Any retirees thought about cutting spending in March 2020?

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flyingaway
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Any retirees thought about cutting spending in March 2020?

Post by flyingaway »

One of the strategies suggested to deal with sequence of withdrawal risks (SWR) is to cut spending when the market is in serious trouble. I think we had one of those moments in March this year for a short period of time. However, cutting spending in retirement is not a fun thing as it requires sacrifice one way or another.

I am wondering if any retirees thought about cutting spending (and how) in March when the market was down hugely? I knew it turned out as not needed. But the thinking at that time could be of help for me (and others) to plan for retirement, i.e., should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
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Re: Any retirees thought about cutting spending in March 2020?

Post by tibbitts »

flyingaway wrote: Sun Sep 20, 2020 9:34 am One of the strategies suggested to deal with sequence of withdrawal risks (SWR) is to cut spending when the market is in serious trouble. I think we had one of those moments in March this year for a short period of time. However, cutting spending in retirement is not a fun thing as it requires sacrifice one way or another.

I am wondering if any retirees thought about cutting spending (and how) in March when the market was down hugely? I knew it turned out as not needed. But the thinking at that time could be of help for me (and others) to plan for retirement, i.e., should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
I retired at the end of 2019. Of course most of us have cut back on spending beginning in March but it came naturally. Last week I bought gas for my car for the first time since March. I've had to stay home so haven't paid someone to take care of my house/llawn/mail/etc. while I was away. I haven't eaten in restaurants. All kinds of spending cuts. It was painful but not in the sense that it was a decision we had to make.
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Re: Any retirees thought about cutting spending in March 2020?

Post by cadreamer2015 »

We cancelled our safari trip to Africa this year.
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Re: Any retirees thought about cutting spending in March 2020?

Post by jebmke »

For many people, spending dropped naturally this time (restaurants, haircuts, travel, transportation .....).

In general, however, I think it makes sense to plan a retirement budget that includes some buffer for discretionary and contingencies with the idea that (a) you can't plan ahead for everything - we just aren't that omniscient and (b) if things go south, you will naturally want to identify spending that can be eliminated or certainly delayed.

When I built my ER budget, I included funds for travel, leisure activities and various one time "capital" items. But I also added a 10% contingency across the entire budget for things I had not though of.
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Re: Any retirees thought about cutting spending in March 2020?

Post by MikeG62 »

There were a number of threads on this topic during the lockdown.

Here are a few:

viewtopic.php?f=2&t=310523&p=5158278&hi ... y#p5158278

viewtopic.php?f=11&t=314507&p=5223628&h ... y#p5223628

viewtopic.php?f=2&t=316545&p=5290239&hi ... y#p5290239

In our experience, it was largely as jebmke said, "spending dropped naturally" and not due to an effort to cut spending.
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JoeRetire
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Re: Any retirees thought about cutting spending in March 2020?

Post by JoeRetire »

flyingaway wrote: Sun Sep 20, 2020 9:34 am I am wondering if any retirees thought about cutting spending (and how) in March when the market was down hugely? I knew it turned out as not needed. But the thinking at that time could be of help for me (and others) to plan for retirement, i.e., should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
We never thought of cutting our spending. We aren't worried about a sequence of returns problem.

If you are close enough to the line so that this could become a worry, perhaps working a few more years would be a wise choice.
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SQRT
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Re: Any retirees thought about cutting spending in March 2020?

Post by SQRT »

cadreamer2015 wrote: Sun Sep 20, 2020 9:41 am We cancelled our safari trip to Africa this year.
Likewise also a biking trip to Normandy in June. This was because of pandemic related travel restrictions not the market drop. Hardly eating out at all for the same reason. Many other spending items are down as we have basically been holed up at our lake house and not using our other properties. Total spending in 2020 will be down about 23% from 2019 all because of the pandemic. Cash is piling up (more liquid than at any time since 2008) but most of these spending reductions were forced on us by pandemic restrictions rather than being our choice. We are actually actively looking for ways to spend a little more.

However, as a result of the market drop we did decide to defer for one year a rebuild of our lake house. This is a very large project for us (well into 7 figures) and will necessitate some portfolio liquidation. Also, given the uncertainty inherent in the March time frame (how bad was it going to get, would construction even be possible etc) it seemed prudent to defer. Have now committed to proceed next year come “hell or high water” despite the fact that our Canadian based portfolio is still down this year.

