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The Case for Retiring in a Bear Market
11-24-2009, 08:26 AM
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#1
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,391
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The Case for Retiring in a Bear Market
Here's a formula for a comfortable retirement: Wait for stocks to plunge 30%. Watch your neighbors panic and market pundits suffer palpitations live on camera. Then quit your job...
Reality check
the-case-for-retiring-in-a-bear-market: Personal Finance News from Yahoo! Finance
...if I can make it there, I'm gonna make it anywhere
It's up to you, New York, New York
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11-24-2009, 08:32 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,204
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I agree with the article, there are no guarantees of course but this says it all IMO:
Quote:
Indeed, a bear market is a better time to retire because it offers a much-needed reality check. If you have enough to retire when stock prices are depressed, maybe you really are financially ready.
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I'd prefer this to retiring after years of a bull market.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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11-24-2009, 08:39 AM
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#3
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
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I think the timing of my retirement (two weeks ago today) was PERFECT. First, I got to experience the worst imaginable bear market last year, and to ask myself "If I were eligible to retire right now, would I?". Despite reading columns by Nouriel Roubini and the other doom-and-gloomers, the answer to that question was always, "You bet I would!"
And now, the market is doing so much better. The only downside to that, is that my 3.5% SWR will be 3.5% of a bigger amount than last year, so I suppose that SWR is less conservative than it would have been last year.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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11-24-2009, 08:47 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2003
Location: Kansas City
Posts: 7,968
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Well - it's the good times that suck for me.
Why? - I know you didn't ask - but because a market bounce back like recently wimps out my portfolio SEC yield. I'm under my mental 3% threshold.
Norwegian a logically speaking my dividends/interest look a little punky. Mr Market may be a hot shot lately - ok for a little fun but she would probably never marry him.
heh heh heh - pssst Wellesley lest I forget. .
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11-24-2009, 09:05 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,545
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I would agree that pulling the plug in a bear market is a good gut check and no doubt put inumberable people's otherwise well intended plans on hold.
In my case (Fire'd at 51, July 1, 09) preparing for retirement actually helped minimize losses in the last downturn. Beginning in mid 2007 I began moving to a more conservative portfolio in anticipation of my FIRE date. The increase in my bond allocation really saved me over the course of the next 18 months.
Then, as a result of the downturn in equities and the increase of the bonds my AA was way out of whack at the end of 08 and I needed to rebalance to bring equities back in line. Result was I caught the wave that began in March.
As my advisor says "that's how AA rebalancing is supposed to work".
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11-24-2009, 09:08 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Of course it's a great idea. It is also the same idea as retiring at the end of a bull market with 50% more than you need. Or simply retiring with lots and lots of money that you don't need at any time.
The beauty of retiring at a bear market low with enough money is that the stock market has set up a conservative retirement asset allocation for you by knocking down your percentage of equities to where they needed to be anyways.
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11-24-2009, 09:24 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Mar 2004
Location: Dallas
Posts: 1,211
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For those who cashed out a pension plan and rolled it over to an IRA in March, and further lumped into their equity AA immediately, the world is looking sweet right now. That would have taken more moxie than most of us have.
The trouble with cashing out a pension in this environment is that the present value calculation would be relatively low due to low long term interest rates.
Of course cashing out a defined benefit pension is probably not an option for today's retiring boomers as this type of pension is fast becoming a relic of the past.
Cheers,
charlie
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11-24-2009, 09:57 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2007
Posts: 7,746
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Quote:
Originally Posted by LOL!
Of course it's a great idea. It is also the same idea as retiring at the end of a bull market with 50% more than you need. Or simply retiring with lots and lots of money that you don't need at any time.
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My thinking as well. Taking 4% from the trough value at the bottom of the bear will undoubtedly be more successful than taking 4% from the value at the absolute market peak. I'll certainly keep recent trends in the market (ie is it a bull or bear?) in mind before pulling the plug. I'd hate to think I have X million in the portfolio, then realize that was the peak of a bull market and I actually have 0.7X-0.8X million when the inevitable correction happens.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (8, 13, and 15).
