Does your retirement plan work if stocks are flat or in decline for decades?

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TheTimeLord
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Does your retirement plan work if stocks are flat or in decline for decades?

Post by TheTimeLord » Mon May 13, 2019 9:36 am

From everything I can tell for the BH philosophy to work you have to believe over the long term stocks will move from lower left to upper right. That said it is very common in threads to see a post that disputes this as a valid assumption and cites non-US examples like Japan, Argentina, Venezuela and the Weimar Republic. So my question is will your retirement plan work if stocks do not at least outperform bonds for the duration of your retirement or worse yet have returns below 0% real? Or another way to put it does your retirement plan have a contingency for stocks being flat or declining throughout your retirement? Just trying to see how many BH view this as a serious enough concern that they actually plan for that possible eventuality. I normal avoid planning for apocalyptic scenarios not because they cannot occur but because the cost of guarding against them seem prohibitive in many cases and damaging to returns what are perceived as the more likely scenarios. Just trying to validate if I am taking a reasonable approach.
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runner3081
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by runner3081 » Mon May 13, 2019 10:02 am

If they earn 0%, yes - will be just fine. If they decline, well, it depends on how much.

For retirement funding, we are supplying enough in principal to sustain in retirement. Any gains from the market just make things more comfortable.

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beyou
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by beyou » Mon May 13, 2019 10:05 am

If there is a long term decline, deflation would likely accompany the equity decline.
If prices are falling for services, then I need less income/assets.
During 2009 there were a number of opportunities to buy at a discount if you had cash.
Make sure you have some non-equity assets.

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Wiggums
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Wiggums » Mon May 13, 2019 10:08 am

Decades is a very long time...

surfstar
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by surfstar » Mon May 13, 2019 10:11 am

ONE MORE YEAR
ONE MORE YEAR

{everyone now}

ONE MORE YEAR!!!


If you never quite working, you never have to worry about retirement.
Problem solved.

mptfan
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by mptfan » Mon May 13, 2019 10:12 am

TheTimeLord wrote:
Mon May 13, 2019 9:36 am
So my question is will your retirement plan work if stocks do not at least outperform bonds for the duration of your retirement or worse yet have returns below 0% real? Or another way to put it does your retirement plan have a contingency for stocks being flat or declining throughout your retirement?
My plans do not depend on stocks outperforming bonds, but they do depend on stocks at least doing as well as bonds. If stocks overall remain flat or return less than bonds over the next 10-15 years then I will have to work longer. I would point out that I don't just invest in the total bond fund (which approximates the return of intermediate term investment grade bonds) as so many on this board, I also include a helping of long term investment grade bonds (a greater helping than contained in the total bond fund) as well as high yield corporate bonds.
Last edited by mptfan on Mon May 13, 2019 10:15 am, edited 1 time in total.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Dottie57 » Mon May 13, 2019 10:13 am

runner3081 wrote:
Mon May 13, 2019 10:02 am
If they earn 0%, yes - will be just fine. If they decline, well, it depends on how much.

For retirement funding, we are supplying enough in principal to sustain in retirement. Any gains from the market just make things more comfortable.
It depends. If SS is eliminated,, I would be screwed. If SS is cut be 25% and keep what I have , ok.. If I lose 50% for over a decade, I am again in deep doo doo.

Ron
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Ron » Mon May 13, 2019 10:15 am

Since I/we draw income from our respective portfolios via dividends, the actual share price is of no concern to us.

Our distributions more than exceed our RMD's, which are used to pay FIT on the RMD, pay FIT on all our other income (SS, SPIA, Pensions, etc.) with the remainder of the RMD being sent to savings (or spent as we want/need).

While we are not strictly dividend investors, it has turned out in that manner since we both started age-70 SS and we no longer have to sell any of our portfolio holdings in order to meet our retirement income needs beyond our other sources of income, which was a normal situation during our early years of retirement; I retired at age 59, wife at age 64.

BTW, I'm only speaking of our TIRA holdings; our Roth account distributions are fully reinvested with the goal of leaving those accounts for the future generation.