70 years old, retired 14 years. If you use a VPW method you would automatically reduce your spending if the market declines over a certain period. Whether this is a problem or not depends on what proportion of your total spending is discretionary.
Last edited by SQRT on Mon Sep 21, 2020 11:02 am, edited 4 times in total.
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Re: Any retirees thought about cutting spending in March 2020?

Post by obgraham »

We have left our "daily living" expenses about the same since the virus.

But we canceled all our travel. That was our major expense beyond daily living.

So our IRA withdrawals (thats what we live on) are markedly down this year. That's probably good for our net worth, but it is certainly damaging to our "quality of life" factor.
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Re: Any retirees thought about cutting spending in March 2020?

Post by SQRT »

JoeRetire wrote: Sun Sep 20, 2020 10:03 am
We never thought of cutting our spending.
So I guess no travel or eating out in your budget?
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Re: Any retirees thought about cutting spending in March 2020?

Post by Vanguard Fan 1367 »

I certainly thought about cutting my spending in March 2020. Thankfully it didn't take too many months for the market to bounce back and it didn't dip as much as it could have. So I didn't get too carried away with actually cutting spending, I just thought about it. I also didn't do any wild extra spending in March.
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Re: Any retirees thought about cutting spending in March 2020?

Post by Cruise »

Had a fun conversation this morning with MsCruise. She really liked the crab cakes I made last night. The container of crab was like $30.00. MsCruise said. " I guess since we aren't traveling, we have money for crab!"
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Re: Any retirees thought about cutting spending in March 2020?

Post by Toons »

Not here


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Re: Any retirees thought about cutting spending in March 2020?

Post by JoeRetire »

SQRT wrote: Sun Sep 20, 2020 5:29 pm
JoeRetire wrote: Sun Sep 20, 2020 10:03 am
We never thought of cutting our spending.
So I guess no travel or eating out in your budget?
We haven't traveled during the pandemic. That had nothing at all to do with cutting spending - we have no need to do that. We have plenty of money such that a down market doesn't worry us.

We have eaten out less than usual. Once again, that had nothing to do with the market or cutting expenses.
Last edited by JoeRetire on Sun Sep 20, 2020 9:22 pm, edited 1 time in total.
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Re: Any retirees thought about cutting spending in March 2020?

Post by HomerJ »

flyingaway wrote: Sun Sep 20, 2020 9:34 am One of the strategies suggested to deal with sequence of withdrawal risks (SWR) is to cut spending when the market is in serious trouble. I think we had one of those moments in March this year for a short period of time. However, cutting spending in retirement is not a fun thing as it requires sacrifice one way or another.

I am wondering if any retirees thought about cutting spending (and how) in March when the market was down hugely? I knew it turned out as not needed. But the thinking at that time could be of help for me (and others) to plan for retirement, i.e., should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
Well, with Covid-19, I'm thinking many people cut spending anyway, regardless of market movements.

So it's tough to figure out cause and effect here.
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Re: Any retirees thought about cutting spending in March 2020?

Post by HomerJ »

JoeRetire wrote: Sun Sep 20, 2020 9:19 pm
SQRT wrote: Sun Sep 20, 2020 5:29 pm
JoeRetire wrote: Sun Sep 20, 2020 10:03 am
We never thought of cutting our spending.
So I guess no travel or eating out in your budget?
We haven't traveled during the pandemic. That had nothing at all to do with cutting spending - we have no need to do that. We have plenty of money such that a down market doesn't worry us.

We have eaten out less than usual. Once again, that had nothing to do with the market or cutting expenses.
If you've eaten out less than usual, and traveled less than usual, then you've cut expenses.. Unless you've spent more money somewhere else?
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Re: Any retirees thought about cutting spending in March 2020?

Post by JoeRetire »

HomerJ wrote: Sun Sep 20, 2020 9:23 pm
JoeRetire wrote: Sun Sep 20, 2020 9:19 pm
SQRT wrote: Sun Sep 20, 2020 5:29 pm
JoeRetire wrote: Sun Sep 20, 2020 10:03 am
We never thought of cutting our spending.
So I guess no travel or eating out in your budget?
We haven't traveled during the pandemic. That had nothing at all to do with cutting spending - we have no need to do that. We have plenty of money such that a down market doesn't worry us.

