Some perspective

[Notmuchlonger]

Fun isn't it

I believe in humanity. That the world deep in their little old hearts want to be successful

 

[Nords]

And by the way, I have very little in the way of guaranteed pensions either.

Here we go again. The people who have pensions are deemed to be too blissfully ignorant to be able to analyze economic issues. "They got theirs."

I'd like to remind anyone who doesn't have a guaranteed pension that they can purchase one anytime they wish in the form of an annuity.

If this little blip in the economy is scary enough to take jabs at people who have pensions or annuities, perhaps that's an indication that asset allocations need to be reviewed in light of a revised examination of one's volatility/risk tolerance...

 

[Dawg52]

I'd like to remind anyone who doesn't have a guaranteed pension that they can purchase one anytime they wish in the form of an annuity.

If this little blip in the economy is scary enough to take jabs at people who have pensions or annuities, perhaps that's an indication that asset allocations need to be reviewed in light of a revised examination of one's volatility/risk tolerance...

Hey, I agree. And when I suggest that an annuity might be a nice addition for a low risk tolerant person like myself, then you get hammered from all the anti-annuity types. Oh well, so it goes.

 

[RockOn]

Hey, I agree. And when I suggest that an annuity might be a nice addition for a low risk tolerant person like myself, then you get hammered from all the anti-annuity types. Oh well, so it goes.

ditto that...(might be a nice addition for many low risk tolerant people)

 

[ladelfina]

Hey, I agree. And when I suggest that an annuity might be a nice addition for a low risk tolerant person like myself, then you get hammered from all the anti-annuity types. Oh well, so it goes.

Now you've got the idea!

And I think I've said before it's not a matter of asset allocation. AA is about when stocks are up and bonds are down, not when stocks are down and bonds are down. We all want energy, right? So why is the energy sector down 4% in the last couple days, to the S&P's 2%? There's just weirdness in the air.

the investment landscape of the past few weeks has become so bizarre that it needs to be recorded for posterity.

Darkside of the Moon

And I am not 'taking jabs' at all people with pensions, just those who 'take jabs' at me and mock me and others who are unsettled and concerned in a season of unprecedented challenges.

 

[REWahoo]

Now you've got the idea!

Yep. Get hammered...

 

[Notmuchlonger]

Ive never seen anyone here hammer on someone about buying an annuity. Knock yourself out if you want to pay someone a fee to dish out your own money

 

[Nords]

Hey, I agree. And when I suggest that an annuity might be a nice addition for a low risk tolerant person like myself, then you get hammered from all the anti-annuity types. Oh well, so it goes.

Ive never seen anyone here hammer on someone about buying an annuity. Knock yourself out if you want to pay someone a fee to dish out your own money

Well, I thought about it a little more.

I guess one issue revolves around just how bad things are. The economy has probably met its recession criteria of two quarters by now, oil & raw materials are at all-time highs, and inflation is taking off. And the stock market is officially into bear territory. But this ain't anywhere near "bad".

If the previous paragraph is "bad", then what would we have done during the really bad ol' days? I'm not even talking about the Depression or WWII-- just 1973-4 or 1966-82 or 19 Oct 87 or even 2000-02. Unemployment and inflation haven't even reached double digits yet. VIX is barely in the teens. This economic climate is so different from the past in so many good ways that I don't think the current "bad" stuff even makes it onto the 20th century's top-ten list.

Another issue: if this little dip in the stock market has people edging toward open windows and throwing away their ER plans, then just how good were those plans? It's one thing to blithely run FIRECalc and claim to be nearly FI, but then getting despondent at a speed bump might mean that the plan wasn't so hot in the first place or that the planner doesn't have enough sleep-at-night confidence. An investor who can't handle the dips that FIRECalc creates as part of its success rate... shouldn't be invested in an asset allocation that could produce those dips. If losing 20% of a stock portfolio is a problem then that's a clear signal to avoid a high equity allocation.

If an ER plan is derailed every time the stock market is down 20%, then that ER plan is undercapitalized.

If an ER wants to retire without consuming principal, then that's not the Trinity study's 4% SWR. That's living off the dividends, which is more an SWR of 3.3% or even less.

Maybe it's worth figuring out what successful ER plans have that enables them to handle a 20% drop in the market.

Maybe it's worth remembering how we all feel about this month's market performance and re-evaluating our risk/volatility tolerance in light of our response to the headlines.

Finally, I can understand that some people want to vent. I can understand the need to analyze the differences and pick over the data to see if things really are different this time.

But I draw the line at labeling confident Young Dreamers (let alone successful ERs) as "Pollyanna"s or poking fun at their "guaranteed pensions". It's one thing to discover that a plan isn't as good as it seemed and to try to make it better, but it's quite another to take it out on posters who have actually been able to execute a plan that's holding up under its stress test. The vast majority of ERs got there through hard work, diligent saving, and taking market risks-- not winning lotteries or through dumb luck. They worked a plan that accounted for of all the craziness that went on over the last three or four decades, and many of us survived one heck of a stress test right at the beginning of their ERs. "Battle-scarred veteran", perhaps, but "Pollyanna"?!?

