Retirees - Were you ready for the Great Recession?

D

DawgMan

Full time employment: Posting here.
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Like many, while my greed gland loves the continued run up in the market, I can’t help but feel we are close to another correction. How much/how long/when it happens, who knows? Being 2 years out from launching, I can’t help but “fear” I be “that guy” who retires right before the big drop, statistically putting me at a disadvantage of a successfully RE. While I am underwriting to a very generous spend budget with significant discretionary spending, I would like to think my SHTF budget is my fallback.

While hopefully the Great Recession was a once in a life time experience, curious as to how those of you who were retired before 2008 and more specifically those of you who retired 2007/2008, but fore the SHTF made your adjustments...

- Went back to work?
- Panic/sell assets/adjust AA?
- Cut your budget and road out the storm?
- Sold the Porshe?
- Had brass balls, stayed with AA, no panic sale, no change in spending budget?

If you had a pension that covers most of your expenses, this question is probably not for you. I am curious to hear more from those of you who rely 100% on your assets to fund your retirement. Your experiences will help many of us getting ready to launch plan accordingly. Look forward to your wisdom!
 
rely 100% on your assets, you say? Does this mean you are contemplating retirement before you can get your SS benefits? how old you are is a measure of your risk. When I retired I was too damn old to go back to work. I knew that when I bailed.

How old are you?
 
And no, the "Great Recession" will not likely be a "once in a lifetime" experience.
 
HadEnuff said:
rely 100% on your assets, you say? Does this mean you are contemplating retirement before you can get your SS benefits? how old you are is a measure of your risk. When I retired I was too damn old to go back to work. I knew that when I bailed.

How old are you?
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In my case, I will launch at 55 so SS is not on the radar. No pension, just investments. Trying to do a gut check based on those who have weathered the last big drop.
 
HadEnuff said:
And no, the "Great Recession" will not likely be a "once in a lifetime" experience.
Click to expand...

Sure, who knows, but I would like to think that is a worst case scenario... hence, the question.
 
I didn't retire until 11/9/2009, but I had no feeling that the recession was over and not just getting a deep breath before a second wind. At work I started the paperwork for retirement in the spring of 2009, since I wanted to give a lot of notice.

I thought that for me, the Great Recession was a good practice run. I found out that my AA worked for me and I didn't cave in and sell low. I had enough cash to last me for several years, so had it continued my plan was to live off that cash as long as I could. I was determined not to claim SS early unless that became necessary, since my plan was to wait until age 70 in 2018.

Hope you hear from people who retired a little earlier than I did.
 
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DawgMan said:
In my case, I will launch at 55 so SS is not on the radar. No pension, just investments. Trying to do a gut check based on those who have weathered the last big drop.
Click to expand...


I would recommend that you start by looking at what AA you need, and then look at what happens if a "worst case" scenarios ensues shortly after you retire.

For example, what happens, with your AA, if there is a 40% drop in equity prices, and it takes a decade to recover. I don't know if that is a "worst case" scenario, but we've seen it.

Can you survive it?
 
Retired in 2006.
When the recession hit we did not change a thing but we were white knuckling it for several weeks. Same AA, same spending, no panic sale.
Oddly, we were concerned but not worried. (Maybe the wise folks here in the forum helped with that).

What we did do was turn off the TV and go to the beach.

Now, on this forum I often mention my 'smarter-than-you' neighbor who proudly announced that she sold everything on the third week of February 2009 and never got back into the market....
 
My retirement was pretty well-timed (3.5 years ago) so I can't speak from personal experience, but what you need to consider are the possible % loss in a down market and then what your withdrawal rate would HAVE to be as a % of your depressed assets in order to meet basic expenses. In other words, if your portfolio went down 10%, could you live on a withdrawal of 3% of that reduced portfolio or would you need 10%? Note also that the potential drop in your investments will depend on how aggressively you're invested.
 
Certainly you know the correct answer, right? I was down to part time, not retired yet, but ready to pull the trigger at any time. It doesn't take brass balls to stay the course. Just don't pay too much attention to the daily ups and downs of the market. Turn off the stock market talking heads shows.
 
W2R said:
I didn't retire until 11/9/2009, but I had no feeling that the recession was over and not just getting a deep breath before a second wind. At work I started the paperwork for retirement in the spring of 2009, since I wanted to give a lot of notice.

I thought that for me, the Great Recession was a good practice run. I found out that my AA worked for me and I didn't cave in and sell low. I had enough cash to last me for several years, so had it continued my plan was to live off that cash as long as I could. I was determined not to claim SS early unless that became necessary, since my plan was to wait until age 70 in 2018.

Hope you hear from people who retired a little earlier than I did.
Click to expand...

So in your case, you mention you kept your AA and you lived out of cash for several years. So your original strategy was to carry a reasonable amount of cash and you were able to rebalance without selling any equities when the were down?
 
athena53 said:
My retirement was pretty well-timed (3.5 years ago) so I can't speak from personal experience, but what you need to consider are the possible % loss in a down market and then what your withdrawal rate would HAVE to be as a % of your depressed assets in order to meet basic expenses. In other words, if your portfolio went down 10%, could you live on a withdrawal of 3% of that reduced portfolio or would you need 10%? Note also that the potential drop in your investments will depend on how aggressively you're invested.
Click to expand...

