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Old 08-09-2020, 04:45 PM   #21
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I agree. When you're making a big decision like when to ER, you don't just look at the market once a year. Especially when it really seems overpriced right now.
I didn't say it was easy. The problem is that looking frequently doesn't give you any information. It just gives you data that is almost pure noise. Here is a graphic I use when discussing this in my Adult-Ed investing class:



There is no way that someone looking only at daily numbers could discern the trend. And the trend is your friend.

There is research that says that investors who look frequently have poorer performance than those who look less frequently. The behavioral finance people explain this as a consequence of our human asymmetrical view of losses and gains. We hate losses more than we love gains. So someone who looks too frequently is frequently exposed to loss scenarios and tends to not buy and hold as he/she should.

I look at the markets every day like I look at those TV sets in bars/restaurants. The TVs, sound off, show various people running around. Usually some kind of ball is involved. It's hard to not look at them but when I leave I care nothing about what I have seen. With markets, when I actually want to know what is going on I look at the 5-year charts. FWIW, over 5 years the Dow is up 57.91% and the S&P is up 61.31%. And those are just nominal numbers, no dividends included. Total return is significantly higher.

Here is another pertinent chart:

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Old 08-09-2020, 04:54 PM   #22
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Well, it's not such an easy question to answer. I approach it like this: What if the stock market went down 50%? Could I survive? Will my investments survive? Most likely, yes! That is why I have between 45 and 48% stocks right now. If I had 100% stocks right now, I wouldn't feel so confident about surviving an ugly downturn because if that were the case { having 100% in stocks}, I would have to go back to work if we went down 50% or more. I do not plan on doing that. I have been retired since 2016.

While I likely could survive a 50% downturn, the psychological depression that would probably result from such an event , would probably be too much for me to handle. I could handle a 20-25% downturn with 45- 48% stocks,but if i was exposed 100% in stocks and my portfolio went down 50% or more, it would be devastating to me personally.

In addition to all that, I get enough income for me with a little extra to reinvest if I want to , that helps with inflation. So for me, that is how I know I have enough, in the fact that i have enough income to live on, I have a little extra money to reinvest every month if I want to, and I feel comfortable that if TSHF I will be alright, thus the conservative stock allocation.
ETA-Ok, maybe know no one can know for sure they have enough, but you try to give yourself the best chance for success.
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Old 08-09-2020, 05:11 PM   #23
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Originally Posted by samcat View Post
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I think we have plenty but as March showed us, one could lose tens of thousands of dollars in one day.

If you don’t sell equities during a severe market downturn, then you really have not lost anything. Holding enough stable value assets to live on during a bear market will allow you to sleep better. Since February, I have been spending from my money market as well as the dividends generated from my 60:40 asset allocation portfolio. I left my equities untouched, and my portfolio is now within a few percentage points of its all-time high. I expect more market volatility ahead, but as long as you maintain enough cash reserves, you can ride it out without too much anxiety.
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Old 08-09-2020, 05:19 PM   #24
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If you don’t sell equities during a severe market downturn, then you really have not lost anything. Holding enough stable value assets to live on during a bear market will allow you to sleep better. Since February, I have been spending from my money market as well as the dividends generated from my 60:40 asset allocation portfolio. I left my equities untouched, and my portfolio is now within a few percentage points of its all-time high. I expect more market volatility ahead, but as long as you maintain enough cash reserves, you can ride it out without too much anxiety.
That's exactly what we do.

The reality is that every dip is followed by a rise. Sometimes we have to wait a while, but that's why a 100% stock portfolio is unwise if you have to spend from it.
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Old 08-09-2020, 05:23 PM   #25
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This has nothing to do with watching the markets on a daily basis. It has to do with how do you know when you have enough and can retire without worrying if the market goes down.



I feel like we have enough now but if the market were to go down like it did in March, we would have sleepless nights. I guess that is my answer!