We have eaten out less than usual. Once again, that had nothing to do with the market or cutting expenses.
If you've eaten out less than usual, and traveled less than usual, then you've cut expenses.. Unless you've spent more money somewhere else?
If you read the question, you'll see it was "if any retirees thought about cutting spending (and how) in March when the market was down hugely?" and not "did anyone spend less due to the pandemic". Two different things.

I answered the question that was actually asked. You seem to be looking for something different.

Had the market tanked in March for non-pandemic reasons, we would have traveled and eaten out as usual.
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Normchad
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Re: Any retirees thought about cutting spending in March 2020?

Post by Normchad »

I’m not retire yet.

My notional plan for retirement though is to determine my annual budget each year on January 1st. So for me, any impacts from something like COVID-19 or a big market swing wouldn’t be seen or felt until the following January.
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Re: Any retirees thought about cutting spending in March 2020?

Post by FrugalInvestor »

All I did to spend money in March was do little projects around the house to keep myself entertained. We've cut our spending by 25% or more for the last few months without even trying! It was a little tougher in '08-'09 because you could still do things but it was hard for us to use our deflated investments to pay for them.

I like feeling like I have some control over my destiny and for that reason I just naturally cut back when times get tough. Doing so may not have a huge impact in the long term but it still makes me feel like I'm taking some positive action.
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Re: Any retirees thought about cutting spending in March 2020?

Post by sil2017 »

Retired in June 2017.
I made sure I had enough money before I retired.
The stock market does not have any affect on my monthly or even daily spending.
I have been spending much less with covid as I have cancelled 3 international trips this year.
My major spending is eating out/take out which I enjoy alot.
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Re: Any retirees thought about cutting spending in March 2020?

Post by HomerJ »

JoeRetire wrote: Sun Sep 20, 2020 9:25 pm
HomerJ wrote: Sun Sep 20, 2020 9:23 pm
JoeRetire wrote: Sun Sep 20, 2020 9:19 pm
SQRT wrote: Sun Sep 20, 2020 5:29 pm
JoeRetire wrote: Sun Sep 20, 2020 10:03 am
We never thought of cutting our spending.
So I guess no travel or eating out in your budget?
We haven't traveled during the pandemic. That had nothing at all to do with cutting spending - we have no need to do that. We have plenty of money such that a down market doesn't worry us.

We have eaten out less than usual. Once again, that had nothing to do with the market or cutting expenses.
If you've eaten out less than usual, and traveled less than usual, then you've cut expenses.. Unless you've spent more money somewhere else?
If you read the question, you'll see it was "if any retirees thought about cutting spending (and how) in March when the market was down hugely?" and not "did anyone spend less due to the pandemic". Two different things.
The question is faulty because two things happened in March... The Pandemic and the stock market crash.

Sure, people can SAY they would have spent the same regardless of the stock market crash.

But the fact is people spent less, most because of the pandemic, and some because of the crash.

I understand that you have plenty of money, and would not cut spending even if the stock market crashed.

I'm just saying most answers will likely give the OP false data unless they determine WHY people didn't spend in March.

There's a pretty huge obvious reason out there.
Last edited by HomerJ on Sun Sep 20, 2020 11:14 pm, edited 2 times in total.
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Re: Any retirees thought about cutting spending in March 2020?

Post by steve roy »

Cutting spending was easy.

Last year we were constantly on the go: cross-country drives, trips overseas, trips to New York, Boston, Philly. Half a week at Disneyworld.

All the expenses attached to all that gallavanting came an end the first week of March and money outflow has been way less since. Thank you Covid-19.
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Re: Any retirees thought about cutting spending in March 2020?

Post by HomerJ »

flyingaway wrote: Sun Sep 20, 2020 9:34 am One of the strategies suggested to deal with sequence of withdrawal risks (SWR) is to cut spending when the market is in serious trouble. I think we had one of those moments in March this year for a short period of time. However, cutting spending in retirement is not a fun thing as it requires sacrifice one way or another.

I am wondering if any retirees thought about cutting spending (and how) in March when the market was down hugely? I knew it turned out as not needed. But the thinking at that time could be of help for me (and others) to plan for retirement, i.e., should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
The trick is to have enough in bonds/cash/CDs so you don't have to care about stocks so much.

That said, if the market crashed right after I retired (in normal times, not pandemic times), I'm guessing I would cut back the following year a bit.

