With this Market, most likely moving FIRE from 2020 to 2022

[Bir48die]

Have three buckets. Deferred comp went to 60/40 about six months ago. Second bucket managed and they've gone cash/short term with small plays in the market. Bucket three went 50/20/30 MLP's. MLP's will be taking a big hit due to crude price but I'm midstream so that bucket is more long play and the biggest of the three.

I was more exposed not that long ago. Will reallocate when the time comes. These are the times when I don't look at portfolio values. I just know what my budget is and will stick to that. Still have SS to fall back on.

[pb4uski]

Quote:

Originally Posted by COcheesehead ....Am I doing dirty timing or just adjusting my AA to my stage in life? ....

Yes.[emoji4]

[Free bird]

Your dirty but in a good way. I even forgive you for being a cheesehead. We may have seen a SB preview last night.

[sgstaley]

Quote:

Originally Posted by cyber888 Was hoping to retire at the beginning of 2020. But I'm now aiming for 2022. With the tariffs and trade war affecting supply chain and the Feds continuing to raise interest rates, the market's looks pretty spooked. Still hoping decision makers will change their policy soon. Firecalc says I'm 97%-99% ok for 2020, but still don't feel comfy. Anyone else changing their target dates?

I am already happily retired, but am having a pretty rough ride in the market right now. I look for it to turn around after the first year. I look forward to a prosperous 2019. Things can turn around pretty quick.

[HadEnuff]

Quote:

Originally Posted by COcheesehead I don’t understand why folks take more risk than they need to. Things to ponder.

agree, but the hard part is figuring out how much risk you need to expose yourself to. I overestimated my "risk tolerance " when I was younger, and didn't realize it until I got smacked around a bit. Fortunately I was young enough to recover.

I think many young investors are young enough so that all they really know is the upside. I remember those heady days in the '80s and '90s, penciling in 10% and 15% returns, as I "projected" my retirement kitty growing in leaps and bounds. Then 1999-2008 happened, and those projections turned out to be more than a bit optimistic.

So now I'm 65, seems like I can live my life just fine on 3% WR, how exposed do I need to be? My answer: not very. In fact when I do the various calculators, and pencil in different AAs, there is not much difference in success rates between a 20% exposure to equities, and a 60%. So why be more exposed than I need to be?

[GR111]

Wow, look at the market last couple days! It looks like there may be some good deals to be had as stocks go on sale. Black Friday! Christmas Deals! (That's my coping mechanism. I look at stocks I want to buy instead of how my stocks have slipped)

[COcheesehead]

Quote:

Originally Posted by HadEnuff agree, but the hard part is figuring out how much risk you need to expose yourself to. I overestimated my "risk tolerance " when I was younger, and didn't realize it until I got smacked around a bit. Fortunately I was young enough to recover. I think many young investors are young enough so that all they really know is the upside. I remember those heady days in the '80s and '90s, penciling in 10% and 15% returns, as I "projected" my retirement kitty growing in leaps and bounds. Then 1999-2008 happened, and those projections turned out to be more than a bit optimistic. So now I'm 65, seems like I can live my life just fine on 3% WR, how exposed do I need to be? My answer: not very. In fact when I do the various calculators, and pencil in different AAs, there is not much difference in success rates between a 20% exposure to equities, and a 60%. So why be more exposed than I need to be?

I found Firecalc can help answer how much exposure do I need.

[street]

Quote:

Originally Posted by COcheesehead I don’t understand why folks take more risk than they need to. Things to ponder.

That is a good question. Greed might be one and some may not need the money to live on, ever.


If you had 2 million and would never need that money, what AA would you use for those funds?


Some might still go very conservative while others might keep a high AA.

[Free bird]

Everyone knows the stock market goes up over time. And the message that was sent in 2008/09 was risk takers will be bailed out. Everyone knows inflation risk will cause losses if portfolio growth is stagnate. The system is managed in such a way thst risk is not always what it appears.

[audreyh1]

Quote:

Originally Posted by COcheesehead I don’t understand why folks take more risk than they need to. Things to ponder.

During accumulation phase, when more than a decade from retirement and a well paying job and well funded emergency fund, it makes sense to take on a lot of market risk. I was close to 100% equities during most of it.

Once retired, it depends on your various income streams. For folks with expenses covered by pensions, annuities, ultimately SS, they may choose to keep a high exposure to equities, especially if they are getting some income as a dividend stream.

