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I was thinking about the news and worry about an upcoming recession.
This thread is NOT ABOUT RECESSION COMING SPECULATION.
Theoretically, if you have done what experts recommend, own your home, car, found some sort of monthly means to cover monthly expenses (pension, investments, rentals whatever).
Then recessions don't affect those retirees? Well depending on investments I guess.
Was anyone retired during the last one?
Anyone curtailing plans or putting them off to see if this next one materializes? Coming up with a recession plan, if you think it will affect you? For example if you had been thinking of selling and moving south, are you going to do it sooner now vs waiting in case the real estate market cools?
We retired January 1, 2008 just before things started to head South. Gloomy at first but ended up being a Bada Bing and a great decade to begin retirement for US. It all depends on your situation.
I think if we have a recession, it will be a mild one, but I’m looking to pick up cheap opportunities to travel. Making lemonade out of lemon kind of thing.
I think the recession problem is starting to withdraw IRA money when the market is down. Say you planned to take out $X per year when your investments are high. When the market is down, that same $X represents a great percentage of your IRA. You'll use up more of your IRA faster.
We brought our house in 2007. Feels like the minute we closed on it, the market tanked. We will not recoup our purchase price. We'll be closer than we were in 2008, but still 10% less 2007. If the recession didn't happen or we didn't relocate in 2007, our financials would be different now.
We are retiring next year. We will sell our house, hopefully before another recession. Keeping our fingers crossed.
I retired after the last recession, my takeaway is I have no debt & I have 2 1/2+ years of cash set aside in CDs & money market funds so I won't have to sell anything at a loss for at least that span of time. I've been trimming a bit of the profits from the best performing funds in my IRA/Roth 2-3 times a year & putting that into their cash instruments as well as into some of their worst performers.
The talk about a potential recession is interesting but it doesn't stress me at all doing this. Plus at some time in less than 2 1/2 years I will start collecting delayed SS which will then comprise almost 2/3 of my income, not dependent on market performance. I'm planning on keeping 2-3 years of cash in assets even after claiming SS.
ETA: I will probably put a bit of the sidelined cash into into index funds when we start to really dip below the moving averages.
Everyone's situation and life experience is different. We planned our retirement for a long time, recognizing there were always cycles in the economy and recessions were part of them. Some people have the need to maintain a certain life style in retirement that drive their risk tolerance and worry level about a recession. The thing is you have no control over the economy, ZERO, but you can plan for hard times.
When you retire you must have a stable income stream of some sort, some savings not linked to the stock market and little to no long term significant debt, enough income to cover basic expenses so you can ride out the storm and not lose your home or apartment. If you have that and good health then worry about something you can control.
While the value of our home rises and falls we really do not care unless the tax board reassesses as they recently did. We moved back here after a job transfer and have no intention of leaving. When we pass away and the kids find us at the bottom the stairs being gnawed on by my wifes cats, they can sell the place for what ever it will fetch. Some hipsters will come in and say oh gawd look at the horrid 2010's decorating style. We need to gut it.
For anyone planning on relocating or tapping the equity for living expenses then the recessions impact to housing is a big concern. I got relocated in a few and managed the relocation costs for a lot of transferred staff. The housing losses were staggering at times. A lot of us have lived through a few housing booms and busts, including recessions. Not all areas of the country are impacted the same and recover at the same time. While our home is now more than we need and long ago paid off, the cost of selling and moving is not really worth it in our situation with kids so close by.
Worry about SS & pension in a severe recession ?
In all the recessions SS/Medicare was never impacted that I can remember. Somebody correct me if I am wrong. Unless there was a world wide financial collapse any action on SS would be a couple of years away for someone getting it now or within the next year. What member of congress will put their name on the record as cutting the old folks benefits before their next election cycle unless they intend to resign and have this as their crowning achievement. If anything SS cuts would be the delay of a COLA and the more draconian ideas get passed by sticking it to the people 5 to 10 years down the road, hopefully enough time to have another cyclical recovery.
You have more of a worry about congress going after your "entitlements" because the treasury is not bringing in enough tax revenue and we all know how congress does not intentionally create deficit situations.
Pensions are another matter. The risk depends on the govt/congress funding of the Pension Benefit Guaranty Corporation. So if your private pension bellied up, while you would not get everything you do today, some of your company pension income may be covered. I looked into this because of the charlatans running some companies today and their funding the company pension plans with questionable investments making them unable to meet government minimum funding requirements. In 2008 a lot of companies needed to come up with a lot of cash for their pension plans. Large companies sitting on a lot of cash like the ones I worked for may have it but smaller ones probably not.
If you have a federal govt pension you may be safer but state and city will be in for as rough a time as corporate private pensions as many of these are already in serious trouble. They will get cut and the expensive lawsuits will follow.This problem means property or state income hikes for the rest of us. In my opinion it is unavoidable.
