Coronavirus - Financial, Health and Other impacts II

[shotgunner]

I have the same view. Market went up much in January, then the virus .. more uncertainty coming .. bottom is not in yet

I agree with the predictions the bottom is not in yet. We need some good news but for the immediate foreseeable future it will be a little more bad news about Corona every day, the death of a 1000 cuts. Some of those cuts will be deeper than others. I believe once Corona has established itself in the USA and if the the death toll is no more severe than the flu society will accept it as the new normal and life goes on. It is going to take some time and how much it will affect the overall economy is yet to be seen.

 

[Gunny]

I went to a very conservative AA about four months ago waiting for a correction to create buying opportunities. I think we just saw one. . Time to ease back into a more aggressive AA? That's the big money question.

 

[Tiger8693]

Starting increasing equity allocations yesterday, will continue next week. Since not in draw down, I see this (and have been waiting on this) as opportunity.

 

[Trooper]

I did a Roth conversion today. More shares converted for the same tax dollars.

That's a good way of putting it. Thinking of doing the same.

I have also stayed the course, and watched my AA (57/38/5) come more into line with my target. I have a question for the experts here, however:

I need to pull some $ from my taxable portfolio in order to pay for taxes on last year's Roth conversion, as well as living expenses for the next few months. Is it best to pull now which will generate lower capital gains, or wait and hope for a rebound, which will require less shares?

ETA: I will likely be in the 15% bracket for QDI/LTCGs, due to aforementioned Roth conversions.

 

[VanWinkle]

That's a good way of putting it. Thinking of doing the same.

I have also stayed the course, and watched my AA (57/38/5) come more into line with my target. I have a question for the experts here,however:

I need to pull some $ from my taxable portfolio in order to pay for taxes on last year's Roth conversion, as well as living expenses for the next few months. Is it best to pull now which will generate lower capital gains, or wait and hope for a rebound, which will require less shares?

Sell in your taxable, replace the shares in your tax deferred by selling bonds so you are still in at the same price. That way, you are selling high(bonds) and buying low(equities).

 

[Bongleur]

Sell in your taxable, replace the shares in your tax deferred.

That gets around the wash sale rule? Because taxable and TIRA/ROTH are legally separate for that action?

 

[VanWinkle]

That gets around the wash sale rule? Because taxable and TIRA/ROTH are legally separate for that action?

He is not selling at a loss, so no wash sale!! Otherwise, there would be if he bought the exact same fund and was taking a capital loss.

IRA and taxable can still cause a wash sale.

 

[Midpack]

I didn’t panic or sell anything (bought some) in 1987, 2000 or 2008 - and I don’t have any plan to this time either. The market always overreacts on the upside and downside to known disruptions, so the pullback will be overdone. There will be buying opportunities as long as you aren’t looking/waiting for the actual bottom, lots of things on sale already.

Wait and watch and gains will come back eventually, just no idea when in advance.

 

[Pellice]

Staying the course because the downsides to my few other options are too great! I don't have much choice, since my IRA is my chief source of funds, and I don't have a big enough sum to play with taking out some now, and putting it back later. I rebalanced in January to my target, and will have to see how far it gets out of whack. Best to just hold on. Financial life, simplified

 

[jcretire77]

This too will pass

I have over reacted in the past during other times of panic. So today we will calmly not sweat the petty stuff. Down a little over 6% this week, but still way ahead of when we retired three years ago.

 

[kingkarmann]

I feel like this is the perfect storm. Global pandemic concerns, presidential election, supply chain issues.
The perfect storm seems like a blessing to me. I work for auto manufacturer and will be retiring in June of this year. I believe my exit timing could not be better! I will be receiving a good pension and have a company 401 that I’m thinking of rolling into a separate IRA that I have from a previous employer. Still undecided on taking a lump sum pension or monthly payments but feel that that the market is so cheap now it might be wise to invest the lump. Thoughts?
Although no one at my plant has said anything about a possible slow down or disruption to our operations, if feels eerily similar to the great recession. During that crisis our production was cut in half and a lot of positions were shed. I hope for my co-workers that this time it isn’t the case.
The DW and I sold our first house in 2007 just before the housing crash. It truly was dumb luck but… Maybe lightning does strike twice!

