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

[IMATERP]

Sticking with 2020. I have a five year CD ladder to get me through if needed.

+1. I created an 8 year CD ladder in Jan 2018 (fire date 12/15/2017.). I figured that each year I could either use the $ for living or do a Roth conversion from my IRA. Either way, I positioned myself not to have to sell any equities any time in the near future.

No worries here.

 

[Dtail]

If a 5% or 10% market move is going to throw your plans off when you're so close, then there's a problem.

1. You do not have sufficient buffer built in to your estimates
2. You have too high of an equity allocation

Think to yourself - what if instead, this correction came in the month when you did just retire? What then?

What if the market goes down another 5% or 10% from here - will that push you out further?

Don't take it personally - I think there is a very large swath of folks in the same boat as you...with very high and aggressive equity allocations.

Lastly, for all those who do not believe in sequence of returns risk - this is a prime example.

Yes, but the SORR is also built into Firecalc and thus is effectively taking into account with a 97-99% success rate.
After a drop, the success rate will change lower, but then the calculator is now being used effectively as a hybrid of a % of remaining portfolio in reality, but still looking for results in the classic Bengen formula.

 

[COcheesehead]

Anyone retiring should have at least 2 years of maturing bonds, CD’s or for super conservative types, cash, in their fixed income bucket. I am going out 5 years or more. I have about 4 years in a bond ladder now, but I add to it almost every month so that in 2 years when I pull the plug, I am ready. I can always reinvest maturing bonds in an under performing asset, if I don’t spend it.
I also dropped my equity allocation to a bit above what FIRECalc said is my minimum I needed to retire, so it stands at 30% today. I plan to let that rise as I pull fixed income out.

 

[Dtail]

Anyone retiring should have at least 2 years of maturing bonds, CD’s or for super conservative types, cash, in their fixed income bucket. I am going out 5 years or more. I have about 4 years in a bond ladder now, but I add to it almost every month so that in 2 years when I pull the plug, I am ready. I can always reinvest maturing bonds in an under performing asset, if I don’t spend it.
I also dropped my equity allocation to a bit above what FIRECalc said is my minimum I needed to retire, so it stands at 30% today. I plan to let that rise as I pull fixed income out.

I was always curious about using Fixed Income in the first few years of retirement, in that if one was going to rebalance to their AA yearly let's say, then what is the difference.
But in your example, if one effectively has a upwards gliding equity %, then it makes more sense to me.

 

[corn18]

Our company is merging which means a change of control and all my RSU's will vest. That will allow me to payoff the house. If I get laid off, I will get a healthy severance and that might allow me to walk away and never look back (will have 4 years of cash). The models indicate I won't have enough, but I'm looking for ways to make it work. I did apply for a job that would be a blast and take me to 59 and then I will be set.

 

[HadEnuff]

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?

What is your AA? you might try lowering your equities allocation in your Firecalc computation, and see if that effects your success rate. How old are you?

 

[hesperus]

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?

Should ask this question to those who retired at the beginning of the great recession. How they entered into retirement at a time like that could either put you at ease, or make you rethink your plans. I retired at the tail end of it, so benefitted from a favorable sequence risk. My feeling is that if they had an allocation they were comfortable with before it set in, they weathered it fine. If you are rethinking your retirement date with just this amount of market noise, you may not have an allocation you are comfortable with.

 

[Bir48die]

Because you establish your initial withdrawal rate based on the reduced portfolio value. If the value then rises in the early years, you will have the opportunity to increase your withdrawals to take advantage of the gains.



Conversely, if you retire at an all time high and based your withdrawal rate on the portfolio value at its peak, you then have to deal with sequence of returns risk and the possibility of having to cut back on your withdrawals to reduce your risk of an early portfolio depletion.



Search for threads on sequence of returns risk for a more detailed analysis.

So, you could have said to retire at the bottom of the cycle, not at the beginning of a down cycle like you did.

 

[mountainsoft]

Was hoping to retire at the beginning of 2020. But I'm now aiming for 2022... Firecalc says I'm 97%-99% ok for 2020, but still don't feel comfy. Anyone else changing their target dates?

We are planning to retire in 2023, and while the current market fluctuations aren't as much fun as the upward climb, we have not changed our plans. The market may decline periodically, but historically the market continues to grow in the long term. Unless you sell everything when the market is down, you'll eventually earn back those losses in the long term (most recessions only last about 22 months I think).

I believe most retirement estimators like Firecalc, try various scenarios of market drops and subsequent gains (all those squiggly lines showing different scenarios). If you see 97-99% success rates your portfolio is probably good enough to ride out the down times.

In any case, if you're more comfortable with 2022 go with that. Ultimately you're the one that has to live with the final decision.

 

[cyber888]

Most posters here heavily pad their FireCalc inputs. (Understate assets and retirement income while exaggerating spending.). You? Perhaps you’re being excessively conservative?

Are you getting excellent value from how you’re spending your most scarce and precious possession, your limited lifetime, while you’re working?

