In a conundrum

[TNBigfoot]

I’m feeling caught in a perfect storm now. Turned in retirement notice back mid Feb and as with most of you have taken a heavy hit in the market. Currently at around 45% equities/35% bond/20% CD + cash. The cash position will cover around 4 yrs expenses until I take SS. At that point, small pension +SS will cover 60% of expenses.

So I am considering selling 30% equity position as I think feel there is more downside in market. Believe this will take 3-4 months to sort out. I by no means have a crystal ball though. Not trying to market time, just trying to protect against more downside risk.

What would you do in this position. Always good to hear other perspectives.

 

[SecondCor521]

I would follow my plan. What does your plan say to do in the event of a downturn?

Mine says to rebalance to my AA, which I have been doing. I've been selling bonds and buying stocks over the past few weeks.

My plan also says for me to opportunistically move toward a stock allocation that has max survivability given my planning horizon and historical data and my spending rate. While "opportunistically" was something I never defined very strictly, I've decided that the current events qualify, so I've gone from a target of 93% stocks to a target of 95% stocks.

This works for me in part because I have a very low net withdrawal rate (currently about 1%) am on the younger side (50), and have some flexibility in my budget (could cut back 20%-30% more if needed). I also like to think of myself as a steely eyed missile man, but honestly I do get a little fearful sometimes, especially in really severe downturns that last a while.

If your plan doesn't account for a downturn, then I would say that it would be wise to develop your plan further before you retire.

 

[VFK57]

I also belong to a group of investors who keeps cash to survive a storm and think that to sell it now is to accept permanently the loss winch is really horrible for me. It is not only that by selling you accept the loss but when the Bear Market is over all big cats of the Market would go there rapidly while low level investors like us would be behind. On the top of it IRS allows to wright off only $3,000. Just my opinion.

 

[marinauser]

I would not sell. You have no way of knowing where the market will be in two days, let alone 1 or 4 years. You have four years cash and only a 45% equity stake, which by now I expect is probably more like 35-40%. Pick an asset allocation and stick to it. While past performance is not guarantee, this virus issue shall pass and you can look at 2008-9 and the years thereafter to see how the market can come back.

 

[bloom2708]

If you don't keep at least 30% stocks, you won't recover when stocks do recover. I would stay the course. 45/55 is a good allocation. Keep your bonds/cash and if your stocks dip to 40 or 35, well you are trying out new allocations on the way.

 

[TNBigfoot]

I also like to think of myself as a steely eyed missile man, but honestly I do get a little fearful sometimes, especially in really severe downturns that last a while.

LOL....this downturn will separate the steely eyes from the wobbly knees

 

[Dogpeace]

I’m feeling caught in a perfect storm now. Turned in retirement notice back mid Feb and as with most of you have taken a heavy hit in the market. Currently at around 45% equities/35% bond/20% CD + cash. The cash position will cover around 4 yrs expenses until I take SS. At that point, small pension +SS will cover 60% of expenses.

So, your 35% bond position need only cover 40% of expenses after 4 years from now. How long will that last? Probably at least until 10 years from now, at which point the equities would have time to recover. I don't see any benefit in selling now unless you don't feel like to have the stamina to avoid selling later when equities have fallen further.