Running out of money?

[braumeister]

Quote:

Originally Posted by athena53 Not everyone likes the idea of a condo; I think I'd find it hard to live without a bit of front and back yard, having to take groceries up in the elevator, sharing walls with neighbors, etc.

You might be limiting your choices unnecessarily.
My condo has both a front and back yard (not huge, but big enough).
It also has a small patio and a deck. Attached garage for convenience, and just one shared wall (not a sound heard in the 1 ½ years we've lived here). No elevator, just walk in from the street (no steps, either, except inside our home to access the lower level).

There are condos, and then there are other condos.

[haha]

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Originally Posted by marko On second thought, we had an early retiree neighbor who blew through a $2MM inheritance on Keno/Scratch tickets. Ended up selling her house (and two other income properties) and now living on the other side of town in subsidized housing.

I also had a friend who went through a $2 million inheritance in about 10 years. She spent it on house remodels that ignored some deep structural problems; on courses to train for different work areas which she never actually got jobs in; on private school for her son; and on cosmetic surgery and beauty treatments.

I made a few attempts to clue her in since she clearly had plenty money (she could have sold the house into a huge early 21st century housing bull market in her neighborhood, and bought a good condo and pocketed 100s of $thousands or even rented a very nice home). She was book intelligent, pleasant, and pretty, but somehow always seemed to make really poor life decisions, including dumping a perfectly adequate good-earner husband. This lady helped me form my decision to never re-marry, not that I would have considered her a prospect in 1000 years, but she was like a course in how weird things could get if you are tied.

Ha

[Carpediem]

Regarding the sequence of returns risk discussion, I found the following thread that I thought was useful:

http://www.early-retirement.org/foru...rns-76971.html

[haha]

Quote:

Originally Posted by RunningBum Why is it safe for me to be 60% in stocks when I'm 60 if I retired 10 years ago, but not if I retired yesterday? I have the same lifespan left. A downturn would hurt just as badly. I suspect this is one of those strategies that seems to work with back testing of data, but I don't see a solid reason to believe it will work better in the future.

+1

Ha

[Huston55]

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Originally Posted by Options Years ago a brilliant and very successful mentor told me money stays around people who respect it and take good care of it. It does the opposite to those who don't manage it well.

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Originally Posted by brucethebroker Love the mentor's advice. Thanks.

+2

[Huston55]

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Originally Posted by imoldernu At age 80, concerns about money are way down on the worry list. With a five to eight year life expectancy, the hope is that income inequality won't move fast enough to affect the kinds of support that we've come to rely upon.... Social Security Medicare and supplements Pharmaceutical costs The current change is most obvious in the exploding costs of medicine. In just two of the medications that I use, the price increases are out of control. Colchicine, which used to cost $.10/ tablet, is now $5.00/tablet. The infamous EpiPen which used to cost about $20.00 is now $600.00 (recently $300.00 for the generic). Social Security is essentially an unfunded liability, with no solution in sight. Four DW and I, not a particular concern, as reason tells us this won't disappear overnight. Medicare... not a major concern as we expect this will not disappear over our lifetime. .................................................. ......................... The good: Most of our limited assets are in IBonds, which we hope will partially keep up in the case of galloping inflation. We do have limited long term care insurance for homecare or nursing home, but only at $100/day. Our living expenses are very low. We have no debt. Our major worry is for the future of younger people, including our own children and grandchildren. As safety nets for catastrophic medical costs disappear, and student debt becomes unmanageable, the pay-as you-go way of life seems to be disappearing for the average citizen. There's a lingering fear of the lean years that we were growing out of as children in the 1930's and 1940's, and the much less serious economy dips in more recent years. Uncertainty won't go away, but the majority of ER members have their heads on straight, and are realistic and prepared for changes as they occur. Hopefully the advances in knowledge and productivity will keep our nation strong, but optimism is not a substitute for reality checks.

Imodernu-

I've always read your posts with interest because, I think they provide good insight into my 'older' future & I admire your active lifestyle in your 80s.

BUT, I never knew you were so 'ambitious'! Now I know the secret to your longevity. Personally, I don't think I'd have the energy.

