The "black swan" and retirement planning. (55, moving, spouse)
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The only defense against something as unforeseeable as this happening is not having one's eggs on one basket which I didn't. But the rest of my baskets didn't have nearly as many eggs because this one had the most opportunity to grow. And I pretty much had to use them up for unexpected medical bills, return to school in hopes of getting a better job and just living.
While this is true, it's akin to asking for sympathy for Millennials who were told to "follow their dreams", who majored in anthropology in college, and ended up with $9/hr McJobs and $70K in tuition-debt. Yes, their fate is unfortunate, and they deserve commiseration. But their decisions were their own. Nobody cajoled investors to dump their holdings in March of 2009, and thenceforth to hide in cash. I'm not going to chortle or to condemn such persons; bad decisions can be made by any of us. But their predicament was self-imposed. It's not the fault of the financial-services industry, or politicians, or the Fed.
Such tools can't account for personal tragedies. They can't account for say a person becoming depressed, acting erratically, going on a shooting-spree and becoming incarcerated for a life-sentence. That's free room, board and healthcare.
Instead, the point is to assuage our fears of stagnant or declining markets, of crashes or geopolitical turmoil, by considering the worst-case scenarios of the past. The assumption is that there won't be an event worse or more traumatic than another Great Depression or another WW2. If that assumption holds, then the tools in question are OK. If the assumption fails, invest instead in ammo and canned goods.
Sure you can! It just involves saving triple what you would have to account for anything at all possible...not realistic for 95% of us.
If that's the simple definition, that's called the unknown future. Everything except a planned event (a move, a wedding, etc) is unforeseen.
Exactly!
Bear markets are to be expected, and are just part of life if one is going to have some allocation to equities.
Peter Lynch put it this way, he said that bear markets are like winters in Minnesota. You know they are coming, and you know they will be unpleasant. When they arrive you just put on your coat and your hat, suck it up, and wait for spring.
To me, a black swan would be the scenario where spring never arrives
Bear markets are to be expected, and are just part of life if one is going to have some allocation to equities.
Peter Lynch put it this way, he said that bear markets are like winters in Minnesota. You know they are coming, and you know they will be unpleasant. When they arrive you just put on your coat and your hat, suck it up, and wait for spring.
To me, a black swan would be the scenario where spring never arrives
If thats your definition of a Black Swan even then North Carolina is getting close. Bye Winter and Hello Summer!
The black swan I most fear is a catastrophic medical event that requires years of nursing care which would sap our savings. LTC insurance is pretty useless according to most people.
For the most part (especially as it relates to this forum), the ones who are telling you that are people who have never purchased LTC insurance and are trying to justify their decision.
I did see a few black swans at a hotel in Hawaii, so it's not that uncommon. That said I think 2008-2009 qualifies as a black swan event but not 1987, 9/11, etc..
One thing I never see addressed in any of these discussions about planning for the unseen is simply scrapping the budget. For the purpose of planning I have a budget much larger than I currently spend, and I know that I could slash my current standard of living if I had to.
Quit going out to eat, no vacations, cut the cable, gut the internet, I could get rid of my cell phone but I only pay about $15 a month. Get rid of the land line, raise the thermostat in the summer and lower it in the winter. Drive the car till the wheels fall off.
I'm pretty sure that I won't have to do any of these things but I could if I had to. If it was a big black swan that's what I would do.
PS I retired in early 2001 and survived through the termoil of the last 15 years quite nicely.
Its been addressed.
But, I agree. I could slash my budget considerably and survive most anything unless there is a disruption in food supply, etc.
While this is true, it's akin to asking for sympathy for Millennials who were told to "follow their dreams", who majored in anthropology in college, and ended up with $9/hr McJobs and $70K in tuition-debt. Yes, their fate is unfortunate, and they deserve commiseration. But their decisions were their own. Nobody cajoled investors to dump their holdings in March of 2009, and thenceforth to hide in cash. I'm not going to chortle or to condemn such persons; bad decisions can be made by any of us. But their predicament was self-imposed. It's not the fault of the financial-services industry, or politicians, or the Fed.
I don't completely agree with you here.
I graduated from high school in 2004. This wasn't a case of the occasional doe-eyed dreamer being told that if they worked hard they could achieve their fantastical dreams by their parents. These were larger, systemic issues of overselling the value of a traditional academic education, while those academic perspectives simultaneously failed to account for changing needs in the labor market.
When I started college in 2004, finance was a hot major buoyed by froth in the real estate market and general economic improvement. By the time that cohort graduated in spring 2008, the financial services job market was falling apart.
There was no way those majors in 2004 at 18 years of age could have had the foresight to predict the collapse four years later. That cohort was consumed by the black swan.
Obviously you'll find plenty of cases of stupidity and poor decision making.
Sure you can! It just involves saving triple what you would have to account for anything at all possible...not realistic for 95% of us.
Yes, many things are not possible for many of us. However regardless of what it is being possible doesn't mean not essential. That is part of the long term problem with retirement. Essential and possible can begin to overlap less and less.
That is part of our collective challenge as a society to help or not help provide for our elderly.
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