 

[GravitySucks]

I really don't see this as much different than the SARS scare of '03. Except we import a bit more stuff than we used to.
Over in 4 months and forgotten in 6 months.

SARS outbreak timeline:
https://www.webmd.com/lung/news/20030411/sars-timeline-of-outbreak

The market differences are much greater. Early 2003 the economy and market were still in hangover mode and there wasn't much exuberance to wring out of it at the time. This time valuations are looking for a reason to fall.
I remember a team mate having to postpone a China plant visit for 6 months and there was talk of parts being unavailable but we we're lucky enough to not slowdown any rollouts.
Think I'll watch a rerun of the South Park SARS episode to keep perspective.

 

[bobbyr]

I believe my exit timing could not be better! I will be receiving a good pension and have a company 401 that I’m thinking of rolling into a separate IRA that I have from a previous employer. Still undecided on taking a lump sum pension or monthly payments but feel that that the market is so cheap now it might be wise to invest the lump. Thoughts?

I retired last year and love having the pension as annuity (100% for life for both of us) with no concerns. Having some guaranteed income each month (with some rental income as well) makes it much easier to ride the market with 401k and IRA.

So for me, being pretty risk averse, regular income gives me peace.

 

[ER Eddie]

I'm feeling a little anxious about it. Not just about the precipitous drop, but about the sense that it could drop much further and lead to a prolonged recession. I retired 8 months ago, and that was the type of scenario I hoped to avoid.

Fortunately, I'm only withdrawing 1.8%, and I'm able to live on dividends and a small pension, without any need to sell stocks. So I'm not actually losing any money, yet. Still, it sucks to see all your hypothetical gains wiped out so quickly.

 

[W2R]

I actually think you (and everyone else) WILL CUT BACK.
It will just be in a way that is not because you don’t have the funds, but because you (and everyone else) won’t be taking what would be unnecessary PERCEIVED risks.

What does that mean?
Less travel in public transport (airplanes cruises subways)
Less entertainment (theatre, sports)
More hunkering down and books and Netflix.

This is why the FED can’t solve this for us. It’s not about the money or liquidity. It’s about people staying home. Which was the number one thing our government wanted us to do after 9/11. Go out and spend!

I'm doing my share!!

My January 2020 spending was 431% of my January 2019 spending, due to buying an expensive new recliner.

My February 2020 spending was 144% of my February 2019 spending, due to buying a nifty new gaming console and stocking up on nonperishable foods just in case I need them when the coronavirus gets to my area.

With the generous tax refund I just got back, who knows what I'll think of to Blow My Dough on in March? I just know that I'm not getting any younger and I can't take it with me when I go (hopefully not in the foreseeable future).

 

[NW-Bound]

I really don't see this as much different than the SARS scare of '03. Except we import a bit more stuff than we used to.
Over in 4 months and forgotten in 6 months.

SARS outbreak timeline:
https://www.webmd.com/lung/news/20030411/sars-timeline-of-outbreak

The market differences are much greater. Early 2003 the economy and market were still in hangover mode and there wasn't much exuberance to wring out of it at the time. This time valuations are looking for a reason to fall.
I remember a team mate having to postpone a China plant visit for 6 months and there was talk of parts being unavailable but we we're lucky enough to not slowdown any rollouts.
Think I'll watch a rerun of the South Park SARS episode to keep perspective.

In 2003, China's economy was 4% of world GDP. In 2019, it was 16%.

The US's is about 24%.

PS. In the above view, it should not be surprising that the Chinese people could afford to travel all over the place. They have a lot of people, so per capita income is still low. Their rich people, however, are awfully rich.

 

[walkinwood]

I'm feeling a little anxious about it. Not just about the precipitous drop, but about the sense that it could drop much further and lead to a prolonged recession. I retired 8 months ago, and that was the type of scenario I hoped to avoid.

Fortunately, I'm only withdrawing 1.8%, and I'm able to live on dividends and a small pension, without any need to sell stocks. So I'm not actually losing any money, yet. Still, it sucks to see all your hypothetical gains wiped out so quickly.