[daylatedollarshort]

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Originally Posted by Jpg1717 GaryT: I agree that the smaller equity allocation at retirement plan has merit.It is impossible to time the market, and the most Important decision is asset allocation which is possible to control. I want to avoid getting crushed by a crash early in retirement. So If I only make 5% instead of 12% for a couple years- that is better than losing 35% the first year of retirement and starting out in the hole.I also would appreciate others thoughts on this important topic. Thanks

One source of information you may find of interest is matching strategies on the Bogleheads forum and especially the posts by a poster named Bobcat2:

https://www.bogleheads.org/wiki/Matching_strategy

The idea is to use matching strategies for your basic retirement needs and then if you have money left over you can use mutual funds and stocks for the rest for your discretionary needs.

[Lsbcal]

Quote:

Originally Posted by daylatedollarshort One source of information you may find of interest is matching strategies on the Bogleheads forum and especially the posts by a poster named Bobcat2: https://www.bogleheads.org/wiki/Matching_strategy The idea is to use matching strategies for your basic retirement needs and then if you have money left over you can use mutual funds and stocks for the rest for your discretionary needs.

After the 2008-2009 meltdown, matching strategies became more popular. Bodie was the only advisor I had herd of that had proposed this before the crash. Of course, it seemed unduly conservative at that time and Bodie got little press. Then others like Bernstein got the point after the crash.

Unfortunately, the rising popularity of matching strategies coincided with very low real rates. So I personally am not attracted to such schemes. But for the very risk adverse this might well be a good idea. If real rates rise more towards their historical level, I'd consider TIPS.

[NW-Bound]

I am not that far from SS, and if I delay both my wife's and mine I can live very well on ours (we will most likely draw my wife's SS early, and to delay mine). SS is my way of matching income to needs, I guess.

So, should I spend most of my stash prior to drawing SS? Heck no. I like to count money. Watching Quicken update all the accounts and tally them up at the end of the day is fun, particularly on good days. During bad downturns, looking for bargains keeps me engaged. Much more exciting than driving a fast car or watching a ballgame.

[kaudrey]

Certainly for most here, we are better prepared than the general population. But, the potential is very real. I have a very small family, and my experiences include: my GM, afflicted with Alzheimer's at 80, living until 94 in a nursing home paid my Medicaid once her money ran out. My uncle, no relation to GM, also suffering from Alzheimer's, getting about 4 years of full time home care; my aunt said he had about $50K left at the time of his death this past October at age 86 (they weren't actually married, but were together for over 30 years). My other GM had a few hundred thousand left at her death at 86, was living mostly on SS money for years after my GF died. My parents are still alive at 80, spending is quite low, and although they are prepared for future nursing home needs given the longevity that runs on both sides.....could they support 14 years' worth? Probably not. That's an anomaly, but I've lived with it...

[ripper1]

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Originally Posted by Jpg1717 Running out of money? Good post- if you retire when the market tanks, then you start out on the wrong foot or in the hole. Jane Bryant Quinn's book Make Your Money Last on p 218 states "the newest idea calls for gradually reducing your stock allocation 5 years before retirement . On retirement day you should just be 30% in stocks.That protects you from risk of a crash in the first few Critical years of retirement.Then gradually increase stocks 2 or 3 % per year for 10 years until you get to 50 or 60% stocks then stop. This prevents you from starting out in the hole like people who retired in 2008 did. Very interesting strategy that people retiring now may want to consider. I would appreciate others thoughts concerning this unique strategy.

Yeah, that might work out for those retiring soon seeing that we have been a raging bull for the last 8 years. I wish though when I retired in 2010 that I had a higher allocation to stocks but I guess I sleep well at 50/50.

[Sunset]

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Originally Posted by Huston55 Not to derail this thread too much but.... There are (among those above) lots of good reasons to rent---forever after FIRE.

But a bad reason to rent if married is Medicare.