FWIW,

- Ron
Last edited by Ron on Mon May 13, 2019 10:16 am, edited 1 time in total.

mak1277
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by mak1277 » Mon May 13, 2019 10:15 am

I don't have a plan for specific bad events (e.g., healthcare costs, bad markets, etc.), but I do have a series of cushions in my retirement plan that will allow us to weather a storm or two:

- ability to go back to work
- sub-4% planned withdrawl rate (really it's going to end up being sub-3% by the time I pull the trigger)
- large college fund for kids that could be tapped if needed
- don't factor SS into my retirement calculations
- planning a healthy annual budget in retirement...could easily scale back 50% or more in a crisis

I'm sure there's a non-zero chance that multiple 'bad' events could happen that would blow up my plans, but I feel my cushions are sufficient to allow me to retire without undue stress.

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TheTimeLord
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by TheTimeLord » Mon May 13, 2019 10:18 am

surfstar wrote:
Mon May 13, 2019 10:11 am
ONE MORE YEAR
ONE MORE YEAR

{everyone now}

ONE MORE YEAR!!!


If you never quite working, you never have to worry about retirement.
Problem solved.
This really isn't a factor on if I work any longer or not. I am just trying to understand the comment frequently made on this forum when someone makes the assumption or bases their plans on stocks continuing to rise into infinity. I always thought that was a integral part of BH philosophy but these posts suggest otherwise.

As an aside, I don't know why you care if I decide to keep working for a another month, year or decade instead of retiring? Just let me be me and save the sarcasm, don't see how it adds to the discourse.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

Admiral
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Admiral » Mon May 13, 2019 10:20 am

My plan will work with an average annual portfolio return of -.6% for the next 40 years WITH an assumed substantial inheritance in 20 years.

Without that, it will work with an average annual portfolio return of -.2% SORRY that should read +.2% for the same time period.

runner3081
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by runner3081 » Mon May 13, 2019 10:28 am

Dottie57 wrote:
Mon May 13, 2019 10:13 am
runner3081 wrote:
Mon May 13, 2019 10:02 am
If they earn 0%, yes - will be just fine. If they decline, well, it depends on how much.

For retirement funding, we are supplying enough in principal to sustain in retirement. Any gains from the market just make things more comfortable.
It depends. If SS is eliminated,, I would be screwed. If SS is cut be 25% and keep what I have , ok.. If I lose 50% for over a decade, I am again in deep doo doo.
SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.

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willthrill81
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by willthrill81 » Mon May 13, 2019 10:28 am

We should be able to cover all of our anticipated essential retirement expenses from SS at FRA, and with the anticipated 25% cut, we could still do it if we deferred to age 70. As such, our portfolio has two primary purposes: (1) cover the 15 year gap between my planned retirement and the beginning of SS benefits and (2) cover our discretionary expenses throughout my retirement. But that being said, we are planning on being able to cover all of our retirement expenses from our portfolio alone. SS, whatever we get, will be a bonus.

As such, our retirement plan would still work if stocks had lackluster performance for multiple decades. Also, with the trend following strategy I use, there's a significant likelihood that I would not own stocks for a significant of the time that stocks were in decline.
Last edited by willthrill81 on Mon May 13, 2019 10:32 am, edited 1 time in total.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by B. Wellington » Mon May 13, 2019 10:29 am

runner3081 wrote:
Mon May 13, 2019 10:02 am
If they earn 0%, yes - will be just fine. If they decline, well, it depends on how much.

For retirement funding, we are supplying enough in principal to sustain in retirement. Any gains from the market just make things more comfortable.
+1

Timelord, we are somewhat conservative with "retirement" a few short years away. 60/40 and "enough" in principal to sustain for a number of years until collecting SS. Bonds, real estate, and a cash "bucket" for expenses should last barring a complete meltdown.

The future in unknowable and we all try to plan as best we can with the information we have available today.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by willthrill81 » Mon May 13, 2019 10:31 am

runner3081 wrote:
Mon May 13, 2019 10:28 am
SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.
That's a wise strategy. I too am not counting on any SS benefits, although I examine the impact on my retirement both with and without SS. Frankly, while I have little doubt that changes will be made which will be disadvantageous to people in our age bracket, it will almost certainly still be there in some form at some point for us. There are just too many people who depend on it too much for it to go away.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

EnjoyIt
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by EnjoyIt » Mon May 13, 2019 10:31 am

My ideal plan will fail, but we will be ok. We will need to probably move into a smaller home which we will likely do anyways in the future. We will not be able to travel as much.

