How Much Is Enough for Game Over Won!!

[scrinch]

The issue for me would be how can I be 100% sure I have all the money I would ever need...

I'm not sure this really should be the issue though. Maybe it should be something like...Is it more likely that high inflation develops in the next 15 years, eating away my purchasing power, or instead that the market tanks in the next 15 years and evaporates half of my networth, eating away my purchasing power? Staying in the stock market doesn't give a 100% guarantee of having all the money one needs. I don't think that should be the criterion for a cash investment either.

Anyway, the OP asks a good question, and I think the answer for each of us is a personal one that centers around how we view the risk of market losses versus the risk of inflation (or of just "drifting" which a lot of people just couldn't handle). After much discussion, I helped get my parents 90% out of the stock market (they are in their mid-late 80's) a few years ago for just this line of reasoning. The risk of high inflation looked lower to us than the risk of stock market volatility over the 10-15 year timeframe we were looking at.

 

[David1961]

I'm not sure this really should be the issue though. Maybe it should be something like...Is it more likely that high inflation develops in the next 15 years, eating away my purchasing power, or instead that the market tanks in the next 15 years and evaporates half of my networth, eating away my purchasing power? Staying in the stock market doesn't give a 100% guarantee of having all the money one needs. I don't think that should be the criterion for a cash investment either.

Anyway, the OP asks a good question, and I think the answer for each of us is a personal one that centers around how we view the risk of market losses versus the risk of inflation (or of just "drifting" which a lot of people just couldn't handle). After much discussion, I helped get my parents 90% out of the stock market (they are in their mid-late 80's) a few years ago for just this line of reasoning. The risk of high inflation looked lower to us than the risk of stock market volatility over the 10-15 year timeframe we were looking at.

I actually never thought of it exactly that way. Thanks for sharing. If only we had a crystal ball and knew what the next 15 years would bring!

 

[nun]

If you can cover your expenses you have enough.

 

[daylatedollarshort]

The issue for me would be how can I be 100% sure I have all the money I would ever need.

Other than liability matching and leaving a big buffer for living longer than expected, there are also concepts such as never spending principal. Or live like Nun and others here and just spend way less than your combined retirement income streams.

 

[Ozstache]

My question has anyone here gotten to the point where they pulled out the markets because they calculate they do not need anymore portfolio growth or income from the portfolio to live the way they want for their balance of time on the planet and did not want to take anymore risk? Hence Game Over!

I recently switched most of my portfolio to a government guaranteed fixed interest position pulling a little over inflation for this reason. I struggle to spend my COLA-indexed pension as it is, so I figured there is no need to put my rainy day stash at any notable volatility risk. I sleep better at night now.

 

[24601NoMore]

@Ozstache - would you mind sharing what FI position you picked up that's .gov guaranteed? I'm looking for reliable, safe harbors at the moment and am thinking the market is not headed for a great outcome in '16.

Tx..

 

[pb4uski]

@Ozstache - would you mind sharing what FI position you picked up that's .gov guaranteed? I'm looking for reliable, safe harbors at the moment and am thinking the market is not headed for a great outcome in '16.

Tx..

All this pessimism about near-term stock market returns I keep hearing from posters are starting to form a bright "buy" signal.

 

[Theseus]

All this pessimism about near-term stock market returns I keep hearing from posters are starting to form a bright "buy" signal.

+1

 

[Danmar]

I probably don't need any more growth but being only 65 and 58 who knows? Inflation could be an issue for a remaining period of say 30 years. Pension covers half our spending and rest is covered by 100% equity portfolio. I am staying in equities to maximize both our spending capacity and the legacy to daughter. I view it almost as an option on a very nice future for daughter. Our future is pretty well assured, I think.

 

[24601NoMore]

All this pessimism about near-term stock market returns I keep hearing from posters are starting to form a bright "buy" signal.

It's not just the short-term..after hearing Bernstein (and others) project <2% "Real" return on equities for the next 20 years or so, the risk/reward ratio is rapidly not becoming worth it to me.

Converting big chunks of our portfolio to cash is a risk adversion / protect the assets move..Wall Street IMHO is becoming increasingly detached from fundamentals and is becoming more like Vegas day by day - and I say that as a 30+ year investor..

 

[nun]

If you can cover your expenses you have enough.

That's probably a bit glib. If you have a liability matching portfolio then you are done. If you need to generate income from riskier investments then you probably need at least 25 times your annual income.....after things like SS are taken into account.

 

[Car-Guy]

Wall Street IMHO is becoming increasingly detached from fundamentals and is becoming more like Vegas day by day - and I say that as a 30+ year investor..

+1

Unfortunately, I'm a gambler so the market is becoming very attractive to me and I don't have to travel to a casino.

 

[Fedup]

Nice problem to have in my 80s, I'll probably go into cash. Don't want to worry at that age.