This is where my SHTF budget comes into play. Essentially a reduced WR.
 
RunningBum said:
Certainly you know the correct answer, right? I was down to part time, not retired yet, but ready to pull the trigger at any time. It doesn't take brass balls to stay the course. Just don't pay too much attention to the daily ups and downs of the market. Turn off the stock market talking heads shows.
Click to expand...

Maybe I am missing your drift, but if you had a plan as of 1/1/07 that says you were good with a 4% SWR and 2008+ happens, I would argue that it DOES take brass balls to blindly stay the course. This is exactly why I am asking the question.
 
DawgMan said:
So in your case, you mention you kept your AA and you lived out of cash for several years. So your original strategy was to carry a reasonable amount of cash and you were able to rebalance without selling any equities when the were down?
Click to expand...

I didn't retire until 11/9/2009, so I was still getting a paycheck during the worst of it. But yes, my strategy was to carry some cash (about 5 years' worth IIRC), and had the recession continued after I retired then I would have lived off that cash.

It turned out that I did not have to. After I retired and was no longer getting a paycheck, I lived off my dividends and one very tiny pension and that was enough. My house was paid off, I had zero debt, and my expenses for one person just aren't that high.

My plan for living off cash (had the recession continued) never had to be put into place. If it had, the reduction in cash would have been offset by the reduction in dollar value of my equities due to the recession (had it continued). So, little to no rebalancing might have been needed. Or so I was thinking at the time.

In 2008 and early 2009, I was not spending that cash buffer on living expenses since I was still working. So, I was able to use some of that cash in rebalancing, to buy low.
 
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W2R said:
I didn't retire until 11/9/2009, but I had no feeling that the recession was over and not just getting a deep breath before a second wind. At work I started the paperwork for retirement in the spring of 2009, since I wanted to give a lot of notice.

I thought that for me, the Great Recession was a good practice run. I found out that my AA worked for me and I didn't cave in and sell low. I had enough cash to last me for several years, so had it continued my plan was to live off that cash as long as I could. I was determined not to claim SS early unless that became necessary, since my plan was to wait until age 70 in 2018.

Hope you hear from people who retired a little earlier than I did.
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W2R is finally going to collect that big, fat Social Security check?? Time to buy Amazon stock!!!
 
I retired in 1999, and I was so nervous about the market that I took two years to average in the proceeds of a major sale of company stock that funded our retirement portfolio. I got lucky. But I could not ignore the extreme valuation of late 1999 - still quite a bit higher than today.

We had also sold almost all our individual tech stocks during the run-up of 1999. DH held on to his AAPL position in his SEP-IRA and still has most of it. We put the proceeds plus sale of some investment land in a “travel fund” to support short-term spending without worrying about stock market wild rides.

I was also lucky that my company stock was not horribly affected by the dot.com boom and bust and held up early and recovered from later hits. So I was able to continue to divest during the early and mid 2000s.

By 2008 I was fully invested with close to a 60/40 AA. I kept rebalancing while things dropped like a rock - it was scary. Our net worth was hit hard enough in early 2009 that for a short while it was slightly less than where we had started in late 1999! Fortunately it recovered and continued to grow and is now well above those levels even in real terms.

Knock on wood!
 
Unlike Marko, I lacked the self-discipline and good sense to turn off the TV and go to the beach.

Retired mid-2005. Age 58, no pension, living 100% off savings.

AA when the SHTF in 2008 was 55/45, with the 45 including six years of expenses in cash and short-term bond funds. Hung on for the ride although I was very worried the wings would fall off the market before it pulled out of the dive.

I turned 62 at the end of 2008 and pulled the trigger on SS. My initial plan was to wait until at least FRA to start, but I felt it was important at the time to stop the bleeding. It was definitely a relief to see that first SS deposit hit my bank account.

Didn't sell but didn't have the nerve to rebalance on the way down and ended up with an AA of roughly 45/55, where I remain today - including seven years of cash/ST bonds.
 
I retired on Jan,19,2008 . I did have a survivor pension and SS survivor annuity both of these were not huge amounts. I was aggressively invested and lost 1/3 of my portfolio.I was ready to panic and sell but one of the long term members (Nords ) talked me off the ledge and told me to stay the course .I did except for a small amount I sold before the bottom.My portfolio returned within five years .Like Rewahoo I did claim my SS early . It was a lot more than the survivor benefit . I took a budget cut but We still travelled a lot . There were some incredible deals at the time . Looking back at some of the terrible things that happened to me this is not even on the radar .If you want an insight search for the old threads during that time especially "Who is a member of lost a million club ".
 
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Another Reader said:
W2R is finally going to collect that big, fat Social Security check?? Time to buy Amazon stock!!!
Click to expand...
That was Plan A.

I'm doing Plan B, inspired by some posts on this very forum. I discovered that I could let my own SS grow until age 70, just as it would have, and also start divorced spousal SS at age 66 (in 2014, before the new SS law). The idea is to collect the same as in Plan A after age 70, and collect divorced spousal between age 66-70. The latter is half of what he is getting, so my own SS is more.

*****Warning: You can't do this any more and assume that your own SS will continue to grow!!***** There was a new law passed in 2015. But I was grandfathered in.

So, I'm already getting SS. And if all goes as planned, I will be getting half again as much later this year when I turn 70 and transition to my own SS, so buy that Amazon stock! :D
 
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