We have an income stream of SS, a pension and interest from FDIC covered accounts/bonds. Reasonably recession proof with the mentioned govt backstops. What we have coming in covers our expenses and the tax bite on all of it with some to spare. But then we continue to live pretty simply, eat out on occasion, weekend trips here and there and don't feel like we are missing out on anything.
Investments in stocks /401K won't be touched until RMD's kick in. I look at the dividends as icing on the cake and do not factor them in as a constant. Besides..... What the hell do I know. I stubbornly stuck with GE and watched the dividend go from 98 cents a share to 48 cents to 4 cents a share while some other holdings increased and made up the slack.
I turned off some reinvestment of dividends and will use that to build up the cash pool for the inevitable roof / HVAC system / Car replacements down the road & start handing off just a little bit to the kids as they can use it at this age. All part of the plan.
Some will argue this or that decision is a mistake but we the way we look at things, feelings about debt and risk tolerance we are happy with our decisions and at least for now are not worried about the coming recession for ourselves but we do worry a lot for our kids.
Last edited by Kentucky62; 08-20-2019 at 12:25 PM..
I think the recession problem is starting to withdraw IRA money when the market is down. Say you planned to take out $X per year when your investments are high. When the market is down, that same $X represents a great percentage of your IRA. You'll use up more of your IRA faster.
We brought our house in 2007. Feels like the minute we closed on it, the market tanked. We will not recoup our purchase price. We'll be closer than we were in 2008, but still 10% less 2007. If the recession didn't happen or we didn't relocate in 2007, our financials would be different now.
We are retiring next year. We will sell our house, hopefully before another recession. Keeping our fingers crossed.
People often do that in attempt to stay afloat over the short term. It often doesn't work, and they still end up in foreclosure/bankruptcy, less their retirement money that would have otherwise been protected.
I was thinking about the news and worry about an upcoming recession.
This thread is NOT ABOUT RECESSION COMING SPECULATION.
Theoretically, if you have done what experts recommend, own your home, car, found some sort of monthly means to cover monthly expenses (pension, investments, rentals whatever).
Then recessions don't affect those retirees? Well depending on investments I guess.
Was anyone retired during the last one?
Anyone curtailing plans or putting them off to see if this next one materializes? Coming up with a recession plan, if you think it will affect you? For example if you had been thinking of selling and moving south, are you going to do it sooner now vs waiting in case the real estate market cools?
My husband wanted to retire in 08
He had business interests that would have given monthly income in addition to his salary
He wanted to stop working
I was worried about investments and really encouraged him to keep working which he did
I think we were/are better for him doing that
Then recessions don't affect those retirees? Well depending on investments I guess.
Recessions can affect retirees who apply for benefits.
The people who applied for Social Security retirement benefits in 2011 got totally screwed, because they receive significantly less in benefits than the people who applied in 2010 or 2012.
Why? Because the Wage Index for 2009 decreased due to the recession.
That $20,000 you earned in 1984?
Social Security does not use that when they calculate your benefits. Social Security indexes your wages to the Wage Index so if, for example, you apply this year, that $20,000 morphs into $60,375 and it is the $60,375 that Social Security uses to calculate your average monthly wage and not the $20,000.
The Wage Index is published each year for the previous year in late November or early December.
Because that's true, if you apply now, they can't use the Wage Index for 2019, since it won't be published until next year. They can't use the Wage Index for 2018, because it won't be published for another several months. To be fair to everyone, they go back two years, and for 2019 that's 2017.
Generally, the Wage Index increase about 2% to 3% per year, but in 2009 it decreased:
The people who filed in 2011 got indexed to 2009 and they lost $50-$300/month in Social Security benefits.
You can apply for retirement benefits during a recession, because your wages are index two year prior to the recession. You can also apply the year after the recession ends.
It's that 2nd year after that you have to be wary.
Recessions don't always result in job losses. You've had a number of recessions where job losses were a few 100,000 and not Millions. Usually if Capital reallocation is the cause of the recession then you lose a lot of jobs, like in the Millions. That was your problem in 2008. You had Capital reallocation within the US, plus Capital flight, where Capital is actually leaving the US (headed to Southeast Asia) that caused Millions of job losses, and you can't pay your mortgage if you don't have a job, or if you have a job that pays less than the job you lost.
A liquidity crisis usually doesn't cause massive job losses, either, unless it's economy-wide or industry-wide.
Anyway, if job losses are severe enough to impact the Wage Index, you may want to apply for Social Security a year earlier than you planned, or delay by a year, so you don't lose money.
"Anyone curtailing plans or putting them off to see if this next one materializes?"
not really curtailing, just "changing lanes" you might say.
1. we are building up our cash or other liquidity. we are planning for deflation.
2. we have already taken some investment profits. old saying: "no one ever went broke taking profits".
3. we have already pre-paid our CCRC entrance fee. that has been our most recent investment. "changing lanes".
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