Although anything is possible I am just not planning for a 20 year decline in equities.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Admiral » Mon May 13, 2019 10:33 am

runner3081 wrote:
Mon May 13, 2019 10:28 am
Dottie57 wrote:
Mon May 13, 2019 10:13 am
runner3081 wrote:
Mon May 13, 2019 10:02 am
If they earn 0%, yes - will be just fine. If they decline, well, it depends on how much.

For retirement funding, we are supplying enough in principal to sustain in retirement. Any gains from the market just make things more comfortable.
It depends. If SS is eliminated,, I would be screwed. If SS is cut be 25% and keep what I have , ok.. If I lose 50% for over a decade, I am again in deep doo doo.
SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.
Clearly you can believe what you wish but SS is the most popular entitlement there is, and it's not going anywhere. The sky is not falling. The changes needed are very minor in relative terms: higher income cutoff (probably the easiest to implement), higher FRA (seems likely but will be phased in) and then, a distant third, would be cuts. Again, phased. You are young so yes, in three decades there will be some changes.

But ignoring it is silly in my view. Discount it by some % if you want.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by willthrill81 » Mon May 13, 2019 10:39 am

Admiral wrote:
Mon May 13, 2019 10:33 am
But ignoring it is silly in my view. Discount it by some % if you want.
It depends on other factors. If he's planning on retiring with $10 million, the marginal impact of SS benefits would be really small anyway. Or he could be an early retiree, and filling the 'gap' between retirement and the beginning of SS benefits could be close to the NPV of the SS benefits themselves. But even if not, it basically just provides him with an additional safety net.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

mak1277
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by mak1277 » Mon May 13, 2019 10:40 am

Admiral wrote:
Mon May 13, 2019 10:33 am
runner3081 wrote:
Mon May 13, 2019 10:28 am
Dottie57 wrote:
Mon May 13, 2019 10:13 am
runner3081 wrote:
Mon May 13, 2019 10:02 am
If they earn 0%, yes - will be just fine. If they decline, well, it depends on how much.

For retirement funding, we are supplying enough in principal to sustain in retirement. Any gains from the market just make things more comfortable.
It depends. If SS is eliminated,, I would be screwed. If SS is cut be 25% and keep what I have , ok.. If I lose 50% for over a decade, I am again in deep doo doo.
SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.
Clearly you can believe what you wish but SS is the most popular entitlement there is, and it's not going anywhere. The sky is not falling. The changes needed are very minor in relative terms: higher income cutoff (probably the easiest to implement), higher FRA (seems likely but will be phased in) and then, a distant third, would be cuts. Again, phased. You are young so yes, in three decades there will be some changes.

But ignoring it is silly in my view. Discount it by some % if you want.
There's no harm in ignoring it though, except for the possibility of working longer than necessary.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by delamer » Mon May 13, 2019 10:42 am

Ron wrote:
Mon May 13, 2019 10:15 am
Since I/we draw income from our respective portfolios via dividends, the actual share price is of no concern to us.

Our distributions more than exceed our RMD's, which are used to pay FIT on the RMD, pay FIT on all our other income (SS, SPIA, Pensions, etc.) with the remainder of the RMD being sent to savings (or spent as we want/need).

While we are not strictly dividend investors, it has turned out in that manner since we both started age-70 SS and we no longer have to sell any of our portfolio holdings in order to meet our retirement income needs beyond our other sources of income, which was a normal situation during our early years of retirement; I retired at age 59, wife at age 64.

BTW, I'm only speaking of our TIRA holdings; our Roth account distributions are fully reinvested with the goal of leaving those accounts for the future generation.

FWIW,

- Ron
If stock prices are flat or falling for decades, your dividend income is going to take a hit too.

We can live comfortably off of our pensions and Social Security, but decades of flat/falling stock prices is going to be very problematic for the economy — or reflect an economy that is in bad shape. No one is secure under those circumstances.

