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Although if you did just invent a new golf ball give me a jingle. You never know! Plus, if nothing else I'm pretty good at doing golf-ball research - if you know what I mean.
One, regarding RE investments I wasn't thinking residential, although careful picking, renovating/upgrading and flipping can be very profitable. There are many commercial/industrial opportunities available but it's like buying a Tesla...
Two, I've had some experience with VC-backed startups and the key is "due diligence" along with a thorough knowledge of management skills and character. It's not the same as giving your golf partner a blank check because he just "invented" a new golf ball.
I have no expertise in commercial RE so can't comment other than to say it seems to me that those are deep pocket kind of investments where you have to be already rich to participate or somehow know someone good the way mathjak got into a good RE deal run by good partners. Also VC investments seem even riskier than individual stocks and like commercial RE seems accessible only to already rich people but I also have no expertise in that. Good luck!
Preference for real-estate is nothing new. I have in my little library books from the 1960s, that extol the munificent prospects of renting apartments to then college-aged Baby Boomers. What is somewhat new is the real estate crash of 2008. It is, I think, akin to the stock market crash of 1973-1974. Remember that one? I don't, having been then too young to care for such things (or much of anything).
There are many alternatives for how to invest. It truly is a poverty of riches. There are astounding successes in every imaginable genre - so much so, that one has aching feeling of abject foolishness, when one considers that one is not in that exalted number. To this, there are many possible reactions, from wide-eyed naive optimism, to bilious cynicism, and anything in between - or orthogonal to that. One almost wishes for a system of implacable rigidity and much constrained opportunity, for that buys something very precious: plausible deniability.
Just to clarify, I have nothing against purchasing Real estate... but I shake my head at people who are purchasing ONLY Real estate and investing in nothing else... i.e. they are purchasing Real estate at the expense of investing in the stock market and their house is their retirement plan (i.e. downsize later and cash the profits).
I have a colleague who just bought a $680,000 house, has only a 6 month emergency fund, has nothing in retirement savings, and does not contribute to a 401k... I asked him why he put all his money in a house instead of the markets and he said he would rather have something physical to touch and he believes stocks can go to zero. It's this kind of ignorance that is rampant.
My husband and I are 15 years into drawing down our IRA. He is 85 and I am 69. We lived through 08 and my husband and I went back to work because we lost about 50% of our portfolio. We had a house, taxes, electric bills, water and all the rest. We had one child in graduate school.
If we didn't go back to work we would have gone broke because real estate was crashing along with the market. We had to sell our house in a declining market, which we never planned to do
We were forced to draw down money from our IRA along with the balance dropping each day due to the market.
I think the point Mathjak is making is, until you realize that the balance of your portfolio drops because the market is dropping, and you are forced to withdraw from it. When you are retired, you can't add to it, it keeps dropping and its a very scary feeling.
I appreciate Mathjaks information because we could be facing a similar situation as 08. Retirees can not make up the loss because they are not adding anything only taking away.
We did not see the crash coming. Our brokers apparently didn't because they kept us 90% in equities.
We did well until we didn't and we couldn't do anything about it.
Now, because of my husbands age, we are forced to withdraw 7% from our IRA. The market has been kind since the crash, but if we hadn't had to draw out of it, we'd be very happy. However, each year he ages, the amount we are forced to withdraw increases. I hope we both live forever, but if we do, we won't have enough money to survive.
Think of your spouse if there is a big age difference. How will they fare if the market tanks and you are too old to return to work?
We are looking for safety now. We've enjoyed the bull run but have to realize it will come to an end and we are still alive and need this money to live on.
I think the casual statements about the market are from those who are not drawing down their retirement funds or not old enough to realize the amount of draw down goes up with each year you live.
Thank you Mathjak for your wisdom for those of us who can no longer add anything to our portfolios and depend on them to live.
The U.S. economy and stock market have been going up for the last 10 years, 25 years, 50 years, 100 years and 200 years. This is arguably the most entrepreneurial nation in the world.
