Not as chilled as the rest of you - need advice

[steady saver]

I'm typically a buy and hold investor - have pretty much done that my whole investing career when I haven't had time to spend and when I have had time to spend then I've gravitated towards value stocks and enjoyed trading. That was years ago.

My (our) situation is this. My DH (we are both 52) is painfully waiting to retire. This has been going on for years. We'd originally said Jan. 2017 but a review of things has us considering Sept of 2018 just for more cushion (we have two sons in college), though Jan. 2017 was still looking doable. However...

Like many of you, we've lost a lot of money this past few days. Just today alone we've lost almost 25K.

When I was looking at a draw down rate of 3.5 % last week, things looked pretty rosy based on the balance I was plotting to draw down from. Now things are not looking so rosy. Having lost (on paper, I know) over 100K, I feel that bit of panic. I have worked really hard to do what I can to help us be in a position for my husband to retire. But gee whiz. This rattles me a bit.

I have a chunk of cash (about 150K) that is sitting in cash in our Fidelity account. Normally I would see this as time to go shopping. But today I'm finding I don't know what to do.

I will buy more VMI for my 19 year old son with his money b/c he'd asked me to do that before he left for college last week. So that's a no brainer. It truly is a sale for him.

If my husband had already retired, then we'd just deal with it. But since he hasn't yet and since our new balance is so much lower, what advice do you have for deciding whether to keep up with your plan? And how do you sleep at night when you're invested in the market?

I need to make another post in a few days about asset allocation, something I've been meaning to ask you all about. Most of our money is in our 401K, which has decent offerings but it makes way less percentage wise than my own small portfolio which is about half the balance of our 401K. I don't know how to maximize earnings in it and keep it safer at the same time. Moving towards safety is a new ballpark for me to explore.

If there is specific information I can offer that would help, please ask. I'm in a bit of a reactive mode at the moment so I know I'm venting more than anything.

Many thanks!

 

[W2R]

Just hang on, and don't sell low.

When the market recovers and is thriving once again (which WILL happen sooner or later), you might want to consider moving to a less risky asset allocation. We all need an AA that is something we can stick with through the inevitable market slumps and crashes that occur from time to time.

With risk comes reward, so AA during the accumulation phase can be a little riskier than AA after retirement. But you are getting close enough to retirement that I think you would be justified in starting a shift towards less risk if you want to, once the market has recovered so that you can sell high.

 

[JDARNELL]

Venting is a good thing. And I would argue that it's not a loss until you sell it. Of course its hard to this mentally. Look at how long it took the market to set new highs from the 2008 mess. It wasn't that long only a couple of years from what I recall. Stick to your plan and don't do anything rash.

JDARNELL

 

[walkinwood]

You have 3 years to go for retirement, so that's good news. This would have been worse on your nerves had you just retired.

Pay attention & see if you can do some tax loss harvesting by selling mutual funds and moving them to another similar fund. Read up on this before acting. That way, you stay in the market, but get some tax benefit near term.

As someone else said, you may need to re-evaluate your AA after this has blown over. Think about what your future AA should be.

We're all in the same boat. We may not act, but don't, for a moment, think that we're all "chilled" about this.

All the best.

 

[RunningBum]

There are risks anywhere you put your money.

Bonds? Corporations or cities can default on them.

Real estate? What if renters don't pay or you can't get a renter, or a flood or earthquake happens, or a pipeline goes through your property?

Annuities? The insurer can go under, leaving it worthless.

FDIC insured savings? Inflation can ravage the value and make your money worth a lot less, even if the amount in your account doesn't fall.

Stocks have more risk than most because there is more upside. I look at this drop in perspective of the run up we've had for the last 6 years. I also look at historical drops and see how the drops mostly were just corrections from a market that was too high. As long as you don't sell in the trough you will come out of it okay.

Diversification is a good way to insure against a bad event ruining your retirement. Own a reasonable % of some or all of these categories (and any others I've missed). The stock market may be down 10% or whatever it is depending on where you start looking, but I haven't lost 10% because I'm not 100% in stocks.

It's a long way to 2017. In some ways you're lucky. If we're in for a long slide, you've still got jobs and can hopefully delay ER if you're not where you want to be then.

 

[Bir48die]

Hey, I'm retiring Friday. My sister's retiring in a month. We're both a little freaked out. You have to pick a point a just go for it. You're much younger than both of us.

On the good side I am going P/T in a month and can live off half my old salary (have benefits). So, I'm just not going to read the financials for a month or two.

 

[Moemg]

I retired in 2008 & I did not chill during that meltdown . I seriously thought about going back to work but I nixed that idea & just went with the drop . The thing that kept me sane is realizing that a $100,000 drop is only $ 4,000 of your annual budget & unless your budget is very tight most of us have $4,000 wiggle room. So the big trip gets postponed or you cut down on dinner's out .I lost a lot in 2008-2009 but I did get it back & then some .

 

[Senator]

I am relying on 130+ years of market data. I am staying the course.

I used to do trading. I have been to many trading schools, bought every high flying stock out there. You can buy them, watch them run up, then decide to stay the course. And lose money on them eventually.

I buy a set amount every month. I purchased September's allocation today. I should have waited, but a week is not going to make or break me. My Real Estate income gives me more than enough to live on, and I am still working. I have some pension money, and SS too, when I get to that point. And free health care.