One scenario that you plan for should be several years of flat/falling stock prices during retirement. But decades of the same, no.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Admiral » Mon May 13, 2019 10:44 am

mak1277 wrote:
Mon May 13, 2019 10:40 am
Admiral wrote:
Mon May 13, 2019 10:33 am
runner3081 wrote:
Mon May 13, 2019 10:28 am
Dottie57 wrote:
Mon May 13, 2019 10:13 am
runner3081 wrote:
Mon May 13, 2019 10:02 am
If they earn 0%, yes - will be just fine. If they decline, well, it depends on how much.

For retirement funding, we are supplying enough in principal to sustain in retirement. Any gains from the market just make things more comfortable.
It depends. If SS is eliminated,, I would be screwed. If SS is cut be 25% and keep what I have , ok.. If I lose 50% for over a decade, I am again in deep doo doo.
SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.
Clearly you can believe what you wish but SS is the most popular entitlement there is, and it's not going anywhere. The sky is not falling. The changes needed are very minor in relative terms: higher income cutoff (probably the easiest to implement), higher FRA (seems likely but will be phased in) and then, a distant third, would be cuts. Again, phased. You are young so yes, in three decades there will be some changes.

But ignoring it is silly in my view. Discount it by some % if you want.
There's no harm in ignoring it though, except for the possibility of working longer than necessary.
Uh, ok, but that seems like a pretty important decision, no? Life is short. As usual, "it depends." Willthrill is correct, if it will have marginal utility then ignore it. That is not the case for most people. Maybe people on this board, but not IRL.

mak1277
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by mak1277 » Mon May 13, 2019 10:46 am

Admiral wrote:
Mon May 13, 2019 10:44 am
mak1277 wrote:
Mon May 13, 2019 10:40 am
Admiral wrote:
Mon May 13, 2019 10:33 am
runner3081 wrote:
Mon May 13, 2019 10:28 am
Dottie57 wrote:
Mon May 13, 2019 10:13 am


It depends. If SS is eliminated,, I would be screwed. If SS is cut be 25% and keep what I have , ok.. If I lose 50% for over a decade, I am again in deep doo doo.
SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.
Clearly you can believe what you wish but SS is the most popular entitlement there is, and it's not going anywhere. The sky is not falling. The changes needed are very minor in relative terms: higher income cutoff (probably the easiest to implement), higher FRA (seems likely but will be phased in) and then, a distant third, would be cuts. Again, phased. You are young so yes, in three decades there will be some changes.

But ignoring it is silly in my view. Discount it by some % if you want.
There's no harm in ignoring it though, except for the possibility of working longer than necessary.
Uh, ok, but that seems like a pretty important decision, no? Life is short. As usual, "it depends." Willthrill is correct, if it will have marginal utility then ignore it. That is not the case for most people. Maybe people on this board, but not IRL.
For me, as I stated above, I consider SS to be part of my contingency plan if things go wrong...not something I want to rely on as part of my base retirement. But I'm also planning to retire before 45, so I don't feel like I'm missing out by ignoring it.

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TheTimeLord
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by TheTimeLord » Mon May 13, 2019 10:49 am

mak1277 wrote:
Mon May 13, 2019 10:46 am
Admiral wrote:
Mon May 13, 2019 10:44 am
mak1277 wrote:
Mon May 13, 2019 10:40 am
Admiral wrote:
Mon May 13, 2019 10:33 am
runner3081 wrote:
Mon May 13, 2019 10:28 am

SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.
Clearly you can believe what you wish but SS is the most popular entitlement there is, and it's not going anywhere. The sky is not falling. The changes needed are very minor in relative terms: higher income cutoff (probably the easiest to implement), higher FRA (seems likely but will be phased in) and then, a distant third, would be cuts. Again, phased. You are young so yes, in three decades there will be some changes.

But ignoring it is silly in my view. Discount it by some % if you want.
There's no harm in ignoring it though, except for the possibility of working longer than necessary.
Uh, ok, but that seems like a pretty important decision, no? Life is short. As usual, "it depends." Willthrill is correct, if it will have marginal utility then ignore it. That is not the case for most people. Maybe people on this board, but not IRL.
For me, as I stated above, I consider SS to be part of my contingency plan if things go wrong...not something I want to rely on as part of my base retirement. But I'm also planning to retire before 45, so I don't feel like I'm missing out by ignoring it.
So with no contribution from stocks you still expect to be able save enough to retire by 45?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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warowits
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by warowits » Mon May 13, 2019 10:51 am

willthrill81 wrote:
Mon May 13, 2019 10:31 am
runner3081 wrote:
Mon May 13, 2019 10:28 am
SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.
That's a wise strategy.
No, it isn’t.