We are living 100% off our investments. We chose our equity exposure based on portfolio survival statistics in Firecalc. There is a wide range of equity to fixed income that has similar survival characteristics. We chose to be about center, rather than either extreme - kind of a middling tradeoff between annual volatility and long-term inflation-adjusted returns. Given our relative youth as retirees, I didn’t want to go to the minimum equity exposure.

We may reduce equity exposure as we age. Then again, we my choose not to....

[COcheesehead]

Quote:

Originally Posted by audreyh1 During accumulation phase, when more than a decade from retirement and a well paying job and well funded emergency fund, it makes sense to take on a lot of market risk. I was close to 100% equities during most of it. Once retired, it depends on your various income streams. For folks with expenses covered by pensions, annuities, ultimately SS, they may choose to keep a high exposure to equities, especially if they are getting some income as a dividend stream. We are living 100% off our investments. We chose our equity exposure based on portfolio survival statistics in Firecalc. There is a wide range of equity to fixed income that has similar survival characteristics. We chose to be about center, rather than either extreme - kind of a middling tradeoff between annual volatility and long-term inflation-adjusted returns. Given our relative youth as retirees, I didn’t want to go to the minimum equity exposure. We may reduce equity exposure as we age. Then again, we my choose not to....

I agree. This is similar to what I have done. 100% when young. Dailing back with shorter horizon to recover.

[COcheesehead]

Quote:

Originally Posted by Free bird Everyone knows the stock market goes up over time. And the message that was sent in 2008/09 was risk takers will be bailed out. Everyone knows inflation risk will cause losses if portfolio growth is stagnate. The system is managed in such a way thst risk is not always what it appears.

Risk is risk. Inflation risk, sequence of return risk, duration risk, reinvestment risk, credit risk.... You need to consider them all.

[atmsmshr]

Ya know it good to see others on the forum waffling with the same things that the atom smasher household ponders.

After riding the bull 30+ years on nearly 100% equity, pulled back to 50% stocks/50% money markets (bonds suck right now) last June (I'm 57. So is Mrs. Atom). DMT that I am, glad it is in the past - but it enabled a FIRE date in 2020.

Then I lost my mind and wanted to work another year for a used RV and safety net, suspenders, blah blah blah. That OMY fever finally broke and we are back to 2020. (Early - to pick up the annual bonus).

Problem is, I am realizing that any more SS wages won't change the calculus (already have 35 years with nearly all hi pay), and next year the medical pension goes to max. Also lucky enough to have a cash pension for immediate use; however, it only increases $1,000 for each additional year worked.

Saving another $150k only becomes $6000 / year using the simplistic 4% rule. The realization that working another 12-18 months translates into only $588/mo extra for life has me wondering.

Fortunately, a bottle of spiced Rum has followed me home to help ponder the possibilities.

Atom

[HadEnuff]

Quote:

Originally Posted by Free bird Everyone knows the stock market goes up over time. And the message that was sent in 2008/09 was risk takers will be bailed out. Everyone knows inflation risk will cause losses if portfolio growth is stagnate. The system is managed in such a way thst risk is not always what it appears.

Well first of all, the question wasn't "why be exposed to risk at all?", the question was why expose yourself to more than you need to. Some market risk is probably a good thing, to try to offset the inflation risk.

Inflation risk increases with the number of years you need to live off your nut i.e. the younger you are when you retire the more you are exposed to inflation risk.

As far as being "bailed out", I don't think the Feds are going to look at you or me and consider us "too big to fail"...I wouldn't put too many of my eggs in that basket.

[Dtail]

Quote:

Originally Posted by atmsmshr Ya know it good to see others on the forum waffling with the same things that the atom smasher household ponders. After riding the bull 30+ years on nearly 100% equity, pulled back to 50% stocks/50% money markets (bonds suck right now) last June (I'm 57. So is Mrs. Atom). DMT that I am, glad it is in the past - but it enabled a FIRE date in 2020. Then I lost my mind and wanted to work another year for a used RV and safety net, suspenders, blah blah blah. That OMY fever finally broke and we are back to 2020. (Early - to pick up the annual bonus). Problem is, I am realizing that any more SS wages won't change the calculus (already have 35 years with nearly all hi pay), and next year the medical pension goes to max. Also lucky enough to have a cash pension for immediate use; however, it only increases $1,000 for each additional year worked. Saving another $150k only becomes $6000 / year using the simplistic 4% rule. The realization that working another 12-18 months translates into only $588/mo extra for life has me wondering. Fortunately, a bottle of spiced Rum has followed me home to help ponder the possibilities. Atom

Stay with your 2020 goal. You will both be 59 yo and will most likely never be better off health wise than the present time, so go for it.
Plus on the east coast of FLA, you might have some good choices on the ACA exchange.

