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Retirement Plan Gets Punched In the Mouth
Old 08-26-2020, 09:35 AM   #1
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Retirement Plan Gets Punched In the Mouth

As Mike Tyson says, every fighter has a plan until he--or she now that we have women professionally beating each other-- gets punched in the mouth.

since retiring 3 years ago the pandemic is my first trial by fire at seeing my reaction during the first sizable--30% though remarkably short lived--correction in the market. i didnt panic during this pandemic, but in Mar, I stopped taking my monthly withdrawals from investments and reinvested div vs. taking them. after 5 months of stoppage and seeing investments recovered nicely in Aug, I took out 10 months at once.

not quite what I had planned on if the market took a big down turn. I thought to start dipping into my 2 years of cash reserves to keep a steady spend to avoid selling on the dip and limit disruptions in household spending. however, I'll admit a little emotion got in the way, and I turtled up and slowed down discretionary spending. I held back on a major renovation to our apartment above the garage as well as delayed putting in a deck in our backyard.

part of the decrease in spending was forced due to locking down as we were unable to launch for our two planned international trips. one to china, Wuhan was part of our itinerary :-), and the other into south america. but most of the spending decrease was due to my oppressive frugal nature.

it was tough to stick to the plan when I saw the market turn. though this was not a major tsunami, like 2008 recession, it still looked grim back few months ago and I my ever hazy crystal ball sees a tough market ahead. the market come back appears to be irrational and unsustainable, and therefore temporary.

at any rate, I'm more confident going thru this that we can ride it out without me having to dust off my resume. Did anyone else make changes to their plan?
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Old 08-26-2020, 10:02 AM   #2
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I am bumping things up if anything. When March hit, I was riding the fence on whether to retire this year, before my 55th birthday in October or hold out until 2021. The crux was that I was supposed to learn this month the amount of my company profit sharing contribution which would be partially vested in January. I wasn't expecting a ton, but thought a couple thousand would be useful (a week of vacation somewhere), and I was expecting a smallish raise at the end of September.

This month, I learned that I am not getting a profit sharing, and my expectations of a raise are not enough to keep me hanging on. I have been practically idle, and that doesn't make for satisfying work. My DW just signed us up for her workplace health coverage, and I have decided to provide notice at the end of the week.

Numbers wise, all of the FireCalc looks good and we are well into FI. We are nearing 100K over our pre-Covid NW, and I feel like we can do well on a 3% AWD. In addition to NW, we have 529s for the kids that should cover 4 years each. I am hoping that with the lack of work they might just let me call Friday my last day. Will have to see how that goes.
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Old 08-26-2020, 10:05 AM   #3
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Yes I did. I am one the unfortunate poor dumb souls that had to experience a significant downturn while in retirement to truly understand how much risk we can stomach. While working, it was easy to just stick with a 70/30 plan and save, save save....
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Old 08-26-2020, 10:23 AM   #4
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For the most part I have stayed true to plan. Instead of retiring April 30th, I retired in June when my contract ran out - my choice not to renew it. DW is still working, but Covid is causing short-falls in the City, so they are giving an incentive to retire. Oct 31st is her last day. As for AA, I sat tight during the downturn. It was a bit of system shock. Once things recovered, however, I have been making a few changes - lowering fees, shifting a bit more into cash/bonds.
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Old 08-26-2020, 10:54 AM   #5
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Even if you have a plan, I think it's natural to examine spending a little more closely when the markets are in flux. Renovations are never fun, but you'll probably enjoy it more if you're not in the middle of major market turmoil. That's different from panic selling all your stock or doing something drastic.
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Old 08-26-2020, 12:08 PM   #6
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Nope, not me. The landscaping project sits at 55 grand with about 10 more to go and then a storage shed and a "she shed" for another 15 me thinks.
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Old 08-26-2020, 12:23 PM   #7
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Nope, not me. The landscaping project sits at 55 grand with about 10 more to go and then a storage shed and a "she shed" for another 15 me thinks.
There you go Robbie B.
Perhaps your DW could get on a she shed commercial.
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Old 08-26-2020, 04:50 PM   #8
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I retired in December 2007. Compared to that, this was a breeze (in retrospect) for holders of financial assets. After watching the whole financial crisis in 2008-09 I was pretty sure that the Federal Reserve would inflate the whole thing so I didn't really think too much about finance in March. Mostly arranging life to stay alive.
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Old 08-26-2020, 05:07 PM   #9
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A lot of construction material has doubled in price in the last couple of months. Check price and availability prior to committing on a new project.
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Old 08-26-2020, 05:09 PM   #10
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I am hoping that with the lack of work they might just let me call Friday my last day. Will have to see how that goes.
Exciting! Congrats.
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Old 08-26-2020, 05:38 PM   #11
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I was very, very fortunate to have lived through the 2008-2009 recession while still working, and just before I was eligible to retire from Megacorp. That reinforced (from the past downturns since 1987 that I had experienced) to anticipate these level of downturns - while rare, it can be a punch in the face. This is why I look at my equities at 50% of their current value to evaluate if I am comfortable with it, and keep enough cash on hand to not be forced to sell equities during long downturns. I am content with a lower level of returns for the increased stability with impact on my retirement life.