Sure SS may change, but it will be there. Even if is only worth 80% of what it is today that is still a large enough asset that it would be ‘wise’ to acknowledge its existence and work it into your planning.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by HomeStretch » Mon May 13, 2019 10:55 am

runner3081 wrote:
Mon May 13, 2019 10:02 am
If they earn 0%, yes - will be just fine. If they decline, well, it depends on how much.
+1 for investment portfolio.

Aside from retirement portfolio withdrawals, only other source of retirement income is social security. We will reduce discretionary spending if social security benefits are cut.

House equity is Plan B in our retirement plan. We will downsize at some undefined point of time. But we will downsize immediately to reduce costs and free up capital:
- if additional funds are needed (plan covers to age 95),
- if we need LTC (do not have LTC policy), or
- if the market declines significantly for a long period of time in early retirement (i.e., really bad sequence of events).

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by DanMahowny » Mon May 13, 2019 10:56 am

My portfolio is all cash (since Jan2018) and a large TSLA short.

I would welcome a large decline in the equity markets (50% would be pretty cool).
Funding secured

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by spinj » Mon May 13, 2019 10:59 am

Admiral wrote:
Mon May 13, 2019 10:33 am
Clearly you can believe what you wish but SS is the most popular entitlement there is, and it's not going anywhere. The sky is not falling. The changes needed are very minor in relative terms: higher income cutoff (probably the easiest to implement), higher FRA (seems likely but will be phased in) and then, a distant third, would be cuts. Again, phased. You are young so yes, in three decades there will be some changes.
My money is on higher income cutoff and another bend point (that only applies to income over the old max). No need to phase it in so it’s a nice patch for congress to wait until the 32nd hour.

To answer the OPs original question I’ll be relying on a sub 4% withdrawl rate but have a bit of real estate and discounting SS (not because I believe it’s going away but because it’s easier as I plan to retire at least 15y before I collect and healthcare is still a bit of a wildcard). There’s enough fat in the budget that I’ll cut back if needed.

Admiral
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Admiral » Mon May 13, 2019 11:00 am

It seems highly unlikely that BOTH stocks AND bonds would be negative for any significant length of time. Short periods, yes, it's possible... anything is possible. A slightly more realistic worst-case would be a crash, a long period of stocks static or giving single-digit returns, and low bond yields. But not negative yields unless there was massive inflation, which I also think is unlikely.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by michaeljc70 » Mon May 13, 2019 11:01 am

No, my plan doesn't "work" if markets are worse or equal to the worst historical decades. But it depends what you mean by "work". I won't be eating cat food from a tent under a bridge, but I also won't be doing everything I had planned on doing. It is not in my plan to move (due to finances) or take out a reverse mortgage either, but those are also backstops.

mak1277
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by mak1277 » Mon May 13, 2019 11:02 am

TheTimeLord wrote:
Mon May 13, 2019 10:49 am
mak1277 wrote:
Mon May 13, 2019 10:46 am
Admiral wrote:
Mon May 13, 2019 10:44 am
mak1277 wrote:
Mon May 13, 2019 10:40 am
Admiral wrote:
Mon May 13, 2019 10:33 am


Clearly you can believe what you wish but SS is the most popular entitlement there is, and it's not going anywhere. The sky is not falling. The changes needed are very minor in relative terms: higher income cutoff (probably the easiest to implement), higher FRA (seems likely but will be phased in) and then, a distant third, would be cuts. Again, phased. You are young so yes, in three decades there will be some changes.

But ignoring it is silly in my view. Discount it by some % if you want.
There's no harm in ignoring it though, except for the possibility of working longer than necessary.
Uh, ok, but that seems like a pretty important decision, no? Life is short. As usual, "it depends." Willthrill is correct, if it will have marginal utility then ignore it. That is not the case for most people. Maybe people on this board, but not IRL.
For me, as I stated above, I consider SS to be part of my contingency plan if things go wrong...not something I want to rely on as part of my base retirement. But I'm also planning to retire before 45, so I don't feel like I'm missing out by ignoring it.
So with no contribution from stocks you still expect to be able save enough to retire by 45?
Well, like I said, I don't run numbers for every specific "bad news" scenario that there is. I listed my cushions in a post up above, and I am comfortable that those will be sufficient to cover me in retirement.

