last night and we've decided to cut back. We're going to let Jeeves change the oil in the Bentley rather than take it to the dealer...

 

[Dawg52]

No, refrig will stay stocked.

 

[Midpack]

We had been paring back expenses going into the 2008 debacle and made even more serious expense reductions then (while DW was unemployed). We have stuck to our recession spending (still living very comfortably), and plan to forever if possible. We are not hoping for the economy to heat up so we can spend more, we're happy at this expense level. And we aren't doing anything as a result of this past months market activity, just a blip in time so far at least, and nowhere near as dangerous as 2008.

Ironically, when you hear the wizards talk about our economic headwinds, they usually cite 'relucatant consumers' as part of the problem. Yep, that's me...it's a new world.

 

[TromboneAl]

One day when Microsoft stock dropped a lot, Jay Leno had a joke:

"Yesterday Bill Gates lost about a billion dollars. Do you think that when he went to lunch today, he said 'Well, maybe I'll only have a single burger instead of a double burger'"?

 

[Lusitan]

No changes here. We generally follow a LBYM lifestyle, and that continues. Stuck with our plans for our annual family vacation. If we weren't already doing the LBYM thing, now would be (another) wake-up call to start, however.

 

[GregLee]

I had planned on making offers for two rental properties in Las Vegas. I suspect I am only going to make one offer since I am not comfortable borrowing money in this environment.

Since others will also be hesitant to buy right now, maybe a really low-ball offer would be accepted. Just a thought.

 

[freebird5825]

No changes. We had no big purchases or trips planned.
Same old, same old.

 

[Koolau]

This is our first year of monitoring expenses very closely. We've found that we're spending more than we thought. So, with the down turn, it would seem prudent to cut back. Still, with my investments more prone to inflation risk than market risk, I'm of two minds about cutting back. Maybe we should spend it before it becomes worthless! We're still well below our SWR. Although our equities are down big-time, our overall stash isn't doing too badly.

I guess I'll think about this next week.

 

[TromboneAl]

At the end of 2010, our cumulative underspending for the first 3.5 years of retirement totaled $96,000. That is, we'd spent 96K less that our 4% inflation-adjusted SWR allowed for. That's why I don't feel that we need to adjust spending downward.

 

[W2R]

This is our first year of monitoring expenses very closely. We've found that we're spending more than we thought. So, with the down turn, it would seem prudent to cut back. Still, with my investments more prone to inflation risk than market risk, I'm of two minds about cutting back. Maybe we should spend it before it becomes worthless! We're still well below our SWR. Although our equities are down big-time, our overall stash isn't doing too badly.

I guess I'll think about this next week.

I can relate to that! I do wonder if inflation will rise. For years I have considered that to be a certainty at some point, but it is difficult to predict when it will occur.

 

[freebird5825]

One day when Microsoft stock dropped a lot, Jay Leno had a joke:

"Yesterday Bill Gates lost about a billion dollars. Do you think that when he went to lunch today, he said 'Well, maybe I'll only have a single burger instead of a double burger'"?

No, but I'll bet he skipped the extra slice of cheese.

 

[chinaco]

I just pulled the plug... We just began! I am planning a trip right now. No plans to adjust down. We have a conservative plan anyway.

Only live once. The only way I would reduce our planned spending level is if there was a sustained market cut for years (e.g., Japan).

 

[Moemg]

Each year since I retired in 2007 I have had a large surplus at the end of the year so I will just continue with my frugal (cheap ) ways . I may rethink my Italy trip if this downturn continues .

 

[HFWR]

Not sure I can get any [-]cheaper[/-] more frugal...

Wonder if used dryer sheets are any good for removing glass from peanut butter?

 

[REWahoo]

Not sure I can get any [-]cheaper[/-] more frugal...

Wonder if used dryer sheets are any good for removing glass from peanut butter?

That's only semi-frugal. Really frugal is checking to see if they will remove spit from toothpaste...

 

[Moemg]

That's only semi-frugal. Really frugal is checking to see if they will remove spit from toothpaste...

No really frugal is eating recycled dryer sheet sandwiches and skipping the peanut butter !

 

[Koolau]

Are we sure it isn't time for the Four Yorshiremen?