For example, if it was a normal stock market crash in March, I would have still gone on all my vacations in 2020, but I probably would have put off booking the first vacation in 2021... Probably drop from 3 trips in 2021 to 2 trips. Of course, if the market rebounded as fast as it did this time, I'd probably book an extra trip at the end of 2021 or early in 2022.

Or maybe not... It's not like 2 trips instead of 3 trips is a huge sacrifice.
should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
It seems to me that working a few more years could be a more painful choice than accepting there's a chance of only going on 2 trips instead of 3 trips.

But you have a very easy job with summers off. In your case, I might keep working.
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Re: Any retirees thought about cutting spending in March 2020?

Post by Sheepdog »

We didn't think about cutting spending, but we did a little by accident only because this year so many things did not happen because of the pandemic like cutting of sporting events, theater, some restaurants, and so on.
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Re: Any retirees thought about cutting spending in March 2020?

Post by marcopolo »

i would hope a well thought out retiremnt plan would not have required any significant cuts to spending based on what happened in March. It was short, and really not even that deep.

Agree with others that the nature of the pandemic has reduced expenses unintentionally.
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Re: Any retirees thought about cutting spending in March 2020?

Post by MathIsMyWayr »

JoeRetire wrote: Sun Sep 20, 2020 9:25 pm
HomerJ wrote: Sun Sep 20, 2020 9:23 pm
JoeRetire wrote: Sun Sep 20, 2020 9:19 pm
SQRT wrote: Sun Sep 20, 2020 5:29 pm
JoeRetire wrote: Sun Sep 20, 2020 10:03 am
We never thought of cutting our spending.
So I guess no travel or eating out in your budget?
We haven't traveled during the pandemic. That had nothing at all to do with cutting spending - we have no need to do that. We have plenty of money such that a down market doesn't worry us.

We have eaten out less than usual. Once again, that had nothing to do with the market or cutting expenses.
If you've eaten out less than usual, and traveled less than usual, then you've cut expenses.. Unless you've spent more money somewhere else?
If you read the question, you'll see it was "if any retirees thought about cutting spending (and how) in March when the market was down hugely?" and not "did anyone spend less due to the pandemic". Two different things.

I answered the question that was actually asked. You seem to be looking for something different.

Had the market tanked in March for non-pandemic reasons, we would have traveled and eaten out as usual.
Reading between lines is helpful, sometimes. :wink:
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Re: Any retirees thought about cutting spending in March 2020?

Post by snowox »

Retired a little over 5 years- I was waiting for a market correction to test my will through it since retiring its been pretty much a straight up ride. Seeing my portfolio drop 700k and buying the dip with extra cash I raised on withdrawals, rebalancing and not panic selling was more my focus one might say- doing the right thing. My budget is predetermined to be about 10% higher so i was saving about an extra 1k a month on the rise moving to cash. Anyhow like so many others with kids in sports that travel and not being able to go anywhere really we didnt need to cut spending because as opposed to having a 1k surplus for a few months there it was more than double that. In our state we shut down completely for almost 3 months. Bought the dip and did some things around a recently purchased house we wanted to do. But my instincts , nothing more says were going to be seeing another downturn in the near future. Nothing to support that just instincts with the Pandemic flaring up, Elections and so on. Peaks and valleys!
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Re: Any retirees thought about cutting spending in March 2020?

Post by JoeRetire »

HomerJ wrote: Sun Sep 20, 2020 10:54 pm The question is faulty
Uhm, okay.
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Re: Any retirees thought about cutting spending in March 2020?

Post by JoeRetire »

MathIsMyWayr wrote: Mon Sep 21, 2020 2:18 am Reading between lines is helpful, sometimes. :wink:
There were lines?
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Re: Any retirees thought about cutting spending in March 2020?

Post by toocold »

Like everybody else, our spending dropped due to the pandemic, not because of the market crash. We cancelled our trip to Hawaii, but we did use that money to buy something for DW for our anniversary.
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Re: Any retirees thought about cutting spending in March 2020?

Post by dknightd »

OP, I'm still new to this. Only retired one year. The March 2020 event was just a short blip. I barely had enough time to add to my stock holdings.