To hit my number, I don't need any appreciation from the market between now and 45...I just need to continue saving as I have been.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by willthrill81 » Mon May 13, 2019 11:04 am

warowits wrote:
Mon May 13, 2019 10:51 am
willthrill81 wrote:
Mon May 13, 2019 10:31 am
runner3081 wrote:
Mon May 13, 2019 10:28 am
SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.
That's a wise strategy.
No, it isn’t.

Sure SS may change, but it will be there. Even if is only worth 80% of what it is today that is still a large enough asset that it would be ‘wise’ to acknowledge its existence and work it into your planning.
We don't know that it will be a large enough asset to warrant including in his planning. The net present value of his SS benefits may be under $250k, depending on the discount rate he uses, and especially if benefits are cut by 25%. If he's planning on retiring with millions in his portfolio, ignoring $250k or less may not be a big deal. His final portfolio balance could easily vary by more than that depending on the market's performance.

His strategy is just a conservative one.
Last edited by willthrill81 on Mon May 13, 2019 11:07 am, edited 1 time in total.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by yohac » Mon May 13, 2019 11:05 am

If stocks return nothing for decades, most likely the entire worldwide economic system has collapsed. So I'd have go with No.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Toons » Mon May 13, 2019 11:07 am

Yes
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Dottie57 » Mon May 13, 2019 11:07 am

runner3081 wrote:
Mon May 13, 2019 10:28 am
Dottie57 wrote:
Mon May 13, 2019 10:13 am
runner3081 wrote:
Mon May 13, 2019 10:02 am
If they earn 0%, yes - will be just fine. If they decline, well, it depends on how much.

For retirement funding, we are supplying enough in principal to sustain in retirement. Any gains from the market just make things more comfortable.
It depends. If SS is eliminated,, I would be screwed. If SS is cut be 25% and keep what I have , ok.. If I lose 50% for over a decade, I am again in deep doo doo.
SS comes nowhere into my retirement planning. I am in my 30's. It will be either greatly reduced or have a significantly older eligibility age when it comes time for me to use it.
I am 62. So yes I expect it to be there. I always thought we had decent politicians and a fix or change would occur before my retirement. There was a fix in the 80’s after all. Why couldn’t another fix be done? Well I was wrong and am in retirement at 62.

I hope to purchase an annuity at age 70 which would offset my loss of SS.

If I had it to do again, I would save 20% instead of 15%. I did other things right (home peice, car, lbym), but would save more in the early years.
Last edited by Dottie57 on Mon May 13, 2019 11:13 am, edited 2 times in total.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by ruralavalon » Mon May 13, 2019 11:09 am

TheTimeLord wrote:
Mon May 13, 2019 9:36 am
From everything I can tell for the BH philosophy to work you have to believe over the long term stocks will move from lower left to upper right. That said it is very common in threads to see a post that disputes this as a valid assumption and cites non-US examples like Japan, Argentina, Venezuela and the Weimar Republic. So my question is will your retirement plan work if stocks do not at least outperform bonds for the duration of your retirement or worse yet have returns below 0% real? Or another way to put it does your retirement plan have a contingency for stocks being flat or declining throughout your retirement? [emphasis added] Just trying to see how many BH view this as a serious enough concern that they actually plan for that possible eventuality. I normal avoid planning for apocalyptic scenarios not because they cannot occur but because the cost of guarding against them seem prohibitive in many cases and damaging to returns what are perceived as the more likely scenarios. Just trying to validate if I am taking a reasonable approach.

Yes, our plan works even if stocks tank and stay down.

Both age 73, retired 8 years, no pension or annuity, our asset allocation is 50/50.

The bond allocation is large enough to cover about 15 years of retirement living expenses net of Social Security. That is longer than our life expectancy.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by willthrill81 » Mon May 13, 2019 11:09 am

TheTimeLord, are you concerned about U.S. and/or global markets having performance similar to Japan's?