Barring strong evidence to the contrary, why would you doubt that this will continue for at least decades into the future?
i don't think anyone has reason to doubt it . but the older you get and the bigger the balance grows the more the cycles mentally and possibly financially take its toll .
once you start spending down , you never know if this is an extended down turn or not .
it is not the depth of a drop but the time the drop lasts that count when spending down . in fact having an extended down turn in the first 5 years can do permanent damage to a retirement . it is akin to a trader having a string of losses day one when you are spending down a portfolio early on in a down turn before your first good up cycle . ..
so more and more i am realizing market volatility is the real retirement lifestyle changer not the fact markets won't one day recover , because while you may be able to continue the care free spending in a down turn , mentally most of us can't and so our lifestyle ends up changing for the worse whenever there is a significant down blast .
so my new thinking is i don't want to bet the ranch as a retiree on just prosperity and low inflation . that is certainly not being diversified at all because now you are subject to the full fury and fire that the markets choose to dole out in the 2nd half of the market cycle. you are never knowing when that recovery is coming or how bad the down blast will be when it is happening and that is what puts the house limits on us in retirement .
at this stage the gains of the bull have been wonderful and i would like to mitigate giving much of it back if i can hence the change in strategy after so many years of this bull .
my investing style has always been adaptive and the asset classes change but i have never been out of the markets ever . that is a losing strategy . i am always in my target range equity wise . what changes from time to time is the asset classes that fly fighter cover when i am not comfortable .
Last edited by mathjak107; 08-02-2018 at 03:20 AM..
My husband and I are 15 years into drawing down our IRA. He is 85 and I am 69. We lived through 08 and my husband and I went back to work because we lost about 50% of our portfolio. We had a house, taxes, electric bills, water and all the rest. We had one child in graduate school.
If we didn't go back to work we would have gone broke because real estate was crashing along with the market. We had to sell our house in a declining market, which we never planned to do
We were forced to draw down money from our IRA along with the balance dropping each day due to the market.
I think the point Mathjak is making is, until you realize that the balance of your portfolio drops because the market is dropping, and you are forced to withdraw from it. When you are retired, you can't add to it, it keeps dropping and its a very scary feeling.
I appreciate Mathjaks information because we could be facing a similar situation as 08. Retirees can not make up the loss because they are not adding anything only taking away.
We did not see the crash coming. Our brokers apparently didn't because they kept us 90% in equities.
We did well until we didn't and we couldn't do anything about it.
Now, because of my husbands age, we are forced to withdraw 7% from our IRA. The market has been kind since the crash, but if we hadn't had to draw out of it, we'd be very happy. However, each year he ages, the amount we are forced to withdraw increases. I hope we both live forever, but if we do, we won't have enough money to survive.
Think of your spouse if there is a big age difference. How will they fare if the market tanks and you are too old to return to work?
We are looking for safety now. We've enjoyed the bull run but have to realize it will come to an end and we are still alive and need this money to live on.
I think the casual statements about the market are from those who are not drawing down their retirement funds or not old enough to realize the amount of draw down goes up with each year you live.
Thank you Mathjak for your wisdom for those of us who can no longer add anything to our portfolios and depend on them to live.
believe me it is not my wisdom . it is the realization and wisdom collectively of a lot of very smart people on various forums as well as the work of today's top researchers in the retirement planning field .
i am only echoing what what they find and that i find to be true in my own life .
Last edited by mathjak107; 08-02-2018 at 03:21 AM..
I cannot imagine how many times I have read the sad stories about how the Great Recession destroyed retirement finances. That makes for a great excuse but almost always there seem to be stupid behaviors that were more involved. In almost every case it seems that those who were close to retirement or in retirement would have done just fine without poor decisions. Sure the markets dropped 40% or so but they also recovered fairly rapidly. On top of that we have had 10 years with nice growth in the markets.
Many people just have no understanding of the 4% rule. The 4% rule is designed to cover a retirement of about 30 years. The withdrawal is not 4% per year. The 4% rule means taking that amount at the start of the 30 year retirement. Then the amount is increased each year based on inflation. Each year the withdrawal will be a high percentage so that by the 30th year it is 100% and nothing is left. If the 2 retirees are greatly different in age and the retirement withdrawals need to extend well past 30 years, then it is necessary to begin with less than a 4% withdrawal rate. Don't blame the markets or the 4% rule if you withdraw more or longer than covered by the rule.
that does not mean you spend 7% . that means you have to shift some of it to the same or other investments but with a taxable status . rmds's are not to be spent , they are only to shift money out and in to taxable accounts .
also the 4% is only first year . year after year the inflation adjustment actually has your draw rate way higher based on the initial draw rate day1 .
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