[pb4uski]

Quote:

Originally Posted by HadEnuff .... So now I'm 65, seems like I can live my life just fine on 3% WR, how exposed do I need to be? My answer: not very. In fact when I do the various calculators, and pencil in different AAs, there is not much difference in success rates between a 20% exposure to equities, and a 60%. So why be more exposed than I need to be?

If you have heirs or charities that you want to donate gobs of money to, then this may be why.

60% equities:

Quote:

FIRECalc looked at the 118 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter. Here is how your portfolio would have fared in each of the 118 cycles. The lowest and highest portfolio balance at the end of your retirement was $561,030 to $5,524,427, with an average at the end of $2,133,336. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.) For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

20% equities:

Quote:

FIRECalc looked at the 118 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter. Here is how your portfolio would have fared in each of the 118 cycles. The lowest and highest portfolio balance at the end of your retirement was $159,379 to $3,751,776, with an average at the end of $993,320. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.) For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

[pb4uski]

Quote:

Originally Posted by atmsmshr .... Problem is, I am realizing that any more SS wages won't change the calculus (already have 35 years with nearly all hi pay), and next year the medical pension goes to max. Also lucky enough to have a cash pension for immediate use; however, it only increases $1,000 for each additional year worked. Saving another $150k only becomes $6000 / year using the simplistic 4% rule. The realization that working another 12-18 months translates into only $588/mo extra for life has me wondering. Fortunately, a bottle of spiced Rum has followed me home to help ponder the possibilities. Atom

The reality is that you won't spend an additional $588/month extra... you'll probably spend whatever you are going to spend and your heirs will end up $150k + growth richer as a result of your decision to work an additional 12-18 months. Just sayin.

[atmsmshr]

Quote:

Originally Posted by pb4uski The reality is that you won't spend an additional $588/month extra... you'll probably spend whatever you are going to spend and your heirs will end up $150k + growth richer as a result of your decision to work an additional 12-18 months. Just sayin.

I think an epiphany is coming over my horizon. Stay tuned.

[YVRRocketSurgery]

Quote:

Originally Posted by COcheesehead I don’t understand why folks take more risk than they need to. Things to ponder.

Agree and I'm likely guilty to a degree.

I think some of it has to do with a lack of appreciation of how it can take for your portfolio to recover. In the good times, you may be encountering regular corrections with the markets recovering and hitting new gains after a few weeks or months. Whereas if you hit a true bear, your portfolio may take years to recover. That might be ok when you are young and in accumulation mode but it's obviously a different issue when your are in retirement mode and need to draw on your portfolio, impacting its ability to recover and as you grow older such that you don't know how much time you have left for recovery and enjoying your portfolio.

Quote:

Originally Posted by audreyh1 During accumulation phase, when more than a decade from retirement and a well paying job and well funded emergency fund, it makes sense to take on a lot of market risk. I was close to 100% equities during most of it. Once retired, it depends on your various income streams. For folks with expenses covered by pensions, annuities, ultimately SS, they may choose to keep a high exposure to equities, especially if they are getting some income as a dividend stream.

+1

[HadEnuff]

Quote:

Originally Posted by pb4uski If you have heirs or charities that you want to donate gobs of money to, then this may be why. 60% equities: 20% equities:

I didn't get everything quoted as well as I might have, but your point, if I understand it, is that a higher equities allocation statistically leaves a higher balance when we croak.

Yes, I understand that aspect. And I would like to leave something to my heirs. However, I feel that Job #1 is to try not to show up on their doorstep explaining why they need to take me in for my final chapter.

One thing about these AA conversations, that we all know, but seldom articulate, is that as the years (decades) go by, we will hopefully be in a position to alter the AA, based more upon what we will leave behind, and less upon our fear that we could run out of money.