Contrary to what many believe, Japan is still operating just fine as a country despite their stock market having had negative cumulative returns for the last 30 years.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Mike Scott » Mon May 13, 2019 11:12 am

Yes...

I believe that if social security AND our pension plans fail, we have bigger problems than we can plan for or fix.
Decades is a long time.
We can't know the future.

Maybe...

Don't you love uncertainty?
Personally, I more concerned about healthcare than any other thing that might or might not happen.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Broken Man 1999 » Mon May 13, 2019 11:16 am

I believe wife and I are set OK even if stocks remain flat for long periods of time. In a pinch we could drop some expenses and live off of our bonds. Decades? Maybe, though I'm not sure we have decades to worry about. :?:

We also have a Vanguard annuity we could tap and pump up our income.

And, finally, we have a home unfettered by loans that could be sold to allow us to downsize.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by TheTimeLord » Mon May 13, 2019 11:18 am

willthrill81 wrote:
Mon May 13, 2019 11:09 am
TheTimeLord, are you concerned about U.S. and/or global markets having performance similar to Japan's?

Contrary to what many believe, Japan is still operating just fine as a country despite their stock market having had negative cumulative returns for the last 30 years.
Personally, I am not but the possibility is raised quite frequently in this forum. I was more wondering if I was being reckless by discounting this possibility.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by HawkeyePierce » Mon May 13, 2019 11:19 am

willthrill81 wrote:
Mon May 13, 2019 11:09 am
TheTimeLord, are you concerned about U.S. and/or global markets having performance similar to Japan's?

Contrary to what many believe, Japan is still operating just fine as a country despite their stock market having had negative cumulative returns for the last 30 years.
I don't know where this quote comes from but "If modern Japan is what a three-decades-long recession looks like, I want one".

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by willthrill81 » Mon May 13, 2019 11:22 am

HawkeyePierce wrote:
Mon May 13, 2019 11:19 am
willthrill81 wrote:
Mon May 13, 2019 11:09 am
TheTimeLord, are you concerned about U.S. and/or global markets having performance similar to Japan's?

Contrary to what many believe, Japan is still operating just fine as a country despite their stock market having had negative cumulative returns for the last 30 years.
I don't know where this quote comes from but "If modern Japan is what a three-decades-long recession looks like, I want one".
As long as you didn't hold much Japanese stock over the entirety of that 30 year period.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by HomerJ » Mon May 13, 2019 11:24 am

TheTimeLord wrote:
Mon May 13, 2019 9:36 am
Or another way to put it does your retirement plan have a contingency for stocks being flat or declining throughout your retirement? Just trying to see how many BH view this as a serious enough concern that they actually plan for that possible eventuality. I normal avoid planning for apocalyptic scenarios not because they cannot occur but because the cost of guarding against them seem prohibitive in many cases and damaging to returns what are perceived as the more likely scenarios. Just trying to validate if I am taking a reasonable approach.
I have a contingency plan for spending less if markets are really bad for decades. I do think it's important for people to be at least mentally prepared for the possibility.

Our retirement plan includes two homes, one in Phoenix for the winter, one on a lake to escape the summer heat of Arizona. We also plan to travel 2-4 times a year.

I agree that the cost of guarding against all scenarios is prohibitive. I'm not planning on working an extra 5-10 years to make absolutely sure that my planned retirement is guaranteed. That would not be smart, in my opinion, because it would also guarantee that I have 5-10 LESS years to enjoy that retirement. And the 5-10 best years.

If really bad times show up, we'll adjust. We'll travel less, we'll probably sell the lake home, and just stay inside during the summer. It would still be a pretty nice retirement. Or maybe I can pick up some contract work. It's important to recognize that possibility beforehand. Need to go into retirement with eyes wide open and paying attention to how your money is doing.
Last edited by HomerJ on Mon May 13, 2019 11:33 am, edited 2 times in total.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by TheTimeLord » Mon May 13, 2019 11:25 am

HawkeyePierce wrote:
Mon May 13, 2019 11:19 am
willthrill81 wrote:
Mon May 13, 2019 11:09 am
TheTimeLord, are you concerned about U.S. and/or global markets having performance similar to Japan's?

