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i find it interesting about all the comments about how the downturn destroyed alot of retirement plans and it seems to me most were destroyed by not the down turn but a lack of having a fully functional plan..
by that i mean down cycles are always part of the business cycle and yet we forget that good planning allows for these downturns and having a plan dosnt mean just throwing all kinds of money into a mix of funds in our 401k and keeping our fingers crossed.
as we get closer to retirement the rules of the game are changing. no longer is it about getting richer but its now about not getting poorer. not by inflation,not by over-withdrawing more money then we can afford to in retirement or by selling stock to live on in down markets
i use a nifty little system based on ray lucias buckets,... although im 56 and my wife is 58 we started our planning 2 years ago for the final decent into retirement land hoping to retire early in 2 to 3 years.
we pretend we are retired , we set up a 3 bucket system that protects our plans for a good 15 years out. why 15 years? because the odds of being down in any 15 year period are just above zero%.
bucket 1 gets 7 years worth of withdrawls in safe money, banks,cd,money markets
bucket 2 gets 7 years worth of withdrawls in relatively safe money .
bonds,bond funds,un-traded reits
bucket 3 is still invested like we are 30... equity funds,stocks,reits,commodities etc...this is our growing bucket..
we can go 15 years before selling or worrying what the markets are doing..15 years ago we crossed 4,000 ...today we all are freaking at 8-9,000.
of course you dont have to wait to refill your buckets, anytime the markets are up refill 1 &2.. its not timing the markets that make money, its time in the markets ... the buckets are rebalanced not on what the markets are doing but rather on how you are doing and whether buckets 1 and 2 need money when the markets are up.
thanks to some careful planning although we are down 6 figures we can still sleep at night and all our plans remain unscathed....
please, everyone , review your plans early and dont try to rule out bad markets, plan and allow for them... it takes alot more creativity then just throwing money into funds to have your plans stay on track. you should put as much thought into your planning as you do buying a refrigerator or a car.
Last edited by mathjak107; 01-30-2009 at 03:50 AM..
I have a plan and it involves various investments for short, medium and long term.
But I don't have any high risk buckets like you do for bucket #3..just a higher rate for a longer term lockin.
I'm an investor not a trader so I'm not in the stock market right now..it's more like the craps table at Vegas. When it bottoms out then I will get back in as an investor for the long haul.
The survivor companies that weather this storm will be the good investments.
be sure and let us all know when it bottoms out... im not smart enough to know.....
im not a trader either,, i take the good with the bad and tune out the noise, i have been rewarded very very nicely over the decades..... with all the drops, crashes, recessions etc you can almost pull out any 15 year period and with a 60/40 mix or so you come within 1% of a average 6-7% return all the time...talk about consistancy its scarey..
a 6-7% average return will allow you to pretty much take a 4% inflation adjusted withdrawl forever with a 95% certainty.... thats tough to do long term without equities ,especially if inflation kicks up... remember we arent talking 100% of your money in something, we are talking a 60/40 or 50/50 very diversified mix to achieve that 6-7%..... some years your equities may be up 50% and some years down 50%
typically markets are up 2/3 of the time and down 1/3 of the time over long periods of time.....
Last edited by mathjak107; 01-30-2009 at 11:25 AM..
be sure and let us all know when it bottoms out... im not smart enough to know.....
im not a trader either,, i take the good with the bad and tune out the noise, i have been rewarded very very nicely over the decades..... with all the drops, crashes, recessions etc you can almost pull out any 15 year period and with a 60/40 mix or so you come within 1% of a average 6-7% return all the time...talk about consistancy its scarey..
a 6-7% average return will allow you to pretty much take a 4% inflation adjusted withdrawl forever with a 95% certainty.... thats tough to do long term without equities ,especially if inflation kicks up... remember we arent talking 100% of your money in something, we are talking a 60/40 or 50/50 very diversified mix to achieve that 6-7%..... some years your equities may be up 50% and some years down 50%
typically markets are up 2/3 of the time and down 1/3 of the time over long periods of time.....
Just that this is no typical market.
I don't care that I don't get in exactly at bottom but I'm going to make sure I don't get caught in any sucker rallies or catch the knife.
Commodities, durable goods, BDI, VIX, etc. None of those indicators are looking good. Banks haven't come clean yet with their debt and layoffs are mounting as corporation profits shrink or go negative.
its soooooooooo hard to tell whats what, i remember back in the 70's nothing looked worse..we were on gas lines, unemployment was soaring, inflation out of control. it felt and looked if there was no hope at all.we were sinking fast. .... then it happened ; business week declared that after so many bad years in a row and no light at the end of the tunnel even visible they are officially declaring equities dead
the cover of the magazine had a little tombstone on it... well from the next day on the biggest ralley in history started and didnt stop for many decades....
in fact typically if you missed the first 3 weeks of the turn around ralley you missed 1/3 of the entire years gains and if you missed the first 3 months you missed 60 % of the gains and added another 2 years to your break even point... problem is these turn arounds happen way before the first visible signs are seen... typically unemplyment hasnt even peaked yet when the markets already turn around....
could happen, but on the other hand we have a whole new world out there with countries that never had money to invest too.... once world growth picks up again both emerging markets, and the new emerging emerging market countries can invest in markets ..
the fact is no one knows what will happen but since its tough building a plan around the unknown i plan around what was the 80 year trend and have to assume that will be the future trend too.. will it pan out, beats me... but a good diversifid mix will probley still outform everything else over time.
the way i look at it cds ,money markets and banks are a guaranteed 100% loss after taxes and inflation, bonds probley another poor choice as all these trillions we owe will be re-financed over and over with new bonds. this will make madoff's ponzi scheme look puny and interest rates rise... in four days the long bond lost over 5% this week with just the thought of financing the stimulus pkg.
equities are sooooo beaten up that once they turn around they stand a good chance of performing okay, certainly not 80's style great
commodities are another good choice as once the scent of growth is in the air they will take off again
real estate may or may not have much growth potential for quite a long time so i look at reits and partnerships as income sources
of course financial markets being what they are will certainly throw some wild curves into the above
Last edited by mathjak107; 01-31-2009 at 02:20 AM..
another thing is all our big drops are always around the same 50% or so in post war times.. what makes this time different is the speed we dropped, usually its over a few years so no one year equals the drop we had..
each time what causes it is different enough that each time is unique unto itself... one think seems certain though and that is the pain of the drop...
while this time seems to be deeper than the past the fact is we dont know when but eventually we should turn around long term..
but there is always that one word in the back of my mind JAPAN
and they are going on over 20 years of a slump... of course they did everything wrong in the beginning from raising rates, to no bail outs to tightning their money supply at first...
lets all hope we did it better!
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