As far as the general plan, if the stock market tanks, stays there for some period (years), and the pandemic had not naturally cut our spending, we would still not have cut our spending in year one. I'm using a modified version of VPW. I keep a 3 year buffer in cash. The rest is roughly 60% stocks/40% other. If the market tanks, I do not have to adjust spending in the first year (although I would start to think about it). In the second year I'd probably cut back on discretionary spending a little (meanwhile I'd also be rebalancing back into stocks using other funds). If the market had not recovered by year 3 we'd have to cut spending even more. Having a cash buffer may not be optimal from an income standpoint, but, it means we do not have to make any sudden changes in lifestyle. I'm pretty sure we could reduce our spending by 25% and still be comfortable. If we had to cut our spending by 50% (not likely, but I suppose possible) we'd still have a roof over our heads and food in our bellies. Being able to spread that reduction over a couple of years would make it easier.

The opposite is also true. If stocks have a banner year, we are not all of a sudden going to start spending more. We'll slowly ramp up spending if our investments have several good years in a row.

So, to answer your question, I did not think about cutting spending in March 2020.
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Re: Any retirees thought about cutting spending in March 2020?

Post by PhoebeCoco »

Like many people who posted here, my spending got cut naturally because there was nothing I could spend money on.

I have a 7-year cash buffer. Some people may think this would be too high for them, but it allows me to sleep well, even through pandemics and stock market ups and downs.

Good sleep is priceless.
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Re: Any retirees thought about cutting spending in March 2020?

Post by Ron »

No.

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Re: Any retirees thought about cutting spending in March 2020?

Post by MBB_Boy »

SQRT wrote: Sun Sep 20, 2020 5:29 pm
JoeRetire wrote: Sun Sep 20, 2020 10:03 am
We never thought of cutting our spending.
So I guess no travel or eating out in your budget?
Or they, like us and many others, continued to do both. Just a change in form, albeit in some cases temporarily (restaurants came back at difference paces depending on where you live). Our trips just became domestic, and more frequent as opposed to 2 big trips a year.

Still under budget though I suppose
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Re: Any retirees thought about cutting spending in March 2020?

Post by Broken Man 1999 »

The pandemic reduced our expenses, with no attempts on our part, but rather from fewer trips out and doing things that cost money.

We ate restaurant food as much as we always did via delivery, but saved some by not having to pay for liquor/beer/wine like we would have if we were actually at the restaurants. We enjoy great alcohol prices at Broken Man's bar, with no tipping allowed.

March was a test of faith in AAs for all investors, the first pullback of that magnitude for many. The pullback was not my first rodeo, and I took full advantage of rebalancing opportunities.

For the most part, living on our retirement portfolio (since 2015) has been smooth sailing. Of course our SS benefits help immensely.

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Re: Any retirees thought about cutting spending in March 2020?

Post by TN_Boy »

flyingaway wrote: Sun Sep 20, 2020 9:34 am One of the strategies suggested to deal with sequence of withdrawal risks (SWR) is to cut spending when the market is in serious trouble. I think we had one of those moments in March this year for a short period of time. However, cutting spending in retirement is not a fun thing as it requires sacrifice one way or another.

I am wondering if any retirees thought about cutting spending (and how) in March when the market was down hugely? I knew it turned out as not needed. But the thinking at that time could be of help for me (and others) to plan for retirement, i.e., should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
It did not make sense to cut spending in March.

Even if your plan is to cut spending during market dislocations, as we have seen, in March it wasn't possible to predict what the market was about to do. One month is not interesting. Thus I do not think March 2020 was "one of those moments"

The turmoil in March, like the crash in 07/08, was relatively short-lived. The more interesting question is what to do in a 2000 - 2003 scenario, when the market went down three years in a row. At what point do you cut spending? By how much?

It is not obvious how to reduce spending during market downturns. It's a fine idea, but as described here:

https://earlyretirementnow.com/safe-wit ... te-series/

easier said than done. See the "Flexibility to the Rescue" section of the linked page above.

[edited to add...] Our spending went down after March, sure, but not because of a portfolio survival concern. It dropped because we couldn't travel anymore.
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Re: Any retirees thought about cutting spending in March 2020?

Post by SQRT »

MBB_Boy wrote: Mon Sep 21, 2020 9:43 am
SQRT wrote: Sun Sep 20, 2020 5:29 pm
JoeRetire wrote: Sun Sep 20, 2020 10:03 am
We never thought of cutting our spending.
So I guess no travel or eating out in your budget?
Or they, like us and many others, continued to do both. Just a change in form, albeit in some cases temporarily (restaurants came back at difference paces depending on where you live). Our trips just became domestic, and more frequent as opposed to 2 big trips a year.