[Sunset]

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Originally Posted by Jpg1717 RunningBum: because you do not want to get wiped out your first year of retirement and then only have a small amount left to take advantage of the good market years that follow. This is a difficult ? to answer, and I believe there is more than one answer. I just thought Ms. Quinn had some interesting analysis on this topic. I learn something from everyone on this forum. Thanks

I tend to agree with RunningBum, perhaps because I have at least 90% stocks

The answer if you have 90% stocks is to have 5 years worth of cash (cd's, actual bonds but not bond funds).
The market tanks to 25% is no issue as you still get dividends from your severly depressed stocks and have 5 yrs of cash, all of which should outlast any stock depression.

[Huston55]

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Originally Posted by Sunset But a bad reason to rent if married is Medicare.

Pls share more details.

[hankster]

Quote:

Originally Posted by Jpg1717 Running out of money? Good post- if you retire when the market tanks, then you start out on the wrong foot or in the hole. Jane Bryant Quinn's book Make Your Money Last on p 218 states "the newest idea calls for gradually reducing your stock allocation 5 years before retirement . On retirement day you should just be 30% in stocks.That protects you from risk of a crash in the first few Critical years of retirement.Then gradually increase stocks 2 or 3 % per year for 10 years until you get to 50 or 60% stocks then stop. This prevents you from starting out in the hole like people who retired in 2008 did. Very interesting strategy that people retiring now may want to consider. I would appreciate others thoughts concerning this unique strategy.

I'm on the verge of retirement and have been doing this to some extent over the last few years. I've missed some upside for sure, but "bird in the hand" and all that If a bad sequence of returns hits us early, the damage should be minimal.

[RunningBum]

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Originally Posted by hankster I'm on the verge of retirement and have been doing this to some extent over the last few years. I've missed some upside for sure, but "bird in the hand" and all that If a bad sequence of returns hits us early, the damage should be minimal.

Are you also planning on raising your equities a few years after retirement as the advice goes? I went from pretty much 100% equities during my working years to 80/20 the last few years before retirement, then 115-age when I ER'd. I don't think that's too unusual.

But the suggested strategy would be to drop equities way below that heading into retirement, then edging them back up. Is there anyone here who has actually done this, or has definite plans to do it?

[COcheesehead]

If you have enough in cash/bonds when you retire to get through 3 years or so, why worry about the market? That gives you all the time you need to recover. Bonds also can take a hit your first few years of retirement as well. See last year for example. Sequence risk is only a "risk" if you need to sell when the market is down. Set yourself up with a cushion and then the risk goes down. Adding equites as a bigger portion of your portfolio later on doesn't guarantee anything.

[Teacher Terry]

Athena: your example about things gradually going downhill and people not realizing it in regard to their homes is what I call stick your head in the sand. Certainly people start to realize that they can't afford to keep up with their homes before all is lost. My Mom decided at 65 to move into a apartment since my Dad was quite ill and it would be easier. My inlaws stayed in their home forever because they had the $ for in home care and for all the repairs to be made to the house. When they died their home was in excellent condition. I have lived in condos and would certainly consider one again. They can be quite nice.

[Jpg1717]

Ripper1: If you sleep well at 50/50 then the peace of mind is worth it- so what if you missed out on a little profit. I retired in mid 2015 at approximately 50/50 and could sleep well. I am considering lowering to 40/60 and over the next 10 years gradually going back up to either 50/50 or 60/40. Since no one can predict the future- 50/50 is pretty reasonable. Thanks to everyone for your interesting ideas concerning the most important investment decision-asset allocation

[Jpg1717]

Quote:

Originally Posted by COcheesehead If you have enough in cash/bonds when you retire to get through 3 years or so, why worry about the market? That gives you all the time you need to recover. Bonds also can take a hit your first few years of retirement as well. See last year for example. Sequence risk is only a "risk" if you need to sell when the market is down. Set yourself up with a cushion and then the risk goes down. Adding equites as a bigger portion of your portfolio later on doesn't guarantee anything.

No matter what you do there are no guarantees in life - except death and taxes.I agree you should not sell when markets are down.I only thought that it was an interesting concept that since the bull is 8 years old some experts believe people retiring now may want to consider starting out with a smaller equity position. Investing for retirement may be considered an art, and not exact science. I appreciate this interesting discussion. Thanks.