Sent from my iPad using Early Retirement Forum

 

[daylatedollarshort]

I had a thought about all the forecasts this morning. Some scoff at the "this time it is different" crowd and then there are the forecasts by Bogle, Shiller, Bernstein and others stating this time it really is different - interest rates and dividends aren't what they used to be - even globally. They are at historic lows. I think the difference is that Firecalc relies on the actual data repeating, while the Bogle crowd is counting on the formulas and ratios to repeat, not the data.

I don't know who is right, though if I had to bet I would bet on the formula types. For me, I am simply more concerned with avoiding big losses in retirement than going for big gains.

 

[sengsational]

In the Bogle interview I saw, he was talking about US stocks, and I don't think he was saying this time would be different. He was saying the current PE10 is high, so that dings stocks, of course. But if the the ratio gets healthy by a big price correction, he'd be singing a different song, I'm sure.

 

[GravitySucks]

It's not just the short-term..after hearing Bernstein (and others) project <2% "Real" return on equities for the next 20 years or so, the risk/reward ratio is rapidly not becoming worth it to ..

A 2% real return will allow a 4% WR to last about 35 years. Add in SS and lowering expenses in later years and I'd end up a happy camper. Sequence of returns and asteroids not included....

 

[Ozstache]

@Ozstache - would you mind sharing what FI position you picked up that's .gov guaranteed? I'm looking for reliable, safe harbors at the moment and am thinking the market is not headed for a great outcome in '16.

Tx..

Sorry, I should have qualified that .gov guarantee is actually .gov.au. Bank deposits up to $250k per institution here in Australia were guaranteed by the Oz government back in 08 and it still stands. I can currently get 3.5% return against inflation of < 2%, so after tax it still gains slightly nominally if I don't touch it. My pension is also Oz federal government funded.

 

[Fermion]

If you worked until you had enough money to not need the stock market, then most likely you have lost, not won.

Last time I checked, extra years of life were more than even Buffett can afford.

 

[unclemick]

If you worked until you had enough money to not need the stock market, then most likely you have lost, not won.

Last time I checked, extra years of life were more than even Buffett can afford.

Jan 1993. 60/40. Katrina, lost of house. Lost of spouse. 1000 miles inland. New house. New spouse. Mr Market has a few ups and downs.

Change is certain. Nowadays 50/50 lifecycle fund ala Vanguard for real retirement plus a few good stocks for the male hormones while in season.

Life's really big question - should I stick with the Saint's after 2010 FINALLY! or go with the Chiefs here in KC?

heh heh heh - stay agile mobile and hostile and adjust to life as reguired. And yes I did vary withdrawal rate and expenses over the years.

 

[Car-Guy]

If you worked until you had enough money to not need the stock market, then most likely you have lost, not won.

If anyone retires and needs (depends on) the stock market then they are bigger gamblers than I am. Or, maybe I don't understand your comment?

Last time I checked, extra years of life were more than even Buffett can afford.

I assume you mean Warrren can't buy more years of life? If not, did they legalize marijuana sales in Washington?

 

[daylatedollarshort]

If you worked until you had enough money to not need the stock market, then most likely you have lost, not won.

I think this post from the sage Nisprius over at Bogleheads shaped my thinking on the matter:

"The great thing about stocks versus bonds is that historically the distribution of outcomes over long holding periods has been almost all upside. But the thing stock enthusiasts continually miss is that the lower end of that distribution is about the same as bonds. What this means is that you need to save about the same amount no matter what your asset allocation is...

The amount you need to save is the same no matter what your asset allocation is. To say "it's very hard to save enough to retire just using Treasury bonds and TIPs" is just to say that it's very hard to save enough. If you aren't saving enough to retire just using Treasury bonds and TIPs, you aren't saving enough if you add stocks. You're counting on luck, and luck is not a strategy."

https://www.bogleheads.org/forum/viewtopic.php?t=93245

 

[RunningBum]

If anyone retires and needs (depends on) the stock market then they are bigger gamblers than I am. Or, maybe I don't understand your comment?

Most of us invest in the market, we don't play in the market or gamble with it. I don't know why you refer to it that way. Frankly, it's getting annoying, but that's my issue, and I can always put you on ignore when I've hit my limit. Maybe you're investing in a lot riskier stocks than I am.

 

[eta2020]

When I got to that point I actually felt even more that staying 100% in equities is a way to go and had even less reasons to get out .
You don't need to get out once dividend yield covers your living expenses.

 

[pb4uski]

If anyone retires and needs (depends on) the stock market then they are bigger gamblers than I am. Or, maybe I don't understand your comment?...

If you think of the stock market as gambling then you don't understand investing.

 

[pb4uski]

...The amount you need to save is the same no matter what your asset allocation is. ...

Nonsense. Very few people who know about retirement planning would agree with that statement.