Investment loss greater than Withdrawals

[FREE866]

I do use the "Significant Below Average" choice, as thsat returns results with 90% confidence. Being that it is a Monte Carlo calculation which includes the worst scenarios with no reversion to the mean concept, it is probably closer to a 95% success rate in Firecalc.

IIRC, the below average results are with 75% confidence.

Nevertheless, I am with you about work and have plans B,C and D before I would ever go back to work.

actually with all these calcualtors I put in account values that are 15% below what they are today as a buffer. I just put in actual values and at "significantly below average" I'm good!

 

[HadEnuff]

Indeed, 2018 was a down year for us, but when I retired in 2016 I fully expected that this would happen at some time, and my expectation is that what we say in 2018 is not the worst that I will see before I croak.

I assume nobody on these boards went into RE thinking and projecting that the market will always go up, and never go down. Right??

 

[kgtest]

My first uncomfortable milestone... I assume I have many cohorts on this board who also experienced their first "loss" since retirement.

I experienced my first annual loss as an investor...period. *Still accumulating

I did rebalance last week but I expect 2019 may be similar to 2018.

I really hope we have some positive news in Q1 AND Q2

 

[Dtail]

actually with all these calcualtors I put in account values that are 15% below what they are today as a buffer. I just put in actual values and at "significantly below average" I'm good!

Good to hear.
Actually Fidelity already puts in a loss to the portfolio for the first year.
It has not always been a consistent %, but with me the range has been 7 to 15% reduction of the portfolio, which accomplishes your buffer concept anyways.

 

[scrabbler1]

The main part of "market performance" I am most concerned about are the monthly dividends per share paid out by my main bond fund, and, to a lesser degree, the quarterly dividends per share paid out by my main stock fund. Those dividends pay my expenses. I don't touch the principal to pay expenses, but I may touch the principal to rebalance or "borrow" from the second-tier emergency fund portion of a.k.a. slush fund.

 

[GravitySucks]

Good to hear.
Actually Fidelity already puts in a loss to the portfolio for the first year.
It has not always been a consistent %, but with me the range has been 7 to 15% reduction of the portfolio, which accomplishes your buffer concept anyways.

Both in December 2017 and 2018 the Fido calculator set to Significantly Below Average dropped about 18% next year, 5% second year and then sideways for about 6 more years in my 60/40 portfolio. Not sure this is an always returned response for these settings but is pessimistic enough for me to count it as planned worst case scenario.

 

[candrew]

Nevertheless, I am with you about work and have plans B,C and D before I would ever go back to work.

Depending on circumstances, my plan B,C & D could mean living under a Bridge while sleeping on Dry Cardboard.

 

[Franklin]

the egg lost about 7% of its value in 2018. WD's accounted for only 1% of that. Have yet to change AA and just hoping this storm blows over. This was my first full year in retirement so it had my full attention.

 

[Dtail]

Both in December 2017 and 2018 the Fido calculator set to Significantly Below Average dropped about 18% next year, 5% second year and then sideways for about 6 more years in my 60/40 portfolio. Not sure this is an always returned response for these settings but is pessimistic enough for me to count it as planned worst case scenario.

Interesting.
Fidelity's calculator is not a true random selection Monte Carlo calculation, as it will return the same results for static data.

 

[mpeirce]

Recent retiree, (2016). My first uncomfortable milestone, my investment loss exceeded my living expenses in 2018. First time since retiring that net worth actually went down YoY. 2018 loss was 2.8% of portfolio. I know it is no bigee for those who were retired in 2008-2010 or at the "turn of the century". I assume I have many cohorts on this board who also experienced their first "loss" since retirement. I did rebalance last week but I expect 2019 may be similar to 2018.

If you have "a lot" in the market you have to expect up and down years. Stay the course!

Here are our results since 1/1/11 when I FIREd. You'll see this is the second down year. We feel pretty blessed to be up 66% since I retired - even after all our spending. Note we track our financial assets - excluding the house we live in. No Pension, no SS for many years to come.

 

[Singletrack]

...Actually Fidelity already puts in a loss to the portfolio for the first year. It has not always been a consistent %, but with me the range has been 7 to 15% reduction of the portfolio, which accomplishes your buffer concept anyways.

I have always wondered why I could not reconcile the beginning portfolio value to my inputs in the Fidelity planner (I'm a customer). Like you, the difference seems kind of random. As a recovering finance guy, that's kind of worrisome...lol

 

[Dtail]

Depending on circumstances, my plan B,C & D could mean living under a Bridge while sleeping on Dry Cardboard.

Well if you are going to be homeless, then come to FLA. Just don't sleep near a lake.

 

[pb4uski]

.... I assume I have many cohorts on this board who also experienced their first "loss" since retirement. I did rebalance last week but I expect 2019 may be similar to 2018.

