Retiring in 10 years

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tlcook47
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Retiring in 10 years

Post by tlcook47 » Mon Aug 03, 2015 8:39 am

My friend recently asked me (finally!) for some suggestions on what she should be doing to prepare for retirement. She wants to retire in 10 years, but isn't in a position financially to do so. Thus, she's taken some dramatic steps (sold her house) and wanted to start a rental house business for extra income when she retires. I didn't ask for specifics, but I'm guessing her savings and 401(k) plan are minimal. She said she's put enough in her 401k over the past 5 years to get the employer match each year.

Most of her life, she lived on the "you only live once" strategy. Now that she realized retirement is right around the corner, she's losing her mind (as evidenced by the fact that she sold her house to live in a rental and start her own rental house business).

I'm trying to talk her out of the rental house business, but I'm looking for some suggestions from fellow Bogleheads regarding other potential investment options for her. Unfortunately, at her age she likely won't benefit from years and years of compound interest. At her age, is it worth putting her money in an all-stock market index fund for the next 10 years?

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Re: Retiring in 10 years

Post by Swampy » Mon Aug 03, 2015 8:48 am

At her age, is it worth putting her money in an all-stock market index fund for the next 10 years?
If I'm reading this correctly she want's to be 100% in equities?

Only if she can handle living on half of that that amount when the market gets a case of the flu.

This is the typical Las Vegas casino mentality so many people develop after failing to plan for a lifetime.

It is so wrong minded as to be laughable - EXCEPT it isn't.
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

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ResearchMed
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Re: Retiring in 10 years

Post by ResearchMed » Mon Aug 03, 2015 8:53 am

tlcook47 wrote:My friend recently asked me (finally!) for some suggestions on what she should be doing to prepare for retirement. She wants to retire in 10 years, but isn't in a position financially to do so. Thus, she's taken some dramatic steps (sold her house) and wanted to start a rental house business for extra income when she retires. I didn't ask for specifics, but I'm guessing her savings and 401(k) plan are minimal. She said she's put enough in her 401k over the past 5 years to get the employer match each year.

Most of her life, she lived on the "you only live once" strategy. Now that she realized retirement is right around the corner, she's losing her mind (as evidenced by the fact that she sold her house to live in a rental and start her own rental house business).

I'm trying to talk her out of the rental house business, but I'm looking for some suggestions from fellow Bogleheads regarding other potential investment options for her. Unfortunately, at her age she likely won't benefit from years and years of compound interest. At her age, is it worth putting her money in an all-stock market index fund for the next 10 years?
Do you have any idea how much SS she'll be able to collect if she continues working?
Or approx. how much is in her retirement and taxable accounts in total?
And what she'll be saving (tax-deferred and taxable) during the next 10 years?

And what her expenses might be (non-luxurious living, and also "bare minimum" level)?

Yes, intrusive questions, but without some/much of that information, it's very difficult to offer much in the way of specific answers.

RM
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tlcook47
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Re: Retiring in 10 years

Post by tlcook47 » Mon Aug 03, 2015 8:57 am

I agree. I'm 30 years younger than her and getting all of my retirement/investments in order, so she asked me if I have any suggestions for her. Without telling her, "you're up a creek because your starting too late," what type of suggestions should I make for her?

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Re: Retiring in 10 years

Post by tlcook47 » Mon Aug 03, 2015 8:59 am

ResearchMed wrote:
tlcook47 wrote:My friend recently asked me (finally!) for some suggestions on what she should be doing to prepare for retirement. She wants to retire in 10 years, but isn't in a position financially to do so. Thus, she's taken some dramatic steps (sold her house) and wanted to start a rental house business for extra income when she retires. I didn't ask for specifics, but I'm guessing her savings and 401(k) plan are minimal. She said she's put enough in her 401k over the past 5 years to get the employer match each year.

Most of her life, she lived on the "you only live once" strategy. Now that she realized retirement is right around the corner, she's losing her mind (as evidenced by the fact that she sold her house to live in a rental and start her own rental house business).