Still under budget though I suppose
I suspect the pandemic restrictions might be a little tighter in Canada. Very few Canadians are travelling anywhere. Eating out( or taking out) ) is gradually coming back but still generally way down. A major chain of restaurants in Toronto just disclosed their revenues are still down by 60%. It is really hard not to be under budget in this environment. Oh, one expense that’s up for us is liquor. :sharebeer
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Re: Any retirees thought about cutting spending in March 2020?

Post by Doom&Gloom »

Never gave it a second thought. We had a bathroom renovation planned for the summer. We changed our timing of the work a bit due to the pandemic and family circumstances but not the stock market drop. The obvious and natural decrease in spending precipitated by the pandemic probably helped ease the financial sting of the renovation.
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flyingaway
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Re: Any retirees thought about cutting spending in March 2020?

Post by flyingaway »

JoeRetire wrote: Sun Sep 20, 2020 10:03 am
flyingaway wrote: Sun Sep 20, 2020 9:34 am I am wondering if any retirees thought about cutting spending (and how) in March when the market was down hugely? I knew it turned out as not needed. But the thinking at that time could be of help for me (and others) to plan for retirement, i.e., should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
We never thought of cutting our spending. We aren't worried about a sequence of returns problem.

If you are close enough to the line so that this could become a worry, perhaps working a few more years would be a wise choice.
This looks like a wise advice.
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4nursebee
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Re: Any retirees thought about cutting spending in March 2020?

Post by 4nursebee »

Not retired, spouse is
Did not cut back
Buried heads in sand
Stopped figuring balance

Keep large enough e fund to weather bad stuff seems to be solution for this problem
Pale Blue Dot
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flyingaway
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Re: Any retirees thought about cutting spending in March 2020?

Post by flyingaway »

HomerJ wrote: Sun Sep 20, 2020 11:13 pm
flyingaway wrote: Sun Sep 20, 2020 9:34 am One of the strategies suggested to deal with sequence of withdrawal risks (SWR) is to cut spending when the market is in serious trouble. I think we had one of those moments in March this year for a short period of time. However, cutting spending in retirement is not a fun thing as it requires sacrifice one way or another.

I am wondering if any retirees thought about cutting spending (and how) in March when the market was down hugely? I knew it turned out as not needed. But the thinking at that time could be of help for me (and others) to plan for retirement, i.e., should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
The trick is to have enough in bonds/cash/CDs so you don't have to care about stocks so much.

That said, if the market crashed right after I retired (in normal times, not pandemic times), I'm guessing I would cut back the following year a bit.

For example, if it was a normal stock market crash in March, I would have still gone on all my vacations in 2020, but I probably would have put off booking the first vacation in 2021... Probably drop from 3 trips in 2021 to 2 trips. Of course, if the market rebounded as fast as it did this time, I'd probably book an extra trip at the end of 2021 or early in 2022.

Or maybe not... It's not like 2 trips instead of 3 trips is a huge sacrifice.
should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
It seems to me that working a few more years could be a more painful choice than accepting there's a chance of only going on 2 trips instead of 3 trips.

But you have a very easy job with summers off. In your case, I might keep working.
Thanks for your reply. My job is easy, but I don't like it anymore if not for the money.

You and some others suggested not to cut spending in the first market down year, that seems to be a good strategy.
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Re: Any retirees thought about cutting spending in March 2020?

Post by flyingaway »

jebmke wrote: Sun Sep 20, 2020 9:43 am For many people, spending dropped naturally this time (restaurants, haircuts, travel, transportation .....).

In general, however, I think it makes sense to plan a retirement budget that includes some buffer for discretionary and contingencies with the idea that (a) you can't plan ahead for everything - we just aren't that omniscient and (b) if things go south, you will naturally want to identify spending that can be eliminated or certainly delayed.

When I built my ER budget, I included funds for travel, leisure activities and various one time "capital" items. But I also added a 10% contingency across the entire budget for things I had not though of.
Did you have a buffer portfolio that is 10% or more larger, compared to you standard retirement portfolio (for example, your financial independence portfolio)?
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Re: Any retirees thought about cutting spending in March 2020?

Post by Stoic9 »

Yes we decreased spending but spent more.