An argument has to stand on its own merits. Name-calling and fingerpointing tend to emphasize the fact that an argument isn't doing a very good job of standing on its own merits.

So let's lay off the personal attacks.

Maybe it's worth seeing this market as the investment opportunity it really is. It's certainly not a rational market!

 

[NW-Bound]

I am a new member here, and was very happy to find a group of FIRE's, who share my interests in financial matters (not a stock picker/day trader forum), lifestyle, and LBYM philosophy. Most of my friends and family members aren't this sophisticated about financial matters. They envy people who retire early, but have NO CLUE what it takes to generate the income they are blowing away right now. For example, a fellow worker wished he could have $500K to retire now. I almost screamed out that he was stupid for thinking that would replace his $100K+ income right now.

Then, just over the last few days, I saw some flames that were unexpected. It's OK to differ on the future outlook of the economy, but we need to remember the other person is investing his/her money, not our own. So, why get all upset if he/she is doing it his/her way? Isn't it their money to do what they wish?

 

[haha]

I don't like to bash people who have fat pensions, since doing so won't bring me one (though I think we have to rethink our ability to keep promising it to new hires, at least in the public sector), but I do agree that it's easier to be less uneasy about the future if you have one. (I highlighted "new hires" here because I want it clear that I don't support taking away pension promises from anyone already in the system.)

Contracts are renogiated all the time, one way or another.

Ha

 

[clifp]

Now you've got the idea!

And I think I've said before it's not a matter of asset allocation. AA is about when stocks are up and bonds are down, not when stocks are down and bonds are down. We all want energy, right? So why is the energy sector down 4% in the last couple days, to the S&P's 2%? There's just weirdness in the air.

Bonds are up a lot in the last year. The total return for Vanguard bonds funds (except for high yield) are up between 5-15% (TIPs) over the last 12 months.
The couch potato portfolio of 50% Total Stock Market (-12.53%) and 50%
Total Bond Market (+7.23) would be down 2.65% in the last year. Not great but hardly earth shattering.

Now those of us who sold our TIPs bond a bit early and proceeded to invest most of the money in financial stocks we are hurting... But any indexer with moderate risk profile should be doing ok.

 

[Dawg52]

Ive never seen anyone here hammer on someone about buying an annuity. Knock yourself out if you want to pay someone a fee to dish out your own money

Sounds like a good idea. Get my money back and then some. Beats the heck out of my current plan. Oh yes, assuming I live long enough. But if I don't, will I care 6 feet under?

 

[ziggy29]

Here we go again. The people who have pensions are deemed to be too blissfully ignorant to be able to analyze economic issues. "They got theirs."

I'd like to remind anyone who doesn't have a guaranteed pension that they can purchase one anytime they wish in the form of an annuity.

Hey, I was just commenting on what someone else referred to...

 

[rs0460a]

Ive never seen anyone here hammer on someone about buying an annuity.

Not necessarily true. Had one person "take me to task" a few years ago when I was investigating an SPIA to set up a "pension" before I retired, a few years ago, and asked for information on this board.

I've been retired (and have had the SPIA) over a year, and IMHO has been a good decision (for me, my DW, and my estate).

Oh yes, the person who argued about it a couple of years ago received the "honor" of being the only person on my "ignore list" on this forum. One thing I've learned - don't argue with "fools" - just ignore them ...

- Ron

 

[Lsbcal]

I hope I have not stepped on anyone's toes here. Pensioners are OK with me -- I wish I had one too. I'm glad some posters have talked about FIRECalc and other downturns too. And yes, the June swoon took down some bond funds too (like Vanguard Total Bond Mkt, DODIX, HABDX), just a little but we were counting on them to go up when stocks went down.

If you just want to vent about the downturn it's OK, we will try to be supportive. DW sometimes gets mad at me for explaining how she should look at something rationally. I've tried to learn how to validate her anger or fears first. But if she could only see how ... never mind.

 

[ladelfina]

Nords, I'm not sure if you are intentionally avoiding the points I've tried to make or not. To begin with, I am not "poking fun" at anyone's pension.. I will come right out with it and say that I have an issue with you personally preaching from an ivory tower when your situation (which you earned and deserve) is far different from even someone relying on a purchased annuity. That's all. And I would not have brought it up if you hadn't "poked fun" at me first, please note!

My AA is fine. I have taken things in stride but like the animals who run away or act oddly before an earthquake or typhoon I am unsettled. Some well-meaning people here would like me to calm down and be more civilized.

I haven't consumed any principle, ever.
The principle is, and will continue to be, consumed for me, not just through market declines but through dilution of shares, cost inflation without concomitant increases in earnings, dividends or bond interest, and the decline of the dollar.

Nor have I ever sold ANY stock, ever*, until I did sell some on Thurs. to bring my cash position up to a whopping 13%. It was a very unpleasant feeling.

*ok, once I did sell one gold-mining position that had gone to $200 just because it irritated me to look at it. We all have our moments of pique.