I'm trying to talk her out of the rental house business, but I'm looking for some suggestions from fellow Bogleheads regarding other potential investment options for her. Unfortunately, at her age she likely won't benefit from years and years of compound interest. At her age, is it worth putting her money in an all-stock market index fund for the next 10 years?
Do you have any idea how much SS she'll be able to collect if she continues working?
Or approx. how much is in her retirement and taxable accounts in total?
And what she'll be saving (tax-deferred and taxable) during the next 10 years?

And what her expenses might be (non-luxurious living, and also "bare minimum" level)?

Yes, intrusive questions, but without some/much of that information, it's very difficult to offer much in the way of specific answers.

RM
I'll see if I can get any of that information out of her.

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Re: Retiring in 10 years

Post by Clever_Username » Mon Aug 03, 2015 9:09 am

tlcook47 wrote:My friend recently asked me (finally!) for some suggestions on what she should be doing to prepare for retirement. She wants to retire in 10 years, but isn't in a position financially to do so. Thus, she's taken some dramatic steps (sold her house) and wanted to start a rental house business for extra income when she retires. I didn't ask for specifics, but I'm guessing her savings and 401(k) plan are minimal. She said she's put enough in her 401k over the past 5 years to get the employer match each year.

Most of her life, she lived on the "you only live once" strategy. Now that she realized retirement is right around the corner, she's losing her mind (as evidenced by the fact that she sold her house to live in a rental and start her own rental house business).

I'm trying to talk her out of the rental house business, but I'm looking for some suggestions from fellow Bogleheads regarding other potential investment options for her. Unfortunately, at her age she likely won't benefit from years and years of compound interest. At her age, is it worth putting her money in an all-stock market index fund for the next 10 years?

What's she doing with the proceeds of the house sale? Is that going (eventually) into her retirement accounts, or is she using this to finance her 'rental house business'? How much landlord experience does she have anyway?

How old is she? Is this the case of a 40 year old wanting to retire at 50?

In any case, over the next ten years, she can put roughly $180,000 into her 401(k), plus employer matching, plus the additional contributions she gets to make if she's over 50. She can also put roughly $55,000 into an IRA of some sort.

Unfortunately for her, that money is a start, not a retirement plan, especially if she's used to a high spending lifestyle and is not expecting a lot of social security (or other forms of income in retirement). But it's a good bit more than nothing.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

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Re: Retiring in 10 years

Post by Grt2bOutdoors » Mon Aug 03, 2015 9:12 am

tlcook47 wrote:I agree. I'm 30 years younger than her and getting all of my retirement/investments in order, so she asked me if I have any suggestions for her. Without telling her, "you're up a creek because your starting too late," what type of suggestions should I make for her?
Downsize your expectations of retirement. Retirement may have to be postponed by working part-time or full time for as long as she can.
Going into the rental business is fraught with peril - renters who don't pay the rent, renters who destroy your property, repairs, tax increases higher than rental income does, etc. This strategy she's cooking up is along the lines of her as you put it "only live once" saying. Well, ask her if she's willing to take her entire life savings and play the Powerball on Wednesday, if she loses, she loses it all - the same can happen in rental real estate especially if she doesn't pay her taxes, the local government will take it from her for the value of taxes owed or she may take a severe haircut if she's forced to sell it at a loss.
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Re: Retiring in 10 years

Post by Jack FFR1846 » Mon Aug 03, 2015 9:15 am

Tell her that the first step is to live below her means......
Forget the rental house idea.
Put money into her 401k to the max and start a Roth at Vanguard and fund it to the max.