In our case wifeiod became bored during lockdown and uprooted our entire retirement plan. She decided we should move and buy a new house, this all in a 30 day period. She hesitated the first day when she wasn't sure she really wanted to spend that much of our retirement money. I explained that you don't spend money when you buy a house. So off we went and bought a new house...new furniture...new window dressings...new on and on. I did an analysis and if I subtract this 180 turn from our plan (new house, all the accompaniments) our spending for 2020 is down 57%. We usually spend half the year out of country, lots of entertainment, eating out.
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Re: Any retirees thought about cutting spending in March 2020?

Post by Golf maniac »

I retired in 2015. I update my portfolio quarterly and run projections on how long my money will last. I have not cut my spending since 2015 and did not cut it in March. If there was a sustained downturn that lasted years and my projections consistently showed I would run out of money, then and only then would I cut spending.
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Re: Any retirees thought about cutting spending in March 2020?

Post by jebmke »

flyingaway wrote: Mon Sep 21, 2020 1:27 pm
jebmke wrote: Sun Sep 20, 2020 9:43 am For many people, spending dropped naturally this time (restaurants, haircuts, travel, transportation .....).

In general, however, I think it makes sense to plan a retirement budget that includes some buffer for discretionary and contingencies with the idea that (a) you can't plan ahead for everything - we just aren't that omniscient and (b) if things go south, you will naturally want to identify spending that can be eliminated or certainly delayed.

When I built my ER budget, I included funds for travel, leisure activities and various one time "capital" items. But I also added a 10% contingency across the entire budget for things I had not though of.
Did you have a buffer portfolio that is 10% or more larger, compared to you standard retirement portfolio (for example, your financial independence portfolio)?
One portfolio - and we never really looked at it much in total until we got close to retirement. The 10% extra spend was simply to allow for things I hadn't thought of when I did the budget - or to cover any large errors that I might have made in my assumptions.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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Re: Any retirees thought about cutting spending in March 2020?

Post by obgraham »

Another aspect to this discussion: though it surely sounds like most retirees spent less just because the opportunity to spend declined. However, I bet most of us at least thought about the decline in portfolio/IRA value, and the economy in general.

In our case it served to remind us that we do indeed have the capacity to contract our lifestyle should a long term major collapse ensue. We look on a lot of the techno-perks of today as not particularly essential. If need be, for instance, we can always return to reading a real book -- one with paper pages!

I'm not so sure the younger generations are set up to withstand such a contraction as easily.
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Re: Any retirees thought about cutting spending in March 2020?

Post by SQRT »

obgraham wrote: Mon Sep 21, 2020 5:05 pm Another aspect to this discussion: though it surely sounds like most retirees spent less just because the opportunity to spend declined. However, I bet most of us at least thought about the decline in portfolio/IRA value, and the economy in general.

In our case it served to remind us that we do indeed have the capacity to contract our lifestyle should a long term major collapse ensue. We look on a lot of the techno-perks of today as not particularly essential. If need be, for instance, we can always return to reading a real book -- one with paper pages!

I'm not so sure the younger generations are set up to withstand such a contraction as easily.
Agree. In our case 25% reduction pretty easy. 50% probably doable. Not sure about younger people. Would vary greatly by their stage of life. Just bought a new house? Just got pregnant? Type of job they have? Hard to generalize.

One thing is certain. Old retired people like us are generally much better off than most younger people just starting out.
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Re: Any retirees thought about cutting spending in March 2020?

Post by snowox »

SQRT wrote: Mon Sep 21, 2020 5:22 pm
obgraham wrote: Mon Sep 21, 2020 5:05 pm Another aspect to this discussion: though it surely sounds like most retirees spent less just because the opportunity to spend declined. However, I bet most of us at least thought about the decline in portfolio/IRA value, and the economy in general.

In our case it served to remind us that we do indeed have the capacity to contract our lifestyle should a long term major collapse ensue. We look on a lot of the techno-perks of today as not particularly essential. If need be, for instance, we can always return to reading a real book -- one with paper pages!

I'm not so sure the younger generations are set up to withstand such a contraction as easily.
Agree. In our case 25% reduction pretty easy. 50% probably doable. Not sure about younger people. Would vary greatly by their stage of life. Just bought a new house? Just got pregnant? Type of job they have? Hard to generalize.