We did not change any spending that was not impacted by the pandemic. We traded off not being able to spend on "luxury" travel/vacations this year by paying off the mortgage early. In effect, the "punch" was a positive one for us for the long run.
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Old 08-27-2020, 04:49 AM   #12
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I did not make any changes. Just took some Roth conversion on the way down.
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Old 08-27-2020, 05:17 AM   #13
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I am bumping things up if anything. When March hit, I was riding the fence on whether to retire this year, before my 55th birthday in October or hold out until 2021.

I have been practically idle, and that doesn't make for satisfying work. My DW just signed us up for her workplace health coverage, and I have decided to provide notice at the end of the week.

Numbers wise, all of the FireCalc looks good and we are well into FI. We are nearing 100K over our pre-Covid NW, and I feel like we can do well on a 3% AWD. In addition to NW, we have 529s for the kids that should cover 4 years each. I am hoping that with the lack of work they might just let me call Friday my last day. Will have to see how that goes.
Karl, your post caught my eye being that I also turn 55 in Oct. 18 Months ago I went down to 32 hrs/wk. Kind of a slow glide slope to ER. 1 Jan brought the IRS 55 rule into play. The pre covid plan was to probably further glide slope down to 20 hrs/wk about now but why? Working (sort of) from home. Maybe 3-4 hours of work per day on a busy day. Easy money. Biggest factor is DW is 48 and wants to go until at least 50 so why would I stop the money train?

To OP, I didn't make any changes to 401k investments. I did hoard cash a bit on the downturn then deployed into my play account on the upswing. I did have current 401k at minimum 6%. Have now ramped it up to max out 2020. Am losing about 10-15K this year without sports officiating (side gig).

Took a five month break from ER site. Now back but will post rarely. Looking forward to my AAPL going from 52 shares to 208 shares. Play account in up almost 40% YTD.
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Old 08-27-2020, 06:10 AM   #14
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A lot of construction material has doubled in price in the last couple of months. Check price and availability prior to committing on a new project.
This. Stop doing projects so we can finish building our house please!

OSB has gone from $10 a sheet, to $20 a couple weeks ago, to $30! today.

1"1/8" T&G subfloor plywood has gone from ~$35 to $61

At this rate, it will cost more to build a house from wood than from gold soon.
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Old 08-27-2020, 06:22 AM   #15
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This. Stop doing projects so we can finish building our house please!

OSB has gone from $10 a sheet, to $20 a couple weeks ago, to $30! today.

1"1/8" T&G subfloor plywood has gone from ~$35 to $61

At this rate, it will cost more to build a house from wood than from gold soon.
You would think it would be a good time to be in the lumber and building material business - but in reality, not so much. I've decided it's a good time to call it a career and will make it official at the end of the year. I guess that makes me a pandemic-induced retiree.
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Old 08-27-2020, 07:07 AM   #16
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After the comeback in the market I took some off the table to add a bigger cash cushion. When some of the stocks I sold came down a bit, I bought some back, but still have a larger cash cushion than before COVID.
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Old 08-27-2020, 07:47 AM   #17
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This. Stop doing projects so we can finish building our house please!

OSB has gone from $10 a sheet, to $20 a couple weeks ago, to $30! today.

1"1/8" T&G subfloor plywood has gone from ~$35 to $61

At this rate, it will cost more to build a house from wood than from gold soon.
I just signed a contract last week to get a 36x60 pole barn garage built. Wonder if I got in just in time?
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Old 08-27-2020, 07:50 AM   #18
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I just signed a contract last week to get a 36x60 pole barn garage built. Wonder if I got in just in time?
I would think the contractor has calculated in the costs but I have heard of these contracts being broken when the materials make it so there is no profit in the construction.
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Old 08-27-2020, 08:30 AM   #19
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We decided to build and retire in same year. My builder didn’t make it seem any better when back in mid March he said “ how does it feel to build a house during a pandemic?”

By dumb luck, some perseverance and the test of wine...we pushed forward. We got lumber at about 40% below where it is today. Got on the preferred contractors schedules, etc because nothing was happening in early Spring.

Our house is now less than 90 days from being done. All the RE around us has fired up again. We probably couldn’t build today for what the house was bid at last winter.

All this while “settling” into retirement.

The portfolio has grown YTD even with taking out all the expenses and we feel good about taking the punch to the face and living to tell the tale.
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Old 08-27-2020, 09:07 AM   #20
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Did anyone else make changes to their plan?
We're still working, but no major changes to our retirement plans. I did pull about 10K out of investments back in March, just in case things went south and we needed more cash on hand. But, all was well and I have since reinvested that money.

I have slowly been adjusting our asset allocation, originally from 60/40 to 50/50, and now we're edging closer to 40/60. We're getting closer to retiring in about 3 years, and don't need to be so aggressive anymore, so I've been backing down the equities. It really had nothing to do with COVID, but that was a good reminder of what can happen. I'm aiming for the slower kiddie coaster than the wild ups and downs of the mega coaster.

We've spent less on travel and recreation this year, but a lot more on home improvements. We're no where near Robbie's level, but I bought a new EGO battery mower, EGO chainsaw, built a large craft table for my wife, and am currently finishing up a big concrete driveway project and craft table for my daughter.
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