I sort of doubt that she presently has the funds to do the above, but those should be the goal. She can't make up for a lack of past savings. How does she then save enough for a comfortable retirement? She works longer. Instead of retiring in 10 years like she wants, maybe she does so in 20 years. This gives her more accumulation years and delays social security so her ss payments will be higher. When you "live for today" all your life, the result is that you then need to continue to work tomorrow.
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Re: Retiring in 10 years

Post by Grt2bOutdoors » Mon Aug 03, 2015 9:20 am

Jack FFR1846 wrote:Tell her that the first step is to live below her means......
When you "live for today" all your life, the result is that you then need to continue to work tomorrow.
Ah, but when you "live your life for tomorrow" all your life, sometimes tomorrow never comes because you did not live to see it.
Moderation in all things, lest we forget to smell the roses while we can.
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Re: Retiring in 10 years

Post by NightFall » Mon Aug 03, 2015 9:51 am

Clever_Username wrote:In any case, over the next ten years, she can put roughly $180,000 into her 401(k), plus employer matching, plus the additional contributions she gets to make if she's over 50. She can also put roughly $55,000 into an IRA of some sort.
I agree with the above and note that if she is 50+, she can put away quite a bit more assuming her income allows her to. Assuming her plan allows for catch up contributions, she can put away (currently) $24,000 per year plus employer match in the 401K. That's $240,000 over 10 years where the annual limits are roughly indexed to inflation. The IRA allows for $6500 per year if age 50+... although ROTH vs traditional vs back door depends on income. That's an additional $65000. So $305,000 with no investment returns or company match factored in isn't horrible with SS as well. I dare say that many retire with this amount of assets or less... not a retirement of luxury though. I think the situation here is part of the reason catch up contributions exist.

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Re: Retiring in 10 years

Post by greg24 » Mon Aug 03, 2015 10:15 am

How old is she?

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Re: Retiring in 10 years

Post by tlcook47 » Mon Aug 03, 2015 10:28 am

greg24 wrote:How old is she?
She is 57. I'm guessing annual income of approximately $60,000. Not married. I've asked her for info on a few of the questions posed above. I'll post that when I have it.

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Re: Retiring in 10 years

Post by ResearchMed » Mon Aug 03, 2015 10:34 am

NightFall wrote:
Clever_Username wrote:In any case, over the next ten years, she can put roughly $180,000 into her 401(k), plus employer matching, plus the additional contributions she gets to make if she's over 50. She can also put roughly $55,000 into an IRA of some sort.
I agree with the above and note that if she is 50+, she can put away quite a bit more assuming her income allows her to. Assuming her plan allows for catch up contributions, she can put away (currently) $24,000 per year plus employer match in the 401K. That's $240,000 over 10 years where the annual limits are roughly indexed to inflation. The IRA allows for $6500 per year if age 50+... although ROTH vs traditional vs back door depends on income. That's an additional $65000. So $305,000 with no investment returns or company match factored in isn't horrible with SS as well. I dare say that many retire with this amount of assets or less... not a retirement of luxury though. I think the situation here is part of the reason catch up contributions exist.
This assumes that she can afford to put away this amount each year.

But point out to her that if she scrimps and scales down spending to put away as much as possible, she's also getting used to a less expensive lifestyle that will make her retirement easier.
And with savings and perhaps some good fortune, perhaps there will also be enough for a few extras like travel.
But that should come AFTER she is sure that she's doing her best to save for a minimal retirement lifestyle.

Has she read ANY of the literature about living within one's means, and "how to invest" (both very important for her)?
If not, will she?

RM
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Re: Retiring in 10 years

Post by greg24 » Mon Aug 03, 2015 3:37 pm

tlcook47 wrote:
greg24 wrote:How old is she?
She is 57. I'm guessing annual income of approximately $60,000. Not married. I've asked her for info on a few of the questions posed above. I'll post that when I have it.
Ugh. Waiting until 57 to begin preparing for retirement is not a great plan. 10 years may be optimistic. The best I can suggest is save like crazy, cutting expenses to the bone.

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Re: Retiring in 10 years

Post by Watty » Mon Aug 03, 2015 3:56 pm

Why not suggest that she ask her own questions here?

You can also point her to this link;

http://www.bogleheads.org/wiki/Getting_started

And the Boglehead books

http://www.amazon.com/s/?search-alias=a ... Bogleheads

That said, there is an old saying, "When you find that you have dug yourself into a hole, the first thing to do is to stop digging."

