Are 25-35 year olds feeling discouraged yet?

[ziggy29]

If I were really young I think my greatest fear wouldn't be the market itself in terms of my own retirement, but the fact that the longer the market stays depressed, the more people who would otherwise retire feel forced to keep working, which would over time significantly reduce new job openings.

If I were 25-30 years old, that aspect of the market would worry me more than a prolonged slump in my own account balances.

 

[ERD50]

As an oldster, I can tell you that Roth is a really good deal. I have heard of a lot of people who get sick and need to take out IRA money premature. There is no early withdrawal penalty, but it just seems there is never a good time to pay taxes on an IRA distribution. If you've got to pay taxes, it's best to pay them when you have a earned income, IMO.

Good point, one that I had not really thought of.

I am trying to convert as much as I can within my tax bracket, and I continue to max Roth contributions while DW is still doing part-year work. And while I think a Roth is a good idea, I'm not really sure (we can't be sure to changes in tax law and our situation). So I look at it more as a tax diversification technique. I already have ~50% of my NW in a Trad, so I'm trying to get a good balance in Roth.

So yes, if I was in a position where I had to pull a big amount in one year for some unexpected expense, that would kill my taxes for that year if I pulled it from a Trad IRA, but a non-event if pulled from a Roth. It could put me in that targeted 2% of rich people!

Thanks, that's making me feel better about my Roth conversions.

-ERD50

 

[FUEGO]

Even if some it was forgiven, since it is a bank loan, the forgiven loan is counted as taxable income, and they still have to pay taxable gains tax on it, whether they know that or not.

I believe they passed a new tax law a year or two ago that says you don't have to recognize the income from forgiveness of mortgage debt. Not sure if it is temporary or permanent though...

 

[OAG]

Permanent. [-]I believe you have to be adjudged "stupid".[/-]

 

[FUEGO]

Permanent. [-]I believe you have to be adjudged "stupid".[/-]

Great. So now if you lose a half million on a house, forgiveness of debt is tax free income. And if you make a half million on a house it is tax free income (assuming you are married). Those are better odds than what Vegas offers!

 

[OAG]

When I said permanent I should have said it "sunsets" in 2012. Anyway here is a IRS document that spells out the thing ($1MM limit is there someplace): Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form

 

[FUEGO]

When I said permanent I should have said it "sunsets" in 2012.

Permanent is the new temporary.

 

[BunsGettingFirm]

I'm 38, and my wife is 30. We're ok so far. Skipped the stock market entirely and paid off the house instead. We just got our release of lien document a week ago.

In 2007, when we were going full throttle with the extra house payments, several of my colleagues at work told me I was crazy - that I could earn much more in a conventional portfolio. Well, hindsight's 20/20, but I'm sure glad we took the course we did. The equivalent of a 6.5% return, when others were losing 30-50%. And that house payment is gone forever, regardless of what the market does.

Regardless, being in this age group, you have to keep in mind that it could be a lot worse. A lot of the loss is not actually realized unless you freak out and sell at the bottom. For older people - ouch. My father-in-law got hurt a lot. He lost a lot in 2002 when he was just about to retire, and now this. Luckily his wife is younger and still working, but it's tight for them right now.

I smell a revival of the carry a mortgage or pay off the house debate. I'm getting my matches and gas can ready.

The Benefit of Paying Off A Mortgage - Registered Investment Advisor

 

[Ed_The_Gypsy]

Are 25-35 year olds feeling discouraged yet?

I dunno. I do know that some of us 55-65 year olds are.

 

[CompoundInterestFan]

The inescapable fact is that had I been irresponsible with my money, spent more than I could responsibly afford on a house (and perhaps cashed in imaginary equity to fill that house with expensive toys) and took on zero investment risk in whatever I did save (i.e. just throw it into FDIC insured CDs) I would be enjoying a much higher standard of living than I am today.

You also could have spent the last several years stealing cars and robbing banks and been better off for it. There was a risk you'd get caught and go to jail, but there was also the risk of the government not bailing you out had you spent more than you could afford on a house.

I understand your frustration, but the right thing to do is always the right thing to do, regardless of how many other people are doing it. Would you have really felt comfortable living above your means and eventually placing the burden of your lifestyle on other people?