If you are having sleepless nights, your equity allocation is out of line with your tolerance for risk. If you can tolerate 50-70% equity allocation AND 4% withdrawal rate will meet your needs, you have enough. As someone pointed out, you don’t need the whole nest egg at the same time. A safe withdrawal rate will meet your needs while equities recover as they have since March. Spending down the non equity allocation and rebalancing should meet your needs for 30 years. If you expect a longer retirement or can’t tolerate 50% equities, you’ll need to adjust accordingly.
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Old 08-09-2020, 05:32 PM   #26
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So, none of you had any doubts when you were looking at pulling the trigger? You just made your decision, left your job, set your retirement AA, and fell soundly asleep as your head hit the pillow?

ETA: Perhaps you did, if you saved twice as much as you need to, as some of you seem to be saying. Others of us didn't want to wait that long to retire though.
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Old 08-09-2020, 05:36 PM   #27
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It is definitely a leap of faith to pull the plug on salary income and depend on investments and savings and any other income streams you might have. I was very nervous the first year or so of retirement and am still paying attention to sequence of returns risk 6 years in.

You need to look at several factors:
- What's your asset allocation? If you have it 100% in equities - then you feel the pain of market swings even stronger. Most people here have a percentage in equities, a percentage in fixed income, and a percentage in cash. And rebalance to those percentages periodicallly (annually, whenever there are big swings, quarterly). The fixed income and cash may not make as much money - but they give you a cushion during market down turns to NOT sell everything in a panic.
- You mention the market swings of March - but.... the market has recovered. So if you panicked and sold - you locked in the losses... Remember to stay calm and maintain your asset allocation... DON'T PANIC. Sometimes it takes a bit longer to recover (2007-2009). But stay the course.
- Look at your withdrawal rate. If you are withdrawing 4% you are likely ok for a 30 year requirement. Historically you were ok 95% of the time. If you are withdrawing 3.5% you are golden... If you are lower than that - you will be making your heirs rich. This assumes a withdrawal rate based on the starting date portfolio value, increased each year for inflation. Your portfolio will likely go up (a lot) but that is what the 95% success for 4% withdrawal was based on.
- Consider a variable withdrawal... if you have extras built into your budget then on years the market is down you withdraw less... on years the market goes up you can withdraw more. This is based on value of your portfolio each year. Several members here withdraw a fixed 3.5% of their portfolio at the beginning of the year. You will never run out of money since you withdraw only 3.5% each year.

Take a deep breathe and read this post:

https://www.early-retirement.org/for...ire-69999.html
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Old 08-09-2020, 05:39 PM   #28
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How do you know when you have enough to retire when the stock market is so wild? Even with diversification, it is crazy.

I think we have plenty but as March showed us, one could lose tens of thousands of dollars in one day.
Just wanted to also say - yeah March was crazy. There was a week that we lost (on paper) several years worth of withdrawals. Yikes. But staying the course we're just fine now.
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When you have enough?
Old 08-09-2020, 05:41 PM   #29
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When you have enough?

We have a dedicated Vanguard advisor and he and their expensive software tell us we have enough to fund the comprehensive plan we’ve built carefully with him. Good enough for me.
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Old 08-09-2020, 05:43 PM   #30
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If 50% of what you have is enough, then you probably have enough, provided you do not panic sell when a 50% downturn comes.
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Old 08-09-2020, 07:10 PM   #31
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So, none of you had any doubts when you were looking at pulling the trigger? You just made your decision, left your job, set your retirement AA, and fell soundly asleep as your head hit the pillow?

ETA: Perhaps you did, if you saved twice as much as you need to, as some of you seem to be saying. Others of us didn't want to wait that long to retire though.


I dunno. Maybe I had doubts but they were more related to some type of black swan event, markets being worse than any time in recorded history, underestimating expenses or SORR. I knew I had enough to execute Plan A and if that didn’t work I had B, C, and D as fallbacks. I’m still keenly aware of a possibility for SHTF and maintain fallback plans 5 yrs in.
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Old 08-09-2020, 07:16 PM   #32
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Originally Posted by RunningBum View Post
So, none of you had any doubts when you were looking at pulling the trigger? You just made your decision, left your job, set your retirement AA, and fell soundly asleep as your head hit the pillow?