Figuring out where her money is going is start living an appropriate lifestyle is one of the first steps she should take.

The bright side is that people often have a lot of debt when they realize that they are in trouble. It sounds like she has some significant assets after selling the house and with up to ten years of work to save so I think a modest retirement is likely doable. She may need to cut back her lifestyle a lot and maybe even move to a low cost of living area when she retires but if things go well then she can have enough to survive OK.

She has two big risks right now that she needs to watch out for.

1) Getting laid off. She needs to make herself as valuable to her employer as possible and to be a good person to work with.

2) Developing health issues that prevents her from working for another ten years. Some things you can't do much about but a lot of things like not smoking, getting exercise, eating good foods, and losing weight can help a lot.

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Re: Retiring in 10 years

Post by rca1824 » Mon Aug 03, 2015 4:20 pm

Swampy wrote:
At her age, is it worth putting her money in an all-stock market index fund for the next 10 years?
If I'm reading this correctly she want's to be 100% in equities?

Only if she can handle living on half of that that amount when the market gets a case of the flu.

This is the typical Las Vegas casino mentality so many people develop after failing to plan for a lifetime.

It is so wrong minded as to be laughable - EXCEPT it isn't.
You don't have to reduce your withdrawals by half when the market is down. If you run some backtesting simulations even during the great depression a 100% equity portfolio could still maintain a 3% SWR for 30+ years.

Not that I would be 100% equity myself ( prefer 90/10 so I have dry powder) but the only way 100% equity fails is if the market gets a "flu" worse than its ever had.
Monthly or yearly movements of stocks are often erratic and not indicative of changes in intrinsic value. Over time, however, stock prices and intrinsic value almost invariably converge. ~ WB

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Re: Retiring in 10 years

Post by Swampy » Mon Aug 03, 2015 8:00 pm

rca1824 wrote
You don't have to reduce your withdrawals by half when the market is down. If you run some backtesting simulations even during the great depression a 100% equity portfolio could still maintain a 3% SWR for 30+ years.Not that I would be 100% equity myself ( prefer 90/10 so I have dry powder) but the only way 100% equity fails is if the market gets a "flu" worse than its ever had.
I invite you to run the numbers on http://www.portfoliovisualizer.com for fun. Plug in 100% US stock market for the period between 1999 and 2009.

A 3% SWR which drops to 44% less than when one started retirement is NOT such a great thing to brag about.
A 4% SWR would drop that number to almost 50% of the initial withdrawn amount.

I can assure you that neither groceries, utilities, housing, automobiles, etc dropped in price between those years.

I've found my comfort zone. A 15% drop in the value of my portfolio will not induce insomnia like a 44% drop would.

But, getting back to the individual in question, it's too late to make a substantial change in the future value of her retirement portfolio at this point.

Damage from decades of neglecting fiscal prudence and wishful thinking has been irretrievably inflicted already.
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

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Re: Retiring in 10 years

Post by randomguy » Mon Aug 03, 2015 8:34 pm

Swampy wrote:rca1824 wrote
You don't have to reduce your withdrawals by half when the market is down. If you run some backtesting simulations even during the great depression a 100% equity portfolio could still maintain a 3% SWR for 30+ years.Not that I would be 100% equity myself ( prefer 90/10 so I have dry powder) but the only way 100% equity fails is if the market gets a "flu" worse than its ever had.
I invite you to run the numbers on http://www.portfoliovisualizer.com for fun. Plug in 100% US stock market for the period between 1999 and 2009.

A 3% SWR which drops to 44% less than when one started retirement is NOT such a great thing to brag about.
A 4% SWR would drop that number to almost 50% of the initial withdrawn amount.

I can assure you that neither groceries, utilities, housing, automobiles, etc dropped in price between those years.

I've found my comfort zone. A 15% drop in the value of my portfolio will not induce insomnia like a 44% drop would.

