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Old 08-14-2020, 06:13 PM   #61
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I like how Monte Carlo simulators work with Schwab. If the future looks like the past, they give a good statistical feel for how likely your assumptions are achievable. And then you can fudge your assumptions to see what is good enough if you are short. Or see how much you can splash out to spend it all.

Helps to have your historical returns available so you can compare yourself relative to market returns.
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Old 08-14-2020, 06:23 PM   #62
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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.
While I haven't FIRED yet, we did save 'twice as much as we needed to', because, we wanted a budget that was 50% travel (100% of this is discretionary). Yes, I could have FIRED at my original goal of age 50, but my travel would have been severely curtailed, and there would have been little buffer for large economic downturns. Still, when I hopefully FIRE (in January), I certainly won't be able to ignore the markets and sleep soundly. I'll be looking for periods where assets are up to sell enough to make the year's expenses. Right now (w$rking), I update the stock values every day. When this year's big COVID crash happened, I was travelling in NZ, and saw $30-40K disappear per day. It wasn't easy, but I didn't panic and sell, even though I had paper losses of $950K. But I did defer ER, mostly due to travel restrictions.
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Old 08-14-2020, 08:25 PM   #63
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The wild market confirmed that I had enough. My original goal was 25x expenses, excluding SS, my buffer. I ended up working an extra year because I needed surgery and rehab. I retired at ~27x expenses. Starting two years before retirement, I reduced my allocation from 80/20 to 55/45 so the portfolio could survive a 50% drop in equities and allow me to sleep at night.

When the March decline happened, I did some tax loss harvesting and rebalancing. Even though I had lost 6 figures, I realized my life would not change at all. In fact, I realized that I wanted a 50% drop so I could pick up more equities. That's when I realized that I had enough. In fact, due to my inability to travel, eat out or shop, I am going to spend less than 2.5% this year rather than 4.0%.
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Old 08-14-2020, 08:54 PM   #64
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Thank you everyone for your thoughtful comments!

When you figure out your annual expenses, do you include taxes?
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Old 08-14-2020, 09:08 PM   #65
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Thank you everyone for your thoughtful comments!

When you figure out your annual expenses, do you include taxes?

Yes and don't forget taxes on RMDs if you have retirement accounts.
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Old 08-14-2020, 09:16 PM   #66
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It's really impossible to know since none of us knows what the future brings. I think flexibility is the key: assume that you'll die at 90 but when you get a heart attack (as I just did) shave a few years off that estimation and live a little Hope for the best when it comes to the stock market but be ready to stay at Holiday Inn instead of Belmond during your travels. Count on Social Security but prepare to move to a cheaper location if it gets cut in a half - and I don't mean a shack in the middle of a corn field. There are great options all over the world if you're willing to be somewhat adventurous (clearly that's not quite feasible now).

I wonder if there are RE folks around this forum who look back and say: "I wish I worked 5 more years"....

Sorry to hear about the heart attack. I hope you are well on the road to recovery now.

I do have a fiend who retired early and now regrets not saving more, and some that went back to work. But I get the feeling they all didn't do as much upfront research and crunch the numbers like most of the posters here seem to do.
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Old 08-14-2020, 10:36 PM   #67
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You know when you have done the homework, understand your expenses, and your Income as % return. Ratio depends on risk tolerance, age, and willingness to flex
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Old 08-14-2020, 11:39 PM   #68
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so line 35 (Portfolio Withdrawal) if the market has crashed and line 14 if things are normal??
Yes - you can also adjust line 11 with regard to frequency (monthly, quarterly or annually) and then line 19 tells you how much you would need to decrease the projected amount for that frequency.

The Boglehead who developed the spreadsheet using the VPW principles also has a thread on the forum that is forward testing the model with a 'smoothing' mechanism; it basically averages out the annual suggestion with the monthly suggestion allowing the user to adjust more finely due to stock market fluctuations throughout the year. He's been doing the forward test for a year; he posts every month going through the sequence of steps using the model and the smoothing mechanism using a hypothetical case that exercises all of the model: portfolio, asset allocation and pension.

Thread is here: https://www.bogleheads.org/forum/viewtopic.php?t=284519
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Old 08-15-2020, 03:32 AM   #69
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I'm 3-4 years away from landing the plane, so this sort of question is on my mind as well.

Setting aside sequence of returns risk, I think market volatility is sort of a red herring. It's pretty easy to overcome with AA and cushion.

As I think about ready-or-not, I have three things in mind:

1) Step away from the spreadsheet on spending. Its easy to think "if I don't have $x, we will starve and die." What options would you have to cut spending if things got rocky? If the answer is "none", then you can't retire. If the answer is "quite a bit", you're OK.

2) The risk I am worried about, and that is very hard to hedge, is interest rates. With full deference to the old joke that "this time is different", we have never seen anything like what's going on with the Fed and Congress. An interest rate snap back would be brutal and a long term impact. And it's very hard to hedge because it would hit all asset classes.

3) Life (and Death) happen. 8 months ago none of us knew what Covid was. There are lots of people who are suddenly ill/deceased from something they didn't see coming. Its worth using the "Rich, Broke, or Dead" calculator to recenter oneself on the actual mortality rates.

https://engaging-data.com/will-money-last-retire-early/

My $0.02.
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Old 08-15-2020, 05:25 AM   #70
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I recall a posting saying that Firecalc updated its recent market data, does this include the great recession of 2020 data in its models?
Unless the market tanks again soon, this "great recession of 2020" might end up being little more than a hiccup. I hit the bottom on March 23, when I was down about 30.5% YTD. But, the bounce back came fast. I finished March down about 21.5%, by April's end I was down about 13.3%. At the end of July I was only down about 2.3%. There have been a few days in August where I've been into slightly positive territory for the year. Last time I added up my numbers on 8/12, I was up 0.15% YTD. I'm sure that 8/13 and 8/14 trimmed that a bit, though.