 

[maddythebeagle]

I still have a stable job and keep telling myself that years of depressed prices will make up for it...but going through a couple of 40%+ corrections over 15 years is a bit difficult....I reset my allocations at the end of last year and upped my max contributions and not looking back...

 

[Ed_The_Gypsy]

You are right on, CIF. Of course, it is harder to steal cars these days anyway.

My fall-back retirement position is to rob a bank here in Canada. The worst thing that can happen is that I get away with it.

 

[Caoineag]

Nope, not discouraged. Keep upping my contributions as I am able. Just need to keep hubby and I employed so we can keep paying off debt and saving up money. If anything the crash made it much easier for us to a buy a home. We had good credit, cash and good work history so the 15 year mortgage was an easy move.

 

[Jbird]

I'm 34 and DW is 30. We have not stopped dumping money into our 401ks and IRAs that are all high risk, long term managed funds. The only thing we've changed, like most people, is that we are now saving more for our short term goals.

Am I the only one that believes this recession could accelerate our retirement date? I feel like we've been given an amazing opportunity to buy low,low,low,low..... If I end up wrong then o'well,.. but for those of us that have taken the higher risk road the payoff in the end could be amazing and allow us to retire much earlier.

If I am wrong and this nation goes to down the drain then there is always plan B. Move to an island of choice, forget health insurance, flip off the corporate world and live a simple life until the end comes.

 

[Tempesta]

For the young'ns, time is on our side, it's our strongest ally. Really, you can never ask for a better partner.

 

[jIMOh]

I know I am. Household conversation:

DW: How much of our income did we save in January (2009)?
DH: $2,000. We're doing a good job staying witin our budget.
DW: How much did our net worth increase?
DH: -$4,000.
DW: Uhh...how do things look for February?
DH: The budget looks great, we will have at least $1,000 left to save.
DW: And the investments?
DH: Uhh...

No reason to be discouraged by short term events for a long term goal.

I am 36 and IMO this market is going to HELP me retire early, not prevent it. I lost 40%/80k in 2008. If my numbers are correct and the market stays this low for 18 months, It's possible I will have 3X as many shares going up as I did going down, meaning if market recovers to previous 2008 high in about 6 years, I will have 600k and a 200% increase in my assets over a short amount of time.

That should help early retirement, not discourage it.

 

[FUEGO]

Am I the only one that believes this recession could accelerate our retirement date? I feel like we've been given an amazing opportunity to buy low,low,low,low..... If I end up wrong then o'well,.. but for those of us that have taken the higher risk road the payoff in the end could be amazing and allow us to retire much earlier.

If you are starting to invest today vs. 8 years ago, then yes, your retirement will be accelerated. It is less certain if you were already 1/4 to 1/2 on your way to FIRE.

 

[ziggy29]

No reason to be discouraged by short term events for a long term goal.

I am 36 and IMO this market is going to HELP me retire early, not prevent it. I lost 40%/80k in 2008. If my numbers are correct and the market stays this low for 18 months, It's possible I will have 3X as many shares going up as I did going down, meaning if market recovers to previous 2008 high in about 6 years, I will have 600k and a 200% increase in my assets over a short amount of time.

That should help early retirement, not discourage it.

I guess it depends on how much skin you already had in the game. I had enough skin in the game already -- one year's new contributions was maybe 5% of my portfolio value before it all started to unravel -- that I could have done without the opportunity to buy cheaper shares for a few years. I would have been much better off had the other 95% not been slaughtered.

If I were just starting out and had very little "skin" in the game already, you bet you're boots that I'd be loading up as much as I could now. Though the 20-somethings shouldn't get too greedy for a prolonged period of depressed shares, because that means many of them would no longer have a job to enable them to buy cheap stocks...

 

[FUEGO]

Though the 20-somethings shouldn't get too greedy for a prolonged period of depressed shares, because that means many of them would no longer have a job to enable them to buy cheap stocks...

True enough. I always knew depressed markets would be a great opportunity for buying shares. But the risk of job loss combined with very little in the way of pay increases could put a damper on future investments at some point.

 

[BunsGettingFirm]

You mean things get worse! Next thing you're gonna tell me is that a 13 yr. old is worse than a 3 yr. old!