But, getting back to the individual in question, it's too late to make a substantial change in the future value of her retirement portfolio at this point.

Damage from decades of neglecting fiscal prudence and wishful thinking has been irretrievably inflicted already.
You are looking at the wrong problem. She is contributing not taking money out.
Lets look at 10 years: 2005-2014. 10k/yr
100% stocks: 217k
50/50 us/bond: 187k
100% total bond: 154k

Your risk is more along the lines of 2000-2009 (about the worst 10 year period of US stocks)
100% stocks: 135k
50/50 us/bond: 153k
100% total bond: 162k

or if she gets lucky (1990-1999)
100% stocks: 371k
50/50 us/bond: 260k
100% total bond: 180k


At some point she needs to derisk. The question is when.

At this point the important things are
a) Figuring out what her current spending is
b) Figure out here expected SS
c) Figure out what here savings will be.

and see how big the gap between them is. And then get aggressive about figuring out how to cut a down. Things might not be as grim as people make out. Lets say she is making 60k today. Pays 4k in SS/medicare, 10k in federal/state and is saving 6k/yr. So she needs 40k/yr of income. SS gives ~20k/yr (another year or two of working would really help her out). That very tough. But saving 300k (assuming she has something today and can up the savings to 10k/yr) isn't crazy. Thats good for 12-15k (remember the 4% rule is a worst case. Most of the time you can spend 5 or 6%) which combined with SS might give an adequate retirment. NOt living high on the hog by any means but it is a long way from eating dog food.

Her big risk is not getting 10 years. Getting laid off at 62 would be grim (fraction of the savings and a fraction of SS). Or developing a nonfatal health care problem.

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Re: Retiring in 10 years

Post by MathWizard » Mon Aug 03, 2015 10:59 pm

If she has waited until age 57 to start thinking about retirement, I might suggest staying away from giving too much advice.

I would just say, "this is what I am doing to maximize my chances of retirement, you may need to do something different because your
circumstances are different. I based my decision on reading xxx and yyy, etc., you might want to look at those sources."

If you do much more, you will own the problem, and she will blame you when she does not meet her goal. It is entirely likely
that she will take reckless risks in an attempt to make up for 20 or 30 years that she should have been investing.

She will likely need to downsize her lifestyle considerably, either now or in retirement.

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Re: Retiring in 10 years

Post by Swampy » Tue Aug 04, 2015 7:21 am

My friend recently asked me (finally!) for some suggestions on what she should be doing to prepare for retirement. She wants to retire in 10 years, but isn't in a position financially to do so.
MathWizard is 110% correct about not giving too much advice.

Perhaps the best thing you can do for your friend is tell her to go to the public library and suggest a couple of books to start her education.

If it was me, I'd recommend the "Millionaire Next Door" by Stanley and Danko and "Don't Count On It" by Bogle.
Then I would stop giving any further advice.

She got herself into this situation. She own's it. It's her responsibility to correct it. Don't be a patsy.
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

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Re: Retiring in 10 years

Post by rca1824 » Tue Aug 04, 2015 8:23 am

Swampy wrote:rca1824 wrote
You don't have to reduce your withdrawals by half when the market is down. If you run some backtesting simulations even during the great depression a 100% equity portfolio could still maintain a 3% SWR for 30+ years.Not that I would be 100% equity myself ( prefer 90/10 so I have dry powder) but the only way 100% equity fails is if the market gets a "flu" worse than its ever had.
I invite you to run the numbers on http://www.portfoliovisualizer.com for fun. Plug in 100% US stock market for the period between 1999 and 2009.

A 3% SWR which drops to 44% less than when one started retirement is NOT such a great thing to brag about.
A 4% SWR would drop that number to almost 50% of the initial withdrawn amount.

I can assure you that neither groceries, utilities, housing, automobiles, etc dropped in price between those years.

I've found my comfort zone. A 15% drop in the value of my portfolio will not induce insomnia like a 44% drop would.