I know, or rather, remember the feeling you're having now. We ER'd in May of 2008 and saw the bottom fall out in September of that year.

Your low withdrawal rate gives you a lot of flexibility and you're only 8 months out of the workforce, so you could go back if needed. While we had a nice head-room in our annual budget, we still felt the need to go back to work for about a year in 2010. We were 44 & 47, so had a lot of years ahead of us.

We kept to our investment plans - more of less. We didn't sell, but we didn't rebalance INTO stocks as much as we should have. But we slept well most nights.

12 years into this adventure, I'm not feeling the same anxiety this time - at least, not yet.

All the best.

 

[GravitySucks]

The only pull back in spending for me will be because prices may drop on discretionary items like travel. 2009 beach front hotels were dirt cheap.
If it becomes a nice deep recession then spending might increase as RVs, vacation real estate, classic and good used luxury cars usually go on sale.
If essentials somehow take a huge inflation hit I suppose I'd have to cut back spending.

I actually think you (and everyone else) WILL CUT BACK.
It will just be in a way that is not because you don’t have the funds, but because you (and everyone else) won’t be taking what would be unnecessary PERCEIVED risks.

What does that mean?
Less travel in public transport (airplanes cruises subways)
Less entertainment (theatre, sports)
More hunkering down and books and Netflix.

This is why the FED can’t solve this for us. It’s not about the money or liquidity. It’s about people staying home. Which was the number one thing our government wanted us to do after 9/11. Go out and spend!

 

[Mdlerth]

I can watch bad comedians work for free at the Comedy Zone

Even Singapore which has less than 100 virus cases is considering a similar measure of giving away free money. In addition, it was just announced that political office holders will forfeit 1 month of pay.

Sounds like a good start. Let's have a show of hands to extend it in USA to 12 months. Per year. Every year.

 

[EastWest Gal]

I'm feeling a little anxious about it. Not just about the precipitous drop, but about the sense that it could drop much further and lead to a prolonged recession. I retired 8 months ago, and that was the type of scenario I hoped to avoid.

Fortunately, I'm only withdrawing 1.8%, and I'm able to live on dividends and a small pension, without any need to sell stocks. So I'm not actually losing any money, yet. Still, it sucks to see all your hypothetical gains wiped out so quickly.

I feel the same. My withdrawal rate is 3% though. And I sold stock late last year even with paying higher taxes due to wage income, hoping to save at the other end (ACA subsidy starting the end of 2020). The market may give me what I wanted-increase taxes by $10K in 2019 and save $1600/month end of this year into 2021.

My travel plans to Italy this year look dicey-another save on discretionary spending.

 

[Dtail]

Still relaxed about it overall in terms of not selling.
The only bothersome thing is that our overall LTD overall increase is now less than 5% since we retired 2.5 years ago.
Thus the old SORR concept coming into play a bit more.

 

[Lisa99]

Funny how not watching the market like a hawk has worked in our favor. In mid-January I withdrew two years worth of cash since we had been significantly under withdrawing and we wanted some mad money to do some traveling.

That withdrawal changed our AA to 40/60 instead of the target 50/50. As a result the market slide has had very little impact.

I looked at Firecalc to see what the impact of the new AA was in terms of money survival rate and it had zero impact so gonna leave the AA alone. Yay lazies!

 

[bobbyr]

My travel plans to Italy this year look dicey-another save on discretionary spending.

Likewise...we were talking about italy this spring as well - too bad, as it sure looks nice and uncrowded (partly february but mostly the virus i suspect)

 

[TromboneAl]

I realized I look at our balances only a few times a year. Here are my rebalancing notes for 2019 and 2020:

 

[Souschef]

I lucked out a bit also. My DS needed some cash to buy a home, so I sold 250K of stock to help him out in December. I readjusted the beneficiary designations to my other son in fairness.
My mom always said it is better to give when you are alive, so you can enjoy the appreciation of your gifts.
I also pulled 18K out of my IRA RMD to pay the 4 qtr estimated taxes and to pay for our cruise.

I agree the virus is a problem, and the steps taken to contain it are drastic, especially in China. Time will tell.