1973-4 or 1966-82 or 19 Oct 87 or even 2000-02

In the 70s, bond interest and wages were rising with inflation, now they are not.
1987 and 2000-02 bothered me not in the least.
Stop looking at the speed bump and focus on the brick wall.

This economic climate is so different from the past in so many good ways

proceeded to invest most of the money in financial stocks

rs0460a, I will bear witness to the near-universal annuity bashing of the past. Whether due to people being revisionist in their assessments or just new folks on the board, I don't know and haven't bothered to track.. but in recent months annuities have been discussed with greater respect and thoughtfulness if not outright approval, in the main.

 

[REWahoo]

Nor have I ever sold ANY stock, ever*, until I did sell some on Thurs. to bring my cash position up to a whopping 13%. It was a very unpleasant feeling.

Ah hah! If I'd had to sell equities after they just took a 20% haircut to refill my "cash bucket", I'd be pissed too. I might also be convinced the financial world is headed to hell in a hand basket.

 

[rs0460a]

Ah hah! If I'd had to sell equities after they just took a 20% haircut to refill my "cash bucket", I'd be pissed too. I might also be convinced the financial world is headed to hell in a hand basket.

Let's hope (at least for me ) that this market get's "straight" in the next 2.5 years (the amount I have in my cash bucket).

I'd hate to start selling the "seed corn".

- Ron

 

[d]

i occasionally like to get a second opinion ... and refer to 1) the asset allocation of vanguard's asset allocation fund, and 2) morningstar's market valuation graph. both of these need, of course, to be taken with a large grain of salt but do distill what i expect to be reasonably informed opinion (more informed than my own).

 

[Jarhead*]

Ah hah! If I'd had to sell equities after they just took a 20% haircut to refill my "cash bucket", I'd be pissed too. I might also be convinced the financial world is headed to hell in a hand basket.

I think our young friend is in dire need of a stress remover.

Perhaps a good stiff one 3 times a day. (Talking about Jim Beam of Course).

 

[rogersteciak]

... it's easier to be less uneasy about the future if you have one.

This is an important point. If one "doesn't currently have a future," then that self-observation should be sufficient motivation to figure out how to get a future.

When I noticed I had very little in the way of retirement money set aside after hitting the big 40 many years ago (and entering my mid-life crisis as a result), I decided to do something about it. Today, retirement money is no longer an issue and I only wish now I had started saving for retirement when I was in my 20s because I would be that much farther ahead.

If this current stress test of one's portfolio points out some weaknesses in one's asset allocation, then it's a good idea to take remedial action when we pull out of these conditions at some point in the future, even if it means working a few more years than originally desired. You can be sure that we'll see market conditions like these again, so it's a good idea to be ready for the next occurrence (whenever that may be).

At the peak of the dot-com bubble, for example, I was calculating how many more months it would be when I would be able to pay off the mortgage and retire. It took me a few years longer than originally expected, but I made the necessary changes to my finances after the bubble burst and got there eventually anyway.

 

[ladelfina]

Ah hah! If I'd had to sell equities after they just took a 20% haircut to refill my "cash bucket", I'd be pissed too. I might also be convinced the financial world is headed to hell in a hand basket.

Let's hope (at least for me ) that this market get's "straight" in the next 2.5 years (the amount I have in my cash bucket).

I'd hate to start selling the "seed corn".

- Ron

I didn't "have to". This was a one-time thing to get cash cushion (accumulated from div. & interest) from about 2 years to about 4. Only at past/current spending levels, not sure whether that will really hold. I want to take this (at least 3 years' worth) and put it in a euro bank with 1 year's cash and 2 years euro short term bonds at 4.25% IF I can justify the [used to be .6%, gotta check that] currency fee AND the auto tax witholding that happens here (it comes straight off the top, no exemption levels). Don't say I can write off the foreign taxes because I do that already with ADRs and it's a convoluted process with form 1116 and I have only gotten ever back about half. Not sure if that changes with the levels reported for better or worse; it's only been in the few hundreds but they won't let you write all of it off.
I still have to figure out if that is worth the trouble or not; if not I will put the money in US treasuries and rend my garments and gnash my teeth.

I could sit around and wait for even a modest rebound of the dollar as I have for the last eight years but I think that will happen maybe in about another 20. For now, I am only considering selling what is likely to keep me out of the maw of the AMT, which I have never experienced and don't want to.

 

[FIREd]

Nor have I ever sold ANY stock, ever*, until I did sell some on Thurs. to bring my cash position up to a whopping 13%. It was a very unpleasant feeling.

I feel for you. Not only are you being hit by the slump in the stock market and inflation like the rest of us, but in addition, your cash reserves are probably being hit pretty hard by the weak dollar... DW and I are contemplating the possibility to retire in Europe so I like to read about your experiences and right now it sure is an eye opener... Hopefully someone is going to start propping up the dollar soon...

 

[ziggy29]

Hopefully someone is going to start propping up the dollar soon...

My recent diversification into more bets against the dollar will see to that.

 

[ladelfina]

Hey, we have had eight years, almost, of the "strong dollar policy"!!
"We're strong dollar people!" (Bush, just the other day)

Imagine if we WEREn't "strong dollar people"!!