But, getting back to the individual in question, it's too late to make a substantial change in the future value of her retirement portfolio at this point.

Damage from decades of neglecting fiscal prudence and wishful thinking has been irretrievably inflicted already.
Again, an immediate 44% portfolio drop does not imply a 44% or even a 1% reduction in sustainable income. You should be choosing a low enough drawdown rate that your probability of success is still 100% despite initial portfolio drops. If you're going to use historical data alone, you will see that 80-100% equity portfolios have the highest probability of success for a given drawdown rate. So to deviate from a high-equity portfolio you need to assume a pattern of stock returns that is worse than history. You can do that, but you need to be explicit about it and not just reference history as the sole reason why equities are risky. History makes equities look really, really good and we've been lucky to avoid a major black swan event for the past 130 years and counting.
Monthly or yearly movements of stocks are often erratic and not indicative of changes in intrinsic value. Over time, however, stock prices and intrinsic value almost invariably converge. ~ WB

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Re: Retiring in 10 years

Post by Artsdoctor » Tue Aug 04, 2015 5:36 pm

tlcook47 wrote: At her age, is it worth putting her money in an all-stock market index fund for the next 10 years?
You'd be surprised how many do this. But no, you don't try to make up for lost time for taking on that amount of risk.

You will not win here and I agree with the above suggestions that you remain detached. There is almost certainly no way her expectations will be met and you will be held at least somewhat responsible.

She's not going to retire in 10 years, and she'll have to work longer. She could conceivably take the proceeds from the sale of the house and, at a later date, buy annuities. She could conceivably increase her social security benefits by delaying social security until she's no longer able to work; since social security will inevitably make up a very large chunk of her retirement income, she may as well try to maximize that as much as possible.

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Re: Retiring in 10 years

Post by bayview » Tue Aug 04, 2015 5:54 pm

rca1824 wrote:
Swampy wrote:
rca1824 wrote:You don't have to reduce your withdrawals by half when the market is down. If you run some backtesting simulations even during the great depression a 100% equity portfolio could still maintain a 3% SWR for 30+ years.Not that I would be 100% equity myself ( prefer 90/10 so I have dry powder) but the only way 100% equity fails is if the market gets a "flu" worse than its ever had.
I invite you to run the numbers on http://www.portfoliovisualizer.com for fun. Plug in 100% US stock market for the period between 1999 and 2009.

A 3% SWR which drops to 44% less than when one started retirement is NOT such a great thing to brag about.
A 4% SWR would drop that number to almost 50% of the initial withdrawn amount.

I can assure you that neither groceries, utilities, housing, automobiles, etc dropped in price between those years.

I've found my comfort zone. A 15% drop in the value of my portfolio will not induce insomnia like a 44% drop would.

But, getting back to the individual in question, it's too late to make a substantial change in the future value of her retirement portfolio at this point.

Damage from decades of neglecting fiscal prudence and wishful thinking has been irretrievably inflicted already.
Again, an immediate 44% portfolio drop does not imply a 44% or even a 1% reduction in sustainable income. You should be choosing a low enough drawdown rate that your probability of success is still 100% despite initial portfolio drops. If you're going to use historical data alone, you will see that 80-100% equity portfolios have the highest probability of success for a given drawdown rate. So to deviate from a high-equity portfolio you need to assume a pattern of stock returns that is worse than history. You can do that, but you need to be explicit about it and not just reference history as the sole reason why equities are risky. History makes equities look really, really good and we've been lucky to avoid a major black swan event for the past 130 years and counting.
rca, with respect, you are posting from the mindset of (paraphrasing your words in another thread) a high-income white collar professional with a wife who is the same, who already has a ton of assets. Meanwhile, the friend of the OP is looking at shopping in the cat food aisle at the rate at which she is going.

People who don't have much and who don't really have a lot of possibilities to reverse this in a decade simply can't take much risk. They can't say to themselves, oh well, things will probably be back up in 5 or 10 years, because they are going to need to withdraw from their portfolio during that period. Airily saying "pick a low enough drawdown rate" is not helpful, and frankly, is pretty clueless about the realities of people who haven't got your income and options.

