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Old 06-27-2019, 12:31 PM
 
472 posts, read 93,715 times
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Quote:
Originally Posted by Tall Traveler View Post
If you set up your life to where you have to draw on your 401K to live, then yes. We have significant 401K moneys and I haven't withdrawn any yet but it's there in case we need it but otherwise hope it's going to be a pass through to our kids when we die...we hope not to need it but might need some for emergency or as a fund to use before I start taking social security.
Quote:
Originally Posted by rjm1cc View Post
Take a look at the RMD - required minimum distribution you will have to take. Might consider to taking money out now to keep tax bracket lower or moving money to a ROTH.
Yes, I was coming to say the same thing. Assuming Tall Traveler has tax-deferred 401K... and not tax-free Roth... there WILL be money withdrawn through RMDs, whether they need it or not.
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Old 06-27-2019, 12:50 PM
 
Location: Haiku
4,056 posts, read 2,568,125 times
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Quote:
Originally Posted by lottamoxie View Post
As counted by the people who do these things for a living, the worst bear market is said to have lasted 39 months. Of course effects of a bear market might be felt for some years after.

If you have a strategy in place and an allocation set up so you're not all in equities, then you should be able to use cash reserves + sell bonds/bond funds to get your living expenses covered without having to sell off equities. Having money in lower risk/less volatility type instruments to cover shorter term needs (up to 4 or 5 years) should give you the room to maneuver in a bear market. Nothing is 100% certain, but it's a reasonable approach to making sure you don't panic and sell equities in a bear market.
You don't need any cash reserves, or fixed income to survive a bear market. Run a back test using FireCalc or one of the many other tools with 90% equities and you will find that a 90/10 portfolio is better than a 50/50 portfolio in terms of SWR and ending assets (i.e., what's left for an inheritance). The fixed income within a portfolio is only there for psychological comfort, so that we don't freak out in a bear market and engage in panic selling. It looks bad to be selling equities that are so far under water, but the flip side is that when the market recovers (and it always does) being 90 or 100% equities pays off big time and more than makes up for the selling you had to while they were under water.

Full disclosure - I am a chicken and like to sleep so I am 65/35, but I know I would be better off at 90/10.
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Old 06-27-2019, 12:52 PM
 
71,469 posts, read 71,652,652 times
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Quote:
Originally Posted by TwoByFour View Post
You don't need any cash reserves, or fixed income to survive a bear market. Run a back test using FireCalc or one of the many other tools with 90% equities and you will find that a 90/10 portfolio is better than a 50/50 portfolio in terms of SWR and ending assets (i.e., what's left for an inheritance). The fixed income within a portfolio is only there for psychological comfort, so that we don't freak out in a bear market and engage in panic selling. It looks bad to be selling equities that are so far under water, but the flip side is that when the market recovers (and it always does) being 90 or 100% equities pays off big time and more than makes up for the selling you had to while they were under water.

Full disclosure - I am a chicken and like to sleep so I am 65/35, but I know I would be better off at 90/10.
same for us . we know cash reserves have been proven to hurt us ... as well as high equity levels have been fine , but i just don't want that wild ride
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Old 06-27-2019, 12:53 PM
 
36 posts, read 13,166 times
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So let's say the stock market drops 40% in 2020. It seems logical that instead of selling stock in the middle of that huge drop, it would be more logical to use money from Bond Funds or Cash to pay for expenses until the market turns around. Instead of selling a hugely depreciated asset at the bottom.
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Old 06-27-2019, 01:01 PM
 
36 posts, read 13,166 times
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Quote:
Originally Posted by TwoByFour View Post
You don't need any cash reserves, or fixed income to survive a bear market. Run a back test using FireCalc or one of the many other tools with 90% equities and you will find that a 90/10 portfolio is better than a 50/50 portfolio in terms of SWR and ending assets (i.e., what's left for an inheritance). The fixed income within a portfolio is only there for psychological comfort, so that we don't freak out in a bear market and engage in panic selling. It looks bad to be selling equities that are so far under water, but the flip side is that when the market recovers (and it always does) being 90 or 100% equities pays off big time and more than makes up for the selling you had to while they were under water.

Full disclosure - I am a chicken and like to sleep so I am 65/35, but I know I would be better off at 90/10.
Jim retired on January 1st, 2000 and put his One Million Dollars in the two funds. They equaled 90% Total Stock Market and 10% Total Bond Market. He withdrew 4% of the Million Dollars every year and adjusted it for inflation. On May 31, 2019 he had $762,710

Jerry retired on January 1st, 2000 and put his One Million Dollars in the two funds. They equaled 50% Total Stock Market and 50% Total Bond Market. He withdrew 4% of the Million Dollars every year and adjusted it for inflation. On May 31, 2019 he had $1,317,266

the bond funds helped his portfolio survive two significant bear markets. There goes your theory that bonds are not helpful!

https://www.portfoliovisualizer.com/...nalysisResults
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Old 06-27-2019, 01:02 PM
 
71,469 posts, read 71,652,652 times
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Quote:
Originally Posted by TwoByFour View Post
You don't need any cash reserves, or fixed income to survive a bear market. Run a back test using FireCalc or one of the many other tools with 90% equities and you will find that a 90/10 portfolio is better than a 50/50 portfolio in terms of SWR and ending assets (i.e., what's left for an inheritance). The fixed income within a portfolio is only there for psychological comfort, so that we don't freak out in a bear market and engage in panic selling. It looks bad to be selling equities that are so far under water, but the flip side is that when the market recovers (and it always does) being 90 or 100% equities pays off big time and more than makes up for the selling you had to while they were under water.