The market had high volume at the open, and many investors were stopped out early today. Many more were forced to sell due to margin calls this afternoon. It will not be long, and all the sellers will have sold, forced or not. At that point, only buyers will remain. The market will be forced to go up.

The economy is doing well, sort of. The fundamentals are the same as last week. There are a few investors that left the market which caused the down swing. Real Estate is not an option for most people at today's prices. Bonds are no bargain at 1% - 2%. Equities are the only game in town.

The market will be up at the end of the year, (likely). If the Fed raises rates, all bets are off.

 

[emerytura]

Perseverance will pay off. You have time to recover, as long as you do not sell lower than you purchased. I took the risk today and moved some cash from money market in my 401k to Large Caps. I do not need this money for the next 5 years and will let them ride. No one really knows how this will unfold in the future, but judging by the past, market usually recovers.

 

[petershk]

Agree with everyone here.

No one shrugs off a 6-10% drop in net worth in a couple days... But the question is how you act right after that.
My suggestion is to figure out your AA and contingency planning when you emotion neutral (or close to it) and then write it down.

Something like "I know I'll freak out when the market drops 5%+ in a day so when it does I will do nothing... Go for a walk... Take a trip to my favorite bakery, etc."

Or. "I know I'll get really scared when it drops 15% in a month and then I'll buy $x, and rebalance as necessary"

And

"I'll be scared out of my mind when it drops 50% in one year and then I'll do x, y, z"

If you want you can put "back to w*rk" triggers or whatever.

The key is to have something other than cnbc to listen to when there's stuff like this.

Its like a fire escape plan... Figuring it out when the house is burning down isn't necessarily the best idea .

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[Nemo2]

And I would argue that it's not a loss until you sell it.

DW & I so have a hard time with that........from our perspective, if we had've cashed out before a/the drop, that money would've been in our hands...that was OUR money.......and now it's not.

 

[levypa]

FWIW I am sat at home, having a nice whisky (Dalmore 18 if anyone's asking) reviewing net worth. And it's down - by an absolute number than makes me not feel good (hence the liquor

But overall net worth is 96.6% of the peak I've record so in the grand scheme of things it's not a killer (not 100% invested in equities). And if the (equity) market drops another 10% then it will hurt some more - but that will be the time to both stay calm and also try to buy a little more stock.

And thankyou for giving me the excuse to write this and feel a bit better - and stick with it, don't sell at the lows. Definitely stop checking your portfolio value daily unless you are awaiting a topup point - we are past the point of selling.

 

[Car-Guy]

I went through this a couple of times with my 401k investments when I was working and typically just stayed the course, kept my head down and focused on work.

Now that I'm retired, I'm mostly in fixed income investments. However, I did buy some specific stocks today that I'm interested in with spare cash and will probably buy more tomorrow, etc, if the market drops again.

 

[Car-Guy]

And I would argue that it's not a loss until you sell it.

JDARNELL

never could get comfortable with that concept but that's me

DW & I so have a hard time with that........from our perspective, if we had've cashed out before a/the drop, that money would've been in our hands...that was OUR money.......and now it's not.

that's the way I see it too

 

[frayne]

My advice, turn off the boob tube and go play golf, take a bike ride, or go fishing. The ups and downs of the markets are just the natural voice of the process that you can't control.

 

[Car-Guy]

Always carry a flagon of whiskey in case of snakebite and furthermore always carry a small snake. - W. C. Fields.

Sorry, no snakebite, but I needed the whiskey today before I could buy into the market. I'll refill tonight for another round tomorrow.

 

[O2Bfree]

I'm 53 and hope to retire in 3-4 years. Not panicking, but coming here for some comfort. (Can't do a shot just now, still at the office...). I'm looking to buy some VTSAX soon as the funding clears in my new Vanguard account.

Now if I could just talk my boyfriend into getting back into the market. He pulled a few years ago and has been missing out...or will he have the last laugh? Stay tuned!!

 

[Ian S]

When I saw what was going on this morning, I just thought back to the 1987 crash when I was fully invested and could do little but watch the carnage. No online trading in those days and the broker phone lines were hard to get through. Wasn't considering selling which is the WORST thing you can do in such a situation. I would have bought more but just didn't have cash available to do so. Today, I was carefully evaluating the situation as I now have cash available to pick up some great dividend stocks on sale. We may see some more wild behavior tomorrow but don't be rash in whatever you decide to do.

 

[Fermion]

We just retired this year so imagine how we feel! Market dropping 1000 points in a day during your first year of retirement. It would be hard with kids, but without kids you can always depend on the taxes of strangers to cover things like ACA and reduce your spending on other items to fit your budget. I think forgoing a European vacation trumps driving an hour each way to work and spending 10 hours in a cubical. Europe is overrated anyway.

 

[turbo89]

Another vote for staying the course... of course I have another 20 yrs until I'd like to retire, so it's easy to take that position.

I've bought on 2 dips. I didn't today, but I will when it dips some more.

 

[jim584672]

I saw some of the prices on the open, I thought they where incorrect or something. Too shocked to take advantage of it.

 

[harley]

Always carry a flagon of whiskey in case of snakebite and furthermore always carry a small snake. - W. C. Fields.

Hey, you stole my sig line!

 

[NW-Bound]

Imitation is the sincerest form of flattery.

I [-]steal[/-] borrow Uncle Mick's "Heh heh heh" line daily, and I am not abashed about it.

 

[harley]

True 'dat. I was realizing all it meant was that we had two flagons available just in case.

 

[NW-Bound]

Can't share a common snake?