ETA: Perhaps you did, if you saved twice as much as you need to, as some of you seem to be saying. Others of us didn't want to wait that long to retire though.
Yup, had no doubts, gave my 30 days and out the door. No lost sleep. Easy.
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Old 08-09-2020, 07:27 PM   #33
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25-30 times your desired retirement budget. We pulled the plug with 35x our desired budget which included everything like planned car replacement, healthcare, travel, fun, etc. So a fat budget.
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Old 08-09-2020, 08:03 PM   #34
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Our retirement calculations didn't include stock returns. We based our plans on a 0% real return from TIPS and other fixed income assets, plus pensions and Social Security. At a 0% real return (just keeping up with inflation, but not incurring any big capital losses), a 30 year safe withdrawal rate 3.33% (100 / 30 years = 3.33%). Plus we still live below our means in retirement and have a buffer. When we retired 30 year TIPS were at inflation + 2%, and we just thought good enough, especially with the relative safety of U.S. Treasury bonds. Our retirement M.O. is focused more on sustainable living, low consumption and hacking expenses rather than relying on stock market gains.
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Old 08-09-2020, 08:14 PM   #35
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So, none of you had any doubts when you were looking at pulling the trigger? You just made your decision, left your job, set your retirement AA, and fell soundly asleep as your head hit the pillow?

ETA: Perhaps you did, if you saved twice as much as you need to, as some of you seem to be saying. Others of us didn't want to wait that long to retire though.

I can't say we never had any doubts, but we both grew up blue collar, and worst case thought we could downsize or move to a lower cost of living area if it meant not having to work anymore. We looked at the Consumer Expenditure Survey of what other households lived on and felt between our savings, pensions and Social Security we were in pretty good shape. Plus we reviewed our plan with our 401K rep and ran our numbers through their retirement planner using only the short term bond allocation and it showed we would be fine.
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Old 08-09-2020, 08:14 PM   #36
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We lived on our passive income for 3 years before pulling the trigger. Could have done it earlier, but I liked work. When I saw an opportunity to receive a package, you didn't have to ask me twice.

Enough for me was building out a financial fortress, so I had high confidence we'd be ok.
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Old 08-09-2020, 08:39 PM   #37
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How do you know when you have enough to retire when the stock market is so wild? Even with diversification, it is crazy.

I think we have plenty but as March showed us, one could lose tens of thousands of dollars in one day.
To me, Asset Allocation is the key to alleviate your portfolio in the event of market downturn. Also use the financial tools to verify your AA scenarios to meet your goal.

That being said, I have notice some people that doesn't matter how many times the financial models generated 100% results, they still scared of "what if". People like such, they may want to consider less stock in their portfolio.
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Old 08-09-2020, 10:24 PM   #38
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My take is (and this is/was directed at myself): If the 30% plunge in March made your retirement questionable, then you aren't ready to retire.

As someone described upthread, you should take your equity stash and assume it loses half its value. Is the remaining stash enough to sustain you? If not, keep working and/or change your AA.
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Old 08-10-2020, 04:58 AM   #39
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The other exercise I do, imagine your equities are priced at 50% (or lower if you are really pessimistic) of what they are now. What does that do to your numbers? If you can still sleep at night, fine. If not - reconsider your AA.
VPW spreadsheet does that in the retirement tab - it shows a hypothetical 50% reduction in the stock portion of your portfolio (you specify your AA) and calculates the decrease to the suggested withdrawal based on that possible portfolio hit. If you believe you can cover your expenses with that decreased amount, you have a high probability of success.

https://www.bogleheads.org/wiki/Vari...age_withdrawal

spreadsheet is at link...
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Old 08-10-2020, 05:34 AM   #40
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25-30 times your desired retirement budget. We pulled the plug with 35x our desired budget which included everything like planned car replacement, healthcare, travel, fun, etc. So a fat budget.
+1 I had a similar thought: Subtract annual guaranteed income (i.e. pension, SS) from annual expenses. Take that result X 33 and that's your number.
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