Full disclosure - I am a chicken and like to sleep so I am 65/35, but I know I would be better off at 90/10.
however the corollary is that in that bear market you can't spend down to low or there is no coming back . kitces found the magic number is if you don't manage to hold at least a 2% real return average over the first 15 years of a 30 year retirement there will be to little left for the bull to work on .

that is what happened to the 1965/1966 group ... they got hit so hard in stocks and bonds the first 15 years that by the time the greatest bull in history came it could not bring them back .

the 30 year returns looked fine , but they were done in by the first 15 years .

30 years
1966 stocks 10.23 - -bonds 7.85 -- rebalanced portfolio 9.56- - inflation 5.38

15 years

1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38%
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Old 06-27-2019, 01:03 PM
 
71,469 posts, read 71,652,652 times
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Quote:
Originally Posted by usual points View Post
Jim retired on January 1st, 2000 and put his One Million Dollars in the two funds. They equaled 90% Total Stock Market and 10% Total Bond Market. He withdrew 4% of the Million Dollars every year and adjusted it for inflation. On May 31, 2019 he had $762,710

Jerry retired on January 1st, 2000 and put his One Million Dollars in the two funds. They equaled 50% Total Stock Market and 50% Total Bond Market. He withdrew 4% of the Million Dollars every year and adjusted it for inflation. On May 31, 2019 he had $1,317,266

the bond funds helped his portfolio survive two significant bear markets. There goes your theory that bonds are not helpful!

https://www.portfoliovisualizer.com/...nalysisResults
your analysis is severely flawed ... you fail to consider the time frames effect before and after ...that is why only full cycles are looked at when looking at retirements . all 119 30 year cycles are analyzed in full .

useless work on your behalf to be honest. you can never pull out a chunk of years from a 30 year retirement and base anything on those results when it comes to retirement outcomes so don't waste your time ..

if you want to play at least play in firecalc with correct data and time frame usage .

https://www.kitces.com/blog/research...-market-timer/

Last edited by mathjak107; 06-27-2019 at 01:49 PM..
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Old 06-27-2019, 01:08 PM
 
71,469 posts, read 71,652,652 times
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Quote:
Originally Posted by usual points View Post
So let's say the stock market drops 40% in 2020. It seems logical that instead of selling stock in the middle of that huge drop, it would be more logical to use money from Bond Funds or Cash to pay for expenses until the market turns around. Instead of selling a hugely depreciated asset at the bottom.
not really , because those years leading in may have really driven your balance higher with the higher equity allocation ... even spending down during those down years may still have left you better off .. it all depends on how long the bear persists and what inflation is .

don't forget you did not need to be even spending down as much after the great recession .. the cpi fell 18% so you could have 18% less and be even in your purchasing and living standard.

don't forget , take a retiree who retired in 1987 ... if he had a very high equity allocation he had 17 years of almost 14% returns from equities ... by the time 2000 came his balance soared . so the fact he spent down for a while while stocks were down is not going to reflect the same outcomes as trying to start with lower equity allocations and equal dollars and comparing just from 2000 on .

so you can't just cherry pick starting dates ... you need to compare all the starting dates and see the success rate of what you are doing over them all .

Last edited by mathjak107; 06-27-2019 at 02:38 PM..
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Old 06-27-2019, 02:43 PM
 
71,469 posts, read 71,652,652 times
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One other point about what your cherry picking did ...by singling out just 2000-2019 you picked a time frame where long term treasuries beat equities for 15 years ,you needed no stocks , just fixed income ..

When you look at 100% fixed income , it has a horrible success rate at 4% ... it failed so many of the 119 30 year cycles it went broke in about 65% of all them before 30 years.

So do yourself a favor and do not plan around or draw conclusions based on the way you are cherry picking dates
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Old 06-27-2019, 02:52 PM
 
6,213 posts, read 4,718,283 times
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Quote:
Originally Posted by mathjak107 View Post
One other point about what your cherry picking did ...by singling out just 2000-2019 you picked a time frame where long term treasuries beat equities ...you needed no stocks , just fixed income ..

When you look at 100% fixed income , it has a horrible success rate at 4% ... it failed so many of the 119 30 year cycles it went broke in about 65% of all them before 30 years.

So do yourself a favor and do not plan around or draw conclusions based on the way you are cherry picking dates
Seems to me we have had this very same discussion. You have also used retirement in 2000 as an explanation for exceptionally cautious behavior such as a low "glide path" or conservative stock allocations overall. Then there were your arguments for various sorts of portfolios with significant allocations in gold.

It can make sense to look at worst case scenarios and past historical events. But long term investing and financial planning based on those worst case scenarios can result in probability of very poor returns.
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