-CC

No, I mean they get better. Trivial pursuits of things such as downing 12 beers in one sitting or getting laid no longer rank as high. Therefore, you don't have to invest in a hot car, hot cloth, or even hot meals. Talk about extreme LBYM. Now, if I can only combine the income of a (still employed) investment banker and the lifestyle of a Shaolin Temple monk, I'd be able to ER in 1 year.

 

[GoodSense]

30 year old here. I am not that discouraged, although it's certainly a little painful to look at current networth. I only check my accounts every other month to get an update. So far it has only shrunk a little, thanks to my continuing to put money in.

Since I pretty much live the way I want and don't really feel deprived, I am OK with continuing saving and buying mutual funds in my 401K. I don't really have much more of a lifestyle need than I currently have. (Born cheap, can't help it) But on the other hand, I am only saving about 25% of my income, so relatively non-aggressive compared with other young dreamers on this board.

As long as I don't get laid off (doesn't look like it), life is pretty good right now. As my horizon is probably 25-30 years out, a lot could happen between now and then, so I really don't have any reason to get anxious at all.

(Generally in a good mood today. Maybe it's because of daylight savings time? I love daylight savings time.)

 

[Hobo]

I am trying to convert as much as I can within my tax bracket, and I continue to max Roth contributions while DW is still doing part-year work. And while I think a Roth is a good idea, I'm not really sure (we can't be sure to changes in tax law and our situation). So I look at it more as a tax diversification technique. I already have ~50% of my NW in a Trad, so I'm trying to get a good balance in Roth.
-ERD50

The best advise I have heard since this economic decline started is, "In a bull market, the object is capital appreciation. In a bear market, the object is capital preservation". This is true at any age - you want to minimize your losses right now. The way to do that right now, IMO is to stay in a major stock fund. I am not a stock picker, so you can choose the one that is right for you.

One thing you must remember is that any bond you buy right now which pays low interest (such as treasuries) will loose significant value if interest rates rise. Interest rates could rise rapidly if all the money the government is pumping into the economy causes inflation. You can loose money in T-bills if interest rates climb and you want to sell the bonds before maturity. That could happen if the market suddenly turns bullish and you want to get your money out of bonds to catch the upturn.

You can always pull your money out of a slow moving, but solid, mutual fund or ETF when the market turns around in the future.

 

[BunsGettingFirm]

I'm not so much worried about the stock market. I'm more worried about my POS job not so much about losing it though that would suck in its own right but rather if it's going to put my career in a downward spiral. I took my current job with the assumption that I'd be making a series of move to move up the ranks. Now, that plans looks like to be on hold forever. I know more than I did 2 years ago, and I'm more focused, but I'm getting paid as if I'm a complete moron. I'm not talking out of the lack of information. I did the finances for my group, so I know what others are making for the same job.

 

[Natesal]

I'm certainly not. My short sighted friends don't understand in the slightest that I'm ok with losing $1000 here and there in the process of buying up shares in my roth in an effort to average down.

Last year I opened up my roth (at age 23) and I maxed it out. So far this year I dumped my tax return in and am priming to dump my secondary salary into it this summer. Overall I'm (only) down $1500. Could I have gotten better prices? Certainly. Will the market turn around and 30 years from now I will look back at the steal of a deal I got? You betcha. Could I have used $1500 elsewhere? you bet your ass, but I'd rather lose it in there while making an effort to set myself up for early retirement down the road than squander it on a new TV or something else I don't need.


I'm in school for ~3 more years(debt free and $ in the bank) before I'll be looking for a job. Until then it I'm counting my blessings for having been so lucky in my timing.

 

[Cruising2022]

I'm discouraged in the sense that I've given up on the stock market. I am no longer convinced that 8%+ returns are what we "should" expect. Why should stock prices outpace economic growth, or company growth? P/E ratios have been slowly inching up over the decades; even today's P/E ratio is still high by historical standards.

We pulled all our money out of stocks and going fully conservative -- CDs, government bonds, etc. We have good salaries and he a military pension that make it possible. If he keeps his pension, we'll be just fine to retire with 1.5 million in taxable accounts plus whatever's in the tax-advantaged accounts we've maxed out.