Last night I read nearly all of your posts, and over the fourteen months that you have been posting here, you have periodically tried and set aside a variety of of very different AA's, including some quite conservative ones when you first joined. Now you're on 90/10, which is no doubt great for you, but IMO (again, with respect), it is irresponsible to suggest that this sort of allocation is great for everyone. Six months from now, when you've moved on to (I dunno...) a 50/50 AA, will you then be urging everyone to do the same?
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: Retiring in 10 years

Post by rca1824 » Tue Aug 04, 2015 6:26 pm

bayview wrote:
rca1824 wrote:
Swampy wrote:
rca1824 wrote:You don't have to reduce your withdrawals by half when the market is down. If you run some backtesting simulations even during the great depression a 100% equity portfolio could still maintain a 3% SWR for 30+ years.Not that I would be 100% equity myself ( prefer 90/10 so I have dry powder) but the only way 100% equity fails is if the market gets a "flu" worse than its ever had.
I invite you to run the numbers on http://www.portfoliovisualizer.com for fun. Plug in 100% US stock market for the period between 1999 and 2009.

A 3% SWR which drops to 44% less than when one started retirement is NOT such a great thing to brag about.
A 4% SWR would drop that number to almost 50% of the initial withdrawn amount.

I can assure you that neither groceries, utilities, housing, automobiles, etc dropped in price between those years.

I've found my comfort zone. A 15% drop in the value of my portfolio will not induce insomnia like a 44% drop would.

But, getting back to the individual in question, it's too late to make a substantial change in the future value of her retirement portfolio at this point.

Damage from decades of neglecting fiscal prudence and wishful thinking has been irretrievably inflicted already.
Again, an immediate 44% portfolio drop does not imply a 44% or even a 1% reduction in sustainable income. You should be choosing a low enough drawdown rate that your probability of success is still 100% despite initial portfolio drops. If you're going to use historical data alone, you will see that 80-100% equity portfolios have the highest probability of success for a given drawdown rate. So to deviate from a high-equity portfolio you need to assume a pattern of stock returns that is worse than history. You can do that, but you need to be explicit about it and not just reference history as the sole reason why equities are risky. History makes equities look really, really good and we've been lucky to avoid a major black swan event for the past 130 years and counting.
rca, with respect, you are posting from the mindset of (paraphrasing your words in another thread) a high-income white collar professional with a wife who is the same, who already has a ton of assets. Meanwhile, the friend of the OP is looking at shopping in the cat food aisle at the rate at which she is going.

People who don't have much and who don't really have a lot of possibilities to reverse this in a decade simply can't take much risk. They can't say to themselves, oh well, things will probably be back up in 5 or 10 years, because they are going to need to withdraw from their portfolio during that period. Airily saying "pick a low enough drawdown rate" is not helpful, and frankly, is pretty clueless about the realities of people who haven't got your income and options.

Last night I read nearly all of your posts, and over the fourteen months that you have been posting here, you have periodically tried and set aside a variety of of very different AA's, including some quite conservative ones when you first joined. Now you're on 90/10, which is no doubt great for you, but IMO (again, with respect), it is irresponsible to suggest that this sort of allocation is great for everyone. Six months from now, when you've moved on to (I dunno...) a 50/50 AA, will you then be urging everyone to do the same?
I'm flattered to have a secret admirer go through my post history. You are right that I am still learning a lot of about investing and hope to have learned even more a year from now.
Monthly or yearly movements of stocks are often erratic and not indicative of changes in intrinsic value. Over time, however, stock prices and intrinsic value almost invariably converge. ~ WB

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sdsailing
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Re: Retiring in 10 years

Post by sdsailing » Tue Aug 04, 2015 6:45 pm

She wants to invest in real estate and the first step was to sell her house? Not an obvious first move to achieve that goal. I agree with the other suggestion not to get too deep into the advising here.

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