Contrary to what many believe, Japan is still operating just fine as a country despite their stock market having had negative cumulative returns for the last 30 years.
I don't know where this quote comes from but "If modern Japan is what a three-decades-long recession looks like, I want one".
Japan’s government debt to GDP ratio sits at 236% in 2017, more than double that of the U.S., which stands at 108%, according to the International Monetary Fund.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by willthrill81 » Mon May 13, 2019 11:28 am

TheTimeLord wrote:
Mon May 13, 2019 11:18 am
willthrill81 wrote:
Mon May 13, 2019 11:09 am
TheTimeLord, are you concerned about U.S. and/or global markets having performance similar to Japan's?

Contrary to what many believe, Japan is still operating just fine as a country despite their stock market having had negative cumulative returns for the last 30 years.
Personally, I am not but the possibility is raised quite frequently in this forum. I was more wondering if I was being reckless by discounting this possibility.
According to Portfolio Charts, the safe withdrawal rate for a 30 year retirement for a 60/40 all Japanese portfolio, including Japan's inflation rate, was 3.0% and 2.5% for a 40 year retirement, I'd say that if your plan could work at those levels, you'd be in really, really good shape.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by HomerJ » Mon May 13, 2019 11:29 am

yohac wrote:
Mon May 13, 2019 11:05 am
If stocks return nothing for decades, most likely the entire worldwide economic system has collapsed. So I'd have go with No.
U.S. Stocks returned basically nothing for 16 years from 1966-1982.

That's a pretty long time. So one should be prepared for it.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by Whatyear? » Mon May 13, 2019 11:31 am

Call me reckless, but my retire plan depends on both continuation of SS and an average real return (stocks and bonds combined) of ~2.75%. I could manage on a bit less than that, but not to the point of zero to negative returns. I'll be 62 by the time I retire, but if I were to plan for no returns I'd probably be 80!

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by willthrill81 » Mon May 13, 2019 11:32 am

HomerJ wrote:
Mon May 13, 2019 11:29 am
yohac wrote:
Mon May 13, 2019 11:05 am
If stocks return nothing for decades, most likely the entire worldwide economic system has collapsed. So I'd have go with No.
U.S. Stocks returned basically nothing for 16 years from 1966-1982.

That's a pretty long time. So one should be prepared for it.
There was one 20 year period where U.S. stocks' real return was -.219%, although I'm not sure of the years involved.

And a 4% withdrawal rate still worked. :wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by mariezzz » Mon May 13, 2019 11:34 am

Yes...

I believe that if social security AND our pension plans fail, we have bigger problems than we can plan for or fix.
Decades is a long time.
We can't know the future.

Maybe...

Don't you love uncertainty?
Personally, I more concerned about healthcare than any other thing that might or might not happen.
I've got to agree with the above.

When I saw the thread title, I asked: When have people investing using one of the (typically recommended)BH approach) - which advise a fixed income component - ever seen portfolios that are flat or in decline for decades? As already stated in other posts, people can adjust portfolios, time working, adjust expectations, spending, etc.

This seems to be a thread that's speculating to the extreme, and more about anxiety than anything else. There are all sorts of other things one could speculate about: physical invasion by another country and widespread war on US soil, for example. Not likely in the next few decades, but always possible. (The Syrians didn't expect the war they've experienced.) Really pointless to speculate about something so unlikely.
Last edited by mariezzz on Mon May 13, 2019 11:36 am, edited 1 time in total.

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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by willthrill81 » Mon May 13, 2019 11:36 am

mariezzz wrote:
Mon May 13, 2019 11:34 am
When I saw the thread title, I asked: When have people investing using one of the (typically recommended)BH approach) - which advise a fixed income component - ever seen portfolios that are flat or in decline for decades?
As I noted above, there was a 20 year period where U.S. stocks' real return was negative.
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Re: Does your retirement plan work if stocks are flat or in decline for decades?

Post by TravelforFun » Mon May 13, 2019 11:37 am

If one worries about the stock market returning sub 0 for decades then one should convert everything they own to a SPIA.

As for me, I keep 10 years of expenses in bonds, CDs, and money market; and the rest is in stock. I base my future on available data which show market declines have never exceeded 5 years; and a planned 3% SWR would insure my money will last forever.

Drawing my SS at 70, and having a SPIA and LTC insurance policies help taking care of our longevity. I’m retiring in August (2019) and can’t wait.

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