Of course, the year isn't over yet.
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Old 08-15-2020, 06:26 AM   #71
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Well if your shares were in Sears for example that money isn’t coming back.....
Adequate diversification will remedy that situation.
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Old 08-15-2020, 06:54 AM   #72
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I always have doubts. My flex response is to return to work, probably Home Depot, since I have already cut costs to the bone.
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When you have enough?
Old 08-15-2020, 06:57 AM   #73
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When you have enough?

Quote:
Originally Posted by tenant13 View Post
It's really impossible to know since none of us knows what the future brings. I think flexibility is the key: assume that you'll die at 90 but when you get a heart attack (as I just did) shave a few years off that estimation and live a little Hope for the best when it comes to the stock market but be ready to stay at Holiday Inn instead of Belmond during your travels. Count on Social Security but prepare to move to a cheaper location if it gets cut in a half - and I don't mean a shack in the middle of a corn field. There are great options all over the world if you're willing to be somewhat adventurous (clearly that's not quite feasible now).



I wonder if there are RE folks around this forum who look back and say: "I wish I worked 5 more years"....


This is really how DW and I are approaching it. There’s about a thousand different levers one could pull to manage an uncomfortable financial situation if it emerges. The other part of knowing “When you have enough” is the w*rk part, i.e. burnout, lack of interest, obligations to managers and staff, endless meetings, yada yada. We are both grateful for the careers we had but have “been there, done that” and have had “enough” of that half of the equation. We will just figure the other financial half of and manage through it. I’m not totally sanguine but I’m also aware that the BS Bucket overfloweth.

Best wishes for your recovery and long health, too. That’s a whole additional motivation to not give more precious life energy to some office.
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Old 08-15-2020, 07:08 AM   #74
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Thank you everyone for your thoughtful comments!

When you figure out your annual expenses, do you include taxes?
Yes, but I have two categories.

1) "Regular" taxes, which is the mostly predictable interest and dividends from my investments/savings. These are included along with all other annual expenses.

2) "Other" taxes, which is cap gains on sales, and funds converted or withdrawn from my tIRA. These are noted in a separate column from total expenses.

This way if I happen to do a large conversion to a RothIRA my expenses aren't skewed by the taxes I pay. It's fallout from years ago when much of my net worth was in the form of vested but unexercised employee stock options. Not many here seem to do it, but it makes sense to me, at least for my situation.
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Old 08-15-2020, 08:08 AM   #75
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I check my balance every day .. and assess when I need to change my asset allocation every 2 - 4 weeks .. depends on whether the stock market is over-heated or there's a big dip.
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Old 08-15-2020, 09:09 AM   #76
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I check my balance every day .. and assess when I need to change my asset allocation every 2 - 4 weeks .. depends on whether the stock market is over-heated or there's a big dip.


How do you assess whether the market is over heated and what counts as a big dip?
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Old 08-15-2020, 09:21 AM   #77
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I check my balance every day .. and assess when I need to change my asset allocation every 2 - 4 weeks .. depends on whether the stock market is over-heated or there's a big dip.
WADR, @cyber888, I think you are trading based on noise. Here is a chart I use in my Adult-Ed investing class to illustrate the concept:



DW and I look somewhat seriously at our portfolio annually during the week between Christmas and New Year. Maybe one year out of three a trade results. Two or three years ago we decided to go from 60/40 to 75/25. This year we may look at our TIPS holdings; as we age we have fewer future years where we need inflation protection.

I do see account balances monthly when I reconcile statements in Quicken but that never results in any action.
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Old 08-15-2020, 09:58 AM   #78
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WADR, @cyber888, I think you are trading based on noise. Here is a chart I use in my Adult-Ed investing class to illustrate the concept:


That looks like the kind of chart where short term rebalancing would give awesome results. Short term rebalancing can hurt you in long drops or gains, where you keep selling stocks as the market continues to rise, or sell all the way down in a drop. But in your chart, you would likely sell at near one of the many spikes up , and buy near the bottom of the frequent drops.

There's no way your chart is realistic, btw. The market goes up 20% and then drops 30% in the same week, and has similar volatility almost every week for 6 months? When has anything close to this ever happen?
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Old 08-15-2020, 10:23 AM   #79
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... There's no way your chart is realistic, btw. The market goes up 20% and then drops 30% in the same week, and has similar volatility almost every week for 6 months? When has anything close to this ever happen?
Oh, it's a simulation. Showing real market behavior in the class would bring in too many other factors.

The points I make are:
1) It's easy to get lucky. There is enough noise that someone is always going to get lucky and brag online. The traders that guess wrong don't post.
2) It's crazy to look daily or even weekly; all you are seeing is noise. The market signal may take a year or more to see. I did just find a good online article on this subject: Are You Checking the Portfolio Too Often? — Investment Masters Class

Re short term rebalancing, it always looks easy in the rear view mirror. I don't know of any research supporting the idea that it works, however. Do you?
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Old 08-15-2020, 10:43 AM   #80
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For those worried about future stock market returns, the Bogleheads wiki has some good tip on matching strategies which is an investment model for retirement planning not using stocks or mutual funds. It might be hard to implement fully now with TIPS rates so low, but still might be food for thought.
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