One thing is certain. Old retired people like us are generally much better off than most younger people just starting out.
Younger people wont like that answer but I couldn't agree more. Having lived a little for sure makes a difference in going through situation like big drops as in march. Though alot of younger people do save money by doing a lot of tech things like video games etc..
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Re: Any retirees thought about cutting spending in March 2020?

Post by flyingaway »

SQRT wrote: Mon Sep 21, 2020 5:22 pm
obgraham wrote: Mon Sep 21, 2020 5:05 pm Another aspect to this discussion: though it surely sounds like most retirees spent less just because the opportunity to spend declined. However, I bet most of us at least thought about the decline in portfolio/IRA value, and the economy in general.

In our case it served to remind us that we do indeed have the capacity to contract our lifestyle should a long term major collapse ensue. We look on a lot of the techno-perks of today as not particularly essential. If need be, for instance, we can always return to reading a real book -- one with paper pages!

I'm not so sure the younger generations are set up to withstand such a contraction as easily.
Agree. In our case 25% reduction pretty easy. 50% probably doable. Not sure about younger people. Would vary greatly by their stage of life. Just bought a new house? Just got pregnant? Type of job they have? Hard to generalize.

One thing is certain. Old retired people like us are generally much better off than most younger people just starting out.
I agree. If you have a lot of room to cut in your budget, then you will not panic. If one retires with a barebone budget at the beginning of 2020, then the feeling might not be good.
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Re: Any retirees thought about cutting spending in March 2020?

Post by Dottie57 »

I pay myself the same amount each month. No change. It is not an extravagant amount.
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Re: Any retirees thought about cutting spending in March 2020?

Post by CyclingDuo »

flyingaway wrote: Sun Sep 20, 2020 9:34 am One of the strategies suggested to deal with sequence of withdrawal risks (SWR) is to cut spending when the market is in serious trouble. I think we had one of those moments in March this year for a short period of time. However, cutting spending in retirement is not a fun thing as it requires sacrifice one way or another.

I am wondering if any retirees thought about cutting spending (and how) in March when the market was down hugely? I knew it turned out as not needed. But the thinking at that time could be of help for me (and others) to plan for retirement, i.e., should we work for a few more years to mitigate the possible painful choice of cutting spending in retirement?
I realize you are asking retirees, but we play that game every year in the May - August months with time off from our jobs (education) and were able to use this 6-7 month stretch so far as a nice pre-retirement testing ground. Others have answered and there have been threads on this throughout the year, but most all of us had spending cut automatically by staying home. Gas, restaurants, discretionary spending, personal grooming, entertainment, travel, etc... all dropped due to Covid-19.

Here we are 6 months later, and according to our budget app, our spending is still cut back due to the ongoing pandemic causing us to do less of many things we were doing prior to the pandemic.

We have usually averaged daily spending around $182-183 per day over the past few years according to the budget app (all household and lifestyle expenses). The last two weeks of March and the month of April, we averaged only $139 per day which was an all time low for us - at least in the past 5 years. May - September not much has changed, although we did start eating out at restaurants where we could sit outside about 1x a week and we did start getting haircuts, and DW's nails again mid-Summer. Budget app says since April and due to still not spending much on gas, entertainment, travel, discretionary, etc... that we are around a daily run rate of $143-45 per day give or take which month. Again, pretty much all automatic when the working from home takes the commute out, the lunch expense when at work is gone, going to movies has not happened, attending no live performances, not going to county or state fairs, and simply not really buying any "stuff" outside of groceries and household needs.

Not sure that has been much of a sacrifice for us as we have kept busy gardening, riding bicycles, puttering around the house, walking the dogs, tuning into Netflix/Hulu/AppleTV/Prime, reading books and articles, cooking, visiting friends in town for outside social distance sit and visit and eat and drink get togethers, etc... . If anything, it's been a good pre-retirement trial to see if we could cut back (we now know we could even though this time it was created more by an automatic response to the pandemic). 7 months thus far and we are on an annual run rate of spending $13-14K less on our expenses as a result.

Could we do it again in retirement in the scenario you were asking about with sequence of returns risk/SWR/down market?

Sure. It doesn't feel like we have really sacrificed anything outside of some unruly hair for a few months and less travel than we have done in years past. It hasn't really been a painful choice as you mention. Pretty sure we could cut even more if we put our minds to it.

CyclingDuo
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