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11-24-2009, 10:14 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Quote:
Originally Posted by W2R
Despite reading columns by Nouriel Roubini and the other doom-and-gloomers, the answer to that question was always, "You bet I would!"
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I knew Nouriel at college and while I think he's more grounded than most pundits I still can't think of him as a serious economist with insight into these issues, to me he's still "Nou Nou"
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11-24-2009, 10:21 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Quote:
Originally Posted by charlie
For those who cashed out a pension plan and rolled it over to an IRA in March, and further lumped into their equity AA immediately, the world is looking sweet right now. That would have taken more moxie than most of us have.
The trouble with cashing out a pension in this environment is that the present value calculation would be relatively low due to low long term interest rates.
Of course cashing out a defined benefit pension is probably not an option for today's retiring boomers as this type of pension is fast becoming a relic of the past.
Cheers,
charlie
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I'm looking to finance my ER with a mix of rental income and dividends/interest. The 4 or 5 year cash cushion is something I like and I intend to put $100k in a 5 year CD ladder. But I'll probably eat into my after tax principal a little before I get to 59 1/2. I want to avoid the 72t option. At 59 1/2 I'll get a $5k /year pension and once the SS kicks in at 62 my expenses will be covered by pensions, SS and rent.
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11-24-2009, 10:25 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Posts: 12,880
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IOW, "If you have a lot of money even after you've lost a lot of money, you are in good shape."
__________________
Al
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11-24-2009, 11:31 AM
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#12
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
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Quote:
Originally Posted by nun
I knew Nouriel at college and while I think he's more grounded than most pundits I still can't think of him as a serious economist with insight into these issues, to me he's still "Nou Nou"
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That is so funny! To me, he always seems so serious. Next time I see something he wrote or said, I'll think of him as "Nou Nou" too.
I think it is SO COOL that you knew him at college! Wow! I guess that in a sense I could say that since I "know" you from the forum, I "know" somebody who knows Nouriel Roubini.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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11-24-2009, 11:32 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,151
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Quote:
Originally Posted by TromboneAl
IOW, "If you have a lot of money even after you've lost a lot of money, you are in good shape."
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Exactly T-Al. I don't think market conditions really matter all that much. Retiring at the peak with $2M or at the trough with $1.4M is pretty much a wash. As long as you have a typical pre-retirement AA of say 50/50 so liquidating eqities isn't an immediate concern, what's the difference?
Or, another way, if you have $1.2M at the trough and calculate an acceptable survival rate at a comfortable standard of living, then I'd expect that when you had $2M at the peak, that would have been OK too.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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11-24-2009, 05:57 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Nov 2005
Location: Colorado, USA
Posts: 1,127
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It's worked out for me. Things changed a lot between when I decided to retire in August 2008 and my first day of retirement on April 1, 2009. I was a little more ... concerned than I had expected to be on retirement day. But my net worth has gone up every month since, and I'm getting more calmed down. If we had worked our way down to, say, DJIA 5000 by now it would be a different story.
Coach
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"Comprehensive health insurance is an idea whose time has come in America." President Richard M. Nixon, February 6, 1974
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11-24-2009, 06:04 PM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Posts: 5,381
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The logic is sound.
But here's the wet blanket. We're not at trough valuations anymore . . . PE-10 is back close to 20x.
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11-24-2009, 06:05 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2009
Posts: 5,307
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Quote:
Originally Posted by charlie
The trouble with cashing out a pension in this environment is that the present value calculation would be relatively low due to low long term interest rates.
Of course cashing out a defined benefit pension is probably not an option for today's retiring boomers as this type of pension is fast becoming a relic of the past.
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My husband has one and the lower the interest rate used the higher the lump sum. We can run the calculations showing how it varies depending on rate. Low rates = higher lump sum.
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11-24-2009, 07:53 PM
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#17
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Thinks s/he gets paid by the post
Join Date: Mar 2004
Location: Dallas
Posts: 1,211
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Kats,
Thanks for correcting my senior moment. I knew that, just misremembered.
Cheers,
charlie
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