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OK, I'll confess. Just bathed in the sink in the Men's room. I'll recommend investigating Kitces bond tent before I get back on the bus.
you know those who have no interest in learning but like arguing these points never heard of the likes of kitces , blanchette , milevsky, pfau to name a few. if they did , they would not be arguing these points they lack knowledge on and parroting other mis-informed people .
I have put a lot of money on the sidelines - can't trust the current POTUS with the reins.
But we have enough that we are not forced to stay fully invested. I do take some our of the IRA now but it's not as much as the account makes each year. I have all dividends from my taxable accounts put into my bank along with SS, etc - so that's all income.
We give some nice amounts to the 3 kids yearly because I cannot imagine, short of the complete dissolution of the economy and country, that our IRA and other stuff will run out. We have money in our houses also and don't need them (that is, we have an extra vacay house or two, etc.), so we can sell those with no real loss in lifestyle (as we get older....because our main house is in a nice area too...so we would be fine with just one).
I did my financial planning for 35 years by getting money deposited into Vanguard every month and funding my IRA for at least 30 of those years. Now I don't have to plan as much.
Christine Benz from Morningstar is a bigger retirement expert than anyone on this board and she is strong support of the Bucket Approach. Who am I going to believe, her or any of you-- who might be all homeless folks sitting in the public library all day?
Believe Bogle. Believe mostly index funds. Believe, if you really want to take some chances, on Dividend Appreciations funds. Believe in AT&T 6.5% and some REITs with 8% plus.
Over 35 years I'm beat the DOW and S&P by less than 1% - which puts my return at maybe 11.5% over that time period. Those who like to complicate things rarely make that or more.....
I am convinced that humans like to take simple things and complicate them. That's the only way to explain the investment world. Take a working career of even just 30 years (30-60) where you fund an IRA and save up an addition 10K per year to save...compound it, and let me know what you have at 61......
(at 11%, it's almost 6 MILLION dollars).
No one has to answer, but my guess is that most people here don't have 6 million in addition to their houses, cars, boats and other stuff.
Take someone with less - they put 10K only into the IRA and save an additional 6K per year. They would "only" have about 4 million.
Maybe all those experts are right and in the long run, a bucket approach does not help you. But huge drops like 2003 and 2008 are scary.
When the stock market takes a huge dive at the start of the next bear market, are you going to be selling your stocks, mutual funds and ETF's to cover your expenses that dropped 40-50%? Or are you going to sell bonds or use money in a cash account instead and wait for the market to recover?
Maybe all those experts are right and in the long run, a bucket approach does not help you. But huge drops like 2003 and 2008 are scary.
When the stock market takes a huge dive at the start of the next bear market, are you going to be selling your stocks, mutual funds and ETF's to cover your expenses that dropped 40-50%? Or are you going to sell bonds or use money in a cash account instead and wait for the market to recover?
why would i sell stocks ? just rebalancing a 50/50 mix with no cash has more then a decade of assorted duration bond funds ... it is never stocks that get sold when they fell if you are not 100% equities .....the question makes little sense. drawing down via the constant allocation method is not the same as a bucket system though .
a bucket system operates differently , even though both can hold cash as part of its allocation .
but even as i showed you , selling stocks if you are 100% equities has not been an issue because you are up so much more in up years ... the success rate between 100% equities and spending from 50/50 is almost the same.
would i want that volatile ride ? no , but that is a mental issue not a financial one .
there is more myth then reality involved with these kind of hypothetical questions about selling stocks in a down market .
either your not 100% equities and not spending stocks or you are 100% equities in which case statistically it is irrelevant because of the higher gains.
historically , except for 2 of the 119 cycles to date , 100% equities would have gone broke only 2x where 50/50 made it through ...
on the other hand 100% equities has had the higher balance most of the time despite spending down in good and bad times.
ironically if you reduced equities each year as you aged you would have gone broke before 30 years many many times over
Last edited by mathjak107; 06-28-2019 at 08:55 AM..
if you bought a fund at 10 bucks and sold it at 30 did you lose money ? of course not , you made a nice profit .
but what if you bought at 10 bucks , it went to 50 and you sold it on the way down at 30 ?
well this is where the un-informed lose sight of the real deal ...
we spend 80% of all our investing time somewhere between the last low and last high ... at any given moment most of the time we are somewhere in between ... but our brains want to reference everything off the high that was ... yet few if any of us will catch the high when selling or rebalancing . so the reference point we use is flawed ..
the fidelity insight growth model took 100k in 1987 and today has it worth over 3 million dollars ... that can fall 20% but it certainly is no loss , that 2.40 million is a huge gain .
but those who throw out these hypothetical what if you were down questions don't realize that long term it is not a loss but just less of a gain in reality .. if you did not invest in equities you would be no where near even 1 million
so there is a lot to learn here about retirement investing and your thinking that has to be altered about spending in down markets .
Last edited by mathjak107; 06-28-2019 at 08:58 AM..
Most everyone I know has most of their retirement money in target funds or balanced mutual funds. A significant amount of these investments is in the stock market. They withdraw their money once a year.
What should they do if the stock market crashes in the months before their annual withdrawal?
Do you have enough cash, money market or bond fund money set aside in separate accounts to cover your expenses in retirement while you wait for the stock market to recover? How much would the stock market have to fall before you access your bonds or money market funds instead of your mutual funds/ETF's that have stock market exposure?
I'm already out. I watched the stock market go sideways since the beginning of the year. I'm waiting for the next oil shock to plunge us into a recession. I've seen the yield curve go inverted more than once since January.
I think that the people with real money are hedging their bets with stop loss orders and put options.
If the stock started at 10 went to 50 and then fell to 30, I would hate to sell it at 30 and if I did I would feel like I lost money. I think most people would because they had 50 at one time.
Quote:
Originally Posted by mathjak107
if you bought a fund at 10 bucks and sold it at 30 did you lose money ? of course not , you made a nice profit .
but what if you bought at 10 bucks , it went to 50 and you sold it on the way down at 30 ?
well this is where the un-informed lose sight of the real deal ...
we spend 80% of all our investing time somewhere between the last low and last high ... at any given moment most of the time we are somewhere in between ... but our brains want to reference everything off the high that was ... yet few if any of us will catch the high when selling or rebalancing . so the reference point we use is flawed ..
the fidelity insight growth model took 100k in 1987 and today has it worth over 3 million dollars ... that can fall 20% but it certainly is no loss , that 2.40 million is a huge gain .
but those who throw out these hypothetical what if you were down questions don't realize that long term it is not a loss but just less of a gain in reality .. if you did not invest in equities you would be no where near even 1 million
so there is a lot to learn here about retirement investing and your thinking that has to be altered about spending in down markets .
And then you die! How does death of you or your spouse factor into all of this when you are in your 70’s or the need to pay for a CCRC and use a large lump sum?
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!
Back-testing using FireCalc, which is what I said one should do, looks at all possible 30-year (or whatever your chosen retirement span is) sequences and takes statistics over the bunch. It is a statistical analysis to find the most likely outcome. You have cherry picked a single sequence, but that is not how maximum likelihood analysis works. Not only did you cherry pick a single sequence but you chose a sequence that is widely recognized as being one of the worst years to retire in the last 80+ years.
You can choose a portfolio that will survive an outlier like the sequence starting in 2000 or you can choose a portfolio that will survive a high percentage of historical sequences. The difference in something like FireCalc is whether you demand 100% or 97% percent success rate. Most people are fine with 97% since it is highly likely yet provides a more comfortable income level.
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