let’s look under the hood at the plan (bond, fund, margin)

[mathjak107]

i didn’t want continue this discussion in the long term investor thread but there is an awful lot of who shot john here with this story line

Originally Posted by Wile E. Coyote

My boss has multiple millions by dollar cost averaging into the S&P 500 for 40 years. Though he admitted to losing money and taking a long time to recover. But, he was never conservatively invested the way you are.

Originally Posted by Wile E. Coyote

Well, it did cause him to work longer (losing money in the S&P 500).

of course the wrong first premise is money was lost over 40 years when investing in the s&p .

when that was challenged it became he didn’t lose money but was down from the high we had so now he couldn’t retire and had to work longer and being invested in the s&p did that to him .

so let’s dive in to all the wrong thinking and concepts i see here .

the first is markets cycle with higher highs and higher lows over time and that on average has grown a lot of money for many of us over the years .

we spend 80% of our time between the last high and last low .

so problem number one is , anyone counting on the momentary high as a reference point for whether they can retire or not is setting themselves up for a setback .

one should ball park the drawdown they can potentially see and allocate based on what you can make in adjustments in spending if push came to shove .


it may just be for a year or a few years but anyone depending on markets for their income needs slack in the plan. maybe a 20-30% reduction in balance year one may need to be stress tested to see if it can work .

in theory this is what the red zone is all about .

but let’s suppose her boss never heard of the red zone. or didn’t cut back his equity allocation and just left 100% in the s&p which is what he did .

so if instead of cutting back and building a bond and cash tent 8-10 years before , let’s say he stayed 100% s&p.

so 100% equities left in an s&p fund from jan 2013 to jan 2023 AFTER the 20% drop would have grown 1 million dollars in to 3.458 million . that is AFTER the 20% drop . and remember we are discussing this specific case where it was claimed the 2022 drop was claimed to have caused the boss not to be able to retire

if he followed the red zone theory and cut back to 40/60 over that time frame he would have 1.8 million , not 3.458 million .

60/40 would be 2.293 million , not 3.458 million .

the point is even with 100% equities and the drop he would have started retirement with far more then had he cut back .

in fact putting that money in cash instruments protecting it and no market drop would have left him with 1.123 million , not 3.458 million

so the point is even in 100% equities and even with the drop his balance was substantially higher then had he gone another route .

so arguing he hurt his retirement by being in the s&p is a lot of nonsense , since it beat the alternatives by a wide margin even after the drop


which leads us to this planning around some momentary high .

that is the worst planning idea one can have .

just for the reason that your income referenced to some elusive high can be so off if you retire in to a downturn.

so initial years income can be temporarily reduced if the balance cycles down , which it will be 80% of the time . we just don’t know exactly where it will be as it’s variable , but that high was just a momentary point in time and poof

in my opinion if one is using a variable method of withdrawal based on markets , you need to make sure you can still pay bills if a temporary reduction in income happens day one or you have a poor plan .

keep in mind also that when cutting back allocations going in to retirement, you may have had a bigger balance to work with even in a down market waiting longer to cut back or even not at all.

but we don’t know if the next down cycle will be a year or 10 years

so understand your options .


markets will always behave like markets and long term money in diversified funds has always done the same within a few points so DONT BLAME MARKETS for a lack of understanding of what one is doing or having a crappy plan then blaming markets.

that is just a lot of WHO SHOT JOHN with no bearing on what really caused the issue on the investors behalf

[mathjak107]

Originally Posted by Wile E. Coyote

Yet you argued that it is if everyone is invested all over again each day because it's always your own money. You contradict yourself so often it is difficult to keep up with.

you are mixing up two different issues that have nothing to do with each other

so hypothetically if i put 100k in the fidelity insight growth model when i started in 1987 , we swapped out loads of funds over the decades but all gains are cumulative.

today that 100k is worth 5.5 million dollars . that is the actual gain or loss .

and if we are down 20% this year its 4.4 million .

but that has nothing to do with the fact that if we keep putting that money in to play each day we are effectively buying in , in a figurative way at todays prices each day . we aren’t actually changing our cost , but we are saying to ourselves by not taking our profits today we are okay with todays prices

that thinking has nothing to do with gains or losses and everything to do with where we think the investment is headed from here each day .

whether i just bought in or i keep my money in play , it takes the same view and CONCERN AS TO WHERE WE GO FROM HERE so each day we make that decision that todays price is worth it or it isn’t as investors , REGARDLESS OF OUR COSTS

[Wile E. Coyote]

I never said he lost money over 40 years. I said he took over a 1 million dollar hit in 2022 and it caused him to delay retirement. My point was yes, he's been invested for 40 years, but it's not like the corrections and crashes don't take a toll on him because unlike you he is not conservatively invested.

[Wile E. Coyote]

I am not in love with the stock market and whether it exists or not. So, we differ on that.

[Wile E. Coyote]

And, that's really all I have to say on the subject. I have tried to explain how being in a horrific accident that hobbled me and a cancer diagnosis made me uncharacteristically conservative at this late stage of life. As if your own personal risk profile does not impact your decision making. Also, my only experience in the stock market from 1998 to 2012 (during 2000 and 2008 crashes) and so my love for the stock market just never took hold.

With all that said I plan to deploy an amount that I do not think I will ever need into the S&P index (after this next crash) because that is slotted for a beneficiary likely to outlive me (so, it actually could be 30 year money).

And, I do not have anything else to say on the subject...

[mathjak107]

Originally Posted by Wile E. Coyote

I am not in love with the stock market and whether it exists or not. So, we differ on that.

that’s okay , you can do what you want


not everyone is cut out for investing we get that . nor should they be if they have no slack in the plan or no flexibility in assets

but the arguments used against investing we see from those anti investing can get outright nonsensical and make no sense when actually looked at.

case in point i tore apart above.

even if that story is true it isn’t markets , it is his plan.

retirees retire in to poor markets all the time or hit rough spots and good plans don’t rule out uncertainty, they allow for uncertainty, they plan for uncertainty.

someone planning on a retirement that only works at some momentary high needs to get a better plan.

we were scheduled to retire in 2007 or 2008 originally when we did that article and the down turn wouldn’t have made a bit of difference to our plan.

our budget was already based on a what if drop , not the highs

[Wile E. Coyote]

I do not know what argument you are referring to. I always say I know I F'd up by not buying and holding for 50 years; but, I did not even have money to do that until around 1998. So, I lived a large portion of my life without the stock market. I feel the financialization of everything the US is a problem in general.

[Wile E. Coyote]

For what it is worth my boss's situation is that they are both under the same plan and could live off of pensions alone. The thing is that it really is hard to retire and leave a big income when you see your first born child (in his case his 401(k) suffering and inflation up and your wife retired two years previously and is renovating the house. I'm sure the full pension, SS and $4-$5 million in a 401k (just his) is more than enough (all of his four children he adopted and have all fully launched into good careers). People get attached to their salaries and their 401(k) balances.

He's basically sitting in the catbird seat. He's not a bad investor.

[mathjak107]

well in any case the argument about his retirement being hurt by the drop is bunk .

it’s his own doing , his bad planning and his miscalculation about planning off a high

[Wile E. Coyote]

Like I said, he is in the catbird seat.