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You are very wise. To plan for stock market downturns is the wise thing to do.
I do something similar. I will be retiring on June 1st. This is my strategy:
1- Go into retirement with as little debts as possible. I only owe money in my mortgage.
2- Move to a state friendly with taxes and seniors. We will be moving out of NJ to SC.
3- Sell the house in NJ and buy cash in SC.
4- Live on SS (mine and my wife's) and pension (I was lucky to get one).
5- Work part time to keep sanity and to make sure my wife does not divorce me, which will happen if I stay home.
6- Do not plan to take out from 401k or IRAs unless I have to; maybe a little to travel or to pay for nursing home insurance.
7- If I need additional (beyond SS and pension), do it the following way:
a- From Cash (CDs) first,
b- From Bonds next,
c- From Roth IRAs third,
d- From Regula IRAs and 401k when I am forced to do it at 70 1/2; I am 66 now,
e- What little I have in plain stocks will leave them there 'til the time the market recovers or else leave them for my grandchildren's college.
Hopefully this strategy should provide to the time they burry me and my wife.
I take it that item b is the equivalent of you 1st. bucket with item c your second and items c and d your third.
Now thats a plan and similar to ours. We both have pensions , SS eventually and investments after that.
thats why you cant put an age and percentage of stocks on whats right for retirees.... if i had a pension i can tell you id be alot more aggressive because i could be..it has nothing to do with age.....its all about designing a plan for whats right for you and for your comfort level....
the trick is getting it to match the with drawl rate you need but theres ways around that too...
for some im a big believer in immeadiate annuties which feature no fees , no costs other then your stated withdrawl rate and they allow you to take higher withdrawls then you could on your own....
There are some great posts here and it has helped me clarify a few things. I did not mention that 1/3 of my stocks are leveraging a 2.5% securitized loan from UBS that is invested in a lake property that I am currently renting out. That has proved to be a good investment as it is prime waterfront and has appreciated even in this down real estate market. But the loan rate is on the Libor and is bound to rise.
I also have lakeshore in Louisiana and made some money selling timber off of some of that acreage. I made 53K and I proceeded to invest half of it in Bank America--which is down 75% from when I bought it. I paid cash for the Louisiana land so that is solid and taxes are very low.
So I have somewhat of a cushion here and there. But the Oklahoma property will probably have to be sold if the market does not improve.
I do have quality financials. But stocks simply make me too nervous. I will be cautious as to how and when I sell.
Once again, some excellent advice. I am going to Louisiana in May and will go up to south-central Arkansas--Camden--to investigate some timberland. I think I might like to get into that as a commodity if I can get some traction on the stocks and segway out of them.
My Daddy always believed in having land and thought it was better to be "land poor" with taxes than in the stock market. I think I will be joining him in that sentiment.
Once again, great advice--the game plans are excellent. I will just have to make the best of it.
one other thing i want to mention.... alot of people buy individual stocks like the bank of america catastrophy above and call it investing in stocks... ITS NOT INVESTING , ITS SPECULATING,, unless you have enough money to buy lots and lots of individual stocks your speculating ..
i dont buy individual stocks , only funds ... nice diversified funds because i learned along time ago im not smart enough to pick just the right company at just the right time, in just the right sector, in just the right market sentiment, in just the right industry ...
even if i got all of the above correct i still dont know what the competitors are doing...
miss an earnings projection and you can loose 25% in a day..
time and time again i read how people put huge percentages into 2 or 3 companies , get burned then swear off stocks as investments..
id rather go to vegas and get dinner and a show along with my gambling then buy individual stocks as an investment.
yes i love speculating on stocks and i do but i do it with only money i can afford to loose, 95% of all my money in equities are diversified funds...
i want no individual company risk in my serious investments, just market risk
Last edited by mathjak107; 04-24-2009 at 02:22 AM..
cd's and money markets i wouldnt call investing, they are storage places really for money needed in the near future or awaiting investment.... i cant call anything thats a guaranteed loss after taxes and inflation an investment. theres no chance of coming out ahead with them unless on relative terms everything else drops.. but that dosnt make it an investment...
heres my definitions of investing and speculating .... investing is when basically you say you are willing to accept whatever the markets give you on a year to year basis.. your money should be broadly diversified covering many many stocks and asset classes... some years your up and some down but basically its like working on commission...
speculating is when you attempt to beat whatever that broad based market or asset class index is returning ... either by just picking the right stocks,or the right sectors, or market timing or your best friends tip from someone who knows someone.....
its your attempt at im smarter then everyone else...
sometimes speculating pays off big, sometimes it dosnt.
but i can tell you this: the forbes 200 is still awaiting the entry into its ranks of the first market timer....
You can't time the market, but you can study broad trends.
I agree that market timing is for losers. There is wisdom in looking at broad trends. But a major financial shock like the one we are going through can shake up all financial modeling. Bank of American is the second largest bank in the U. S. and was yielding 6% when I bought it. A decline of 75% of its value and the complete elimination of its dividend could have not been foreseen by Houdini himself. That said, I should have not put so much money into that individual stock. I learned my lesson there. I also had too much money in Smurfitt-Stone, a Canadian paper and packaging company, that took on too much debt and went belly-up in January. I had preferred stock with a dividend of 7%. That one was admittedly a bit more risky. I presently have J. P. Morgan and Wells Fargo, along with a rather diversified portfolio--that is what I hope will improve so I can get out of it and go into some safer fixed income. A major bout of inflation is bound to be in our future. Once again, thanks for the advice.
p.s. Investment involves more risk than standard vanilla fixed income. That being said, a good old C. D. looks pretty good right now.
actually bonds historically have failed to beat inflation and actually had many more down years then stocks when inflation adjusted ..... its actually riskier long term to invest in bonds.... interest rates are extremely unpredictable and inflation can eat them alive... we came from a period of time where for 20 years interest rates steadily dropped... that was good for bonds... at this point with interest rates historically low the future for bonds could be a train wreck.....
stocks long term were the least risky asset class for 15 year periods and longer and actually had the most consistant returns with the least volatilty......no matter what 15 year period you pulled out ,no matter what the world events , no matter if you even pulled the 15 year period out in order , the return on the major indexes is all within 1% of each other.. its amazing....
in that period stocks were always up 67% of the time and down 33% ....
although we took a big hit it just may work out that over the next 5 years that this last 15 year period may very well come in on target.....
again we are not talking individual stocks, we are talking diversified funds with hundreds of stocks...
short term know one knows what equities will do , even up to ten years out can be risky you may not beahead but so far over 100 years of history equities have been amazingly stable going out long term.
lets all hope the past history continues in the future, because without it very few of us will be able to take that 4% proverbial return without earning at least 7% and inflation averages 3%......
Last edited by mathjak107; 04-26-2009 at 03:32 AM..
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Thanks for the great advice!