Yes, it is padded. The variable is healthcare. After looking at Healthcare.gov and my projected withdrawal, I’ve padded healthcare expense by at least $500/month -$700/month more than the quotes.
I also have $6000-$6500/year budget for a European vacation, which we could cut. We already have 3-4 weeks timeshare/timeshare exchange for US vacations. I still have Cable, so we could cut the cord.

 

[cyber888]

What is your AA? you might try lowering your equities allocation in your Firecalc computation, and see if that effects your success rate. How old are you?

I’m 54 .. my equities are 90% .. was thinking of shifting 10% more to bonds.

 

[njhowie]

I’m 54 .. my equities are 90% .. was thinking of shifting 10% more to bonds.

100 - age = percentage for equities

90% at 54 could get you into trouble ... which you've already begun to experience.

 

[Dtail]

I’m 54 .. my equities are 90% .. was thinking of shifting 10% more to bonds.

For many folks who truly depend on their portfolio for withdrawals, 90% equities would be considered very high.
For those that mostly depend on Pensions/SS and other non market derived income and wish to leave a legacy, no real issues.

 

[COcheesehead]

Yes, it is padded. The variable is healthcare. After looking at Healthcare.gov and my projected withdrawal, I’ve padded healthcare expense by at least $500/month -$700/month more than the quotes.
I also have $6000-$6500/year budget for a European vacation, which we could cut. We already have 3-4 weeks timeshare/timeshare exchange for US vacations. I still have Cable, so we could cut the cord.

Everyone is different, but if I am cutting vacations and things like cable, how padded is your budget in reality? Padded to me is everything I want...plus 30% on top. Plus a little more.

 

[njhowie]

For many folks who truly depend on their portfolio for withdrawals, 90% equities would be considered very high.

90% is considered very high for most anyone.

 

[Free bird]

Fletcher Chase: I mean what would it take to make you feel secure? J Paul Getty: More

 

[street]

90% is considered very high for most anyone.

That may be true, but if you don't need those funds, it is a good percentage or even higher IMO.

 

[Free bird]

The machines are battling it out. You trust the fire calculator. You believe in it. Or you don't. Buffet believes in the system. He's rich & no ones fool. Have faith the system is a collective interest mechanism. Be resonable about expectations. Be the ball Danny

 

[Dtail]

90% is considered very high for most anyone.

That may be true, but if you don't need those funds, it is a good percentage or even higher IMO.

Yes exactly my point. There are definitely posters here who have made it clear they don't depend on the market investments, but wish to leave a legacy and are willing to ride the roller coaster.

 

[Retch The Grate]

90% is not necessarily high. I'm at 100% equities and intend to maintain it when I retire (ok, the realities of banking mean it will likely be more like 99%/1%), because my goal is maximizing success over a 60 year period without having to lower withdrawals. For that time horizon, 100% equities and a 3% withdrawal rate (slightly lower than actually needed for 100% survival because like everybody on here, I pad) historically works best.

 

[ERD50]

90% is considered very high for most anyone.

100 - age = percentage for equities

90% at 54 could get you into trouble ... which you've already begun to experience.

90% is not necessarily high. I'm at 100% equities and intend to maintain it when I retire (ok, the realities of banking mean it will likely be more like 99%/1%), because my goal is maximizing success over a 60 year period without having to lower withdrawals. For that time horizon, 100% equities and a 3% withdrawal rate (slightly lower than actually needed for 100% survival because like everybody on here, I pad) historically works best.

Agreed that 90% is not necessarily high. IIRC historical success is pretty flat from ~ 95% equities, down to ~ 35% equities. Then a pretty sharp curve down below 35%. I prefer to be closer to the middle of that flat range, ~ 75/25, and I'd rather be 95/5 than 20/80.

-ERD50

 

[COcheesehead]

Everything is relative to one’s situation. Portfolio size, desired income/expenses, age, retired or not, etc. So blanket statements about asset allocation are useless outside the context of an individual’s situation.

 

[ponyboy]

You mean the longest bull market in history? The one that has been ongoing since 2009? Yeah, tough times out there. lol

 

[sengsational]

Being 100% means selling low for certain. But I guess if the amount you sell low is small enough, that extra few percent in equities will benefit in the long run.

 

[njhowie]

Many folks talk a big game about their sky high equity allocations and will continue to, seemingly wearing it as a badge of honor - no fear.

We've seen this before back in 2007/2008, as well as 1999/2000.

When the downturn comes, then we'll see the outpouring of mea culpas and articles about folks who had millions to their name and watched a significant portion of it disappear.

My belief is that many folks have become much too complacent during this bull market and have unrealistic growth expectations.

Some will point to Buffett's statement about 90/10, but Buffett is different. If you have a $1 billion portfolio (for example), having "only" $100 million in safer things is likely not going to hurt your lifestyle much, even if the $900 million went down in value significantly. However, for those who "only" have $1 million, should that $900,000 equity portion take a nice haircut, the effects can be enormous.

Back to the OP, with 90% equities - a 40% hair cut could push his FIRE date out another 10 years, 20 years, or potentially make retirement near impossible. For a 54 year old, again, considering sequence of returns risk, the remaining time may not be sufficient to recoup paper losses experienced in the years just prior to an intended retirement date.