Investment loss.... 3.45%
Withdrawals......... 3.61%

This is the first year with a loss since I retired in early 2012.... but 2015 was 0.00%.

 

[street]

Investments YTD >>> -3.27
Withdrawal >>> .25%

First year with a loss just with 30 months into retirement. I don't budget and don't use a certain WR. We just spend what ever we need. Last year WR was .50%.

 

[Dtail]

Investments YTD >>> -3.27
Withdrawal >>> .25%

First year with a loss just with 30 months into retirement. I don't budget what and use a certain WR. We just spend what ever we need. Last year WR was .50%.

Not that it is bad, but it is much easier to not budget when your WR% <1%.
Congrats....

 

[RobLJ]

can you please provide a link to that?
thx

https://www.fidelity.com/calculators-tools/retirement-planning-and-guidance


Ultimately, the fidelity planner and FireCalc results were similar, although the latter showed a 14% "margin" over my inputs (planned expenditures) versus FireCalc was more like 20%. The "results" are displayed differently, so it's a bit difficult to compare the two. Fidelity shows your overall yearly % overage or underage, considered on a yearly basis of your planned withdrawal.

I had a good margin of safety on both, so I didn't parse the outputs too carefully. I would suggest looking at the table of withdrawal results, which I didn't know about until my Fidelity rep told me about it. It shows yearly gains/dividends versus expenses over the entire years of planned retirement, so you get a good sense of inputs/outputs over time. This is just a model, of course, but I agree it is pretty conservative.

 

[DrRoy]

I lost 3.5% from 12/31/17 to 12/31/18.

+1 for last year return. WR last year 1.6%, this year 2.4%.

 

[goingoodsofar]

Try this. Add you expenses for the last 3 year. Add your net worth change for the last 3 years. Divide each answer by 3. If the expenses are larger than the change you will need to re-think your expenses and/or better your investments. Think of it this way... with a job you probably work 5 days a week, yet there are 7 days to consider. Do you feel depressed on Saturday and Sunday when, essentially, you are not making any $. Answer - probably not. It's the big, longer picture you need to consider. Just my way of thinking or coping....not sure which.

 

[athena53]

I retired in mid-2014 and I did something similar; result is that I've been up an average of 1.5%/year after withdrawals since retirement, which looks sustainable to me. Before everything went down it was closer to 3.5%/year.

This is my first really bad market since retirement but you have to expect them. It's the reason our returns are higher than interest on CDs or Treasuries- a compensation for volatility.

 

[guitarguy]

For me, Dividend Kings and Aristocrats are the answer to volatility, and I have a good chunk of my portfolio in them. I follow Regarded Solutions on Seeking Alpha, and he makes a great point... when you invest in these companies for a total yield that supports your annual expenses, you don't care about the market value of your portfolio quite so much. And of course there's dividend growth too.
He also said that your portfolio's market value is something your heirs have to worry about... if you have dividend income in both up and down markets, you're good and your heirs won't have to worry about supporting you. Of course, we all want to leave something to our kids, but this approach makes sense to me, and balances the various worries quite a bit for me.

 

[Spock]

If you are worried when the stock market goes down and happy when it goes up it probably indicates that your portfolio is unbalanced. If your income is also tied to how the economy does, you are doubly at risk because your portfolio can go down when your income is worst which is scary. Most people and companies are in that position and many make it even riskier by borrowing money to be in that position in an even bigger way. That’s what makes the financial rollercoaster ups and downs so big and dramatic. To me, the key is to not have any systematic biases by structuring your portfolios and your incomes so that they hedge each other and are in balance.
- Ray Dalio

"easier said than done"

no idea how to "structuring your portfolios and your incomes so that they hedge each other" when things that used to hedge now correlate instead.

 

[CRLLS]

I somehow comforted to see these numbers. Not that any of them are "good". It is nice to see that we are not an outlier. 2018 was our 1st year into full retirement. We lost 8.6% of out investment portfolio including our 2.6%ish withdrawal rate and taxes on a Roth conversion. I was/am mentally prepared for the market ups and downs. Considering our 80/20 AA, not too bad I think.

 

[HaveEnough]

After all expenses pulled out including *large* tax bills and kid in state schools. Retired in 2016, we have very little stock exposure. Only investible worth, no real estate appreciation included...

2018 +9.6%
2017 +17.6%
2016 +6.7%

 

[joeea]

My first uncomfortable milestone, my investment loss exceeded my living expenses in 2018.

I'm not sure why the two factors would have anything to do with one another.

Consider that before retirement, any investment loss would be greater than your withdrawals.

Don't sweat it.

 

[big-papa]

I'm not sure why the two factors would have anything to do with one another.

Consider that before retirement, any investment loss would be greater than your withdrawals.

Don't sweat it.

+1 This is the only thing that can happen no matter how big your portfolio.