58 y/o nearing retirement - looking at economic/stock market indicators

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
drhoda
Posts: 23
Joined: Wed Feb 11, 2015 8:13 am

58 y/o nearing retirement - looking at economic/stock market indicators

Post by drhoda » Mon Dec 03, 2018 11:20 pm

Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?

User avatar
Watty
Posts: 14585
Joined: Wed Oct 10, 2007 3:55 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by Watty » Mon Dec 03, 2018 11:29 pm

Most likely your expenses that you pay out of your retirement savings will the highest until you start Social Security and get on medicare.

Having that "bucket" of money invested conservatively makes sense.

dcop
Posts: 58
Joined: Fri Sep 08, 2017 6:06 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by dcop » Mon Dec 03, 2018 11:33 pm

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
3.55% with no risk is a very reasonable conservative plan, not crazy at all. But 3.55% on what and your plan to retirement if you aren't already? If it's 3.55 on 100k it wont grow too much in 7 years in terms of retirement at 65. But if you hit all your financials goals already or are very close then locking in is sensible. So far with what you provided only you know.

User avatar
mhadden1
Posts: 412
Joined: Tue Mar 25, 2014 8:14 pm
Location: North Alabama

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by mhadden1 » Mon Dec 03, 2018 11:38 pm

At 58, you can reasonably hope for 20-30 years in retirement. You may be right about a recession next year, but you could easily have to endure two or three or four more after that. You should make a long term plan that allows you to achieve your financial goals while sleeping well at night. If you have saved enough so that a CD ladder is enough, then great. OTOH, there is some thinking that a floor percentage allocated to stocks, maybe 25-30%, is advisable to help prevent running out of money during a long retirement.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

retiredflyboy
Posts: 23
Joined: Sun Dec 02, 2018 10:02 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by retiredflyboy » Mon Dec 03, 2018 11:43 pm

Totally understand your perspective, however, I think it best to set an asset Allocation that is appropriate for retirement and that fits your risk tolerance. I think starting at a 50-50 stock bond AA and then moving that to fit you is a good plan. For me it is 40 stock and 60 bond. This market may have a lot left to give or not, but no body really knows. Also, if you stay out of market now, you have to decide when to get back in. If you need to do 30 stock 70 bond that is fine, but would not try and time the market. To answer your question, you are not crazy to be conservative, but don’t be conservative just because you think the market is high. If you are conservative then set AA accordingly. I should add that using cd ladder for your fixed income/bond allocation makes good sense. Best of luck.
Last edited by retiredflyboy on Mon Dec 03, 2018 11:47 pm, edited 1 time in total.
Facts are stubborn things. Everything works until it doesn’t.

KlangFool
Posts: 10666
Joined: Sat Oct 11, 2008 12:35 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by KlangFool » Mon Dec 03, 2018 11:46 pm

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
drhoda,

<<Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years>>

Then, do not invest 10 years of your expense in the stock market.

<<Am I crazy to be so conservative?>>

If you do not invest 10 years of your expense, it is a prudent and normal thing to do before you retire. If you do not invest your whole portfolio, you are not conservative unless your portfolio is at least 50 times your annual expense. Your portfolio will be killed by inflation if it is not big enough.

KlangFool

smitcat
Posts: 2076
Joined: Mon Nov 07, 2016 10:51 am

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by smitcat » Tue Dec 04, 2018 11:20 am

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
If you are near retirement and have a sufficient portfolio saved to fund your expenses than going conservative is a reasonable choice.
No need to play the game if you have already won.

User avatar
Sandtrap
Posts: 5462
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by Sandtrap » Tue Dec 04, 2018 11:40 am

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
No. Not if it works for "you".
Actionably:
Find a balanced allocation between the relative "safety" of a diversification of fixed and potential average long term returns of equities.
IE: fixed: CD Ladders, Short and Interm. Term Treasuries, Muni's, etc.
IE: equities: Total Stock, etc.

Valuethinker
Posts: 36662
Joined: Fri May 11, 2007 11:07 am

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by Valuethinker » Tue Dec 04, 2018 11:42 am

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
If you have enough money for your retirement plans then there is no need to play in the equity casino.

One caveat: the historic evidence is that a portfolio which is 20% equities/ 80% US Treasury bonds (CDs are simply an alternative to that) both has lower risk and higher return than one which is 100% bonds. The benefits of diversification.

Ben Graham's rule of thumb was never to be more than 75%, nor less than 25% in equities. There's sense in that (probably 80% and 20%). There are states of the world where bonds do very badly and equities less so.

I would add that TIPS did not exist in Ben Graham's world. Inflation is a big risk for retirees in the long run - partly mitigated by delaying taking SS. In that SS deferrals are "actuarially fair" (present value should be the same whenever you take it using the legally mandated parameters for life expectancy*) however if you defer, you increase the baseline CPI-indexed income.

I can easily make a case for up to half of bond weightings being in TIPS and/ or ibonds. Assuming no CPI-indexed Defined Benefit pension, that is. TIPS are, empirically, more price volatile than straight US Treasury bonds, however.

* I am ignoring issues regarding Spousal SS and tax clawbacks for total income (I am not US based so I don't know the details of same).

drhoda
Posts: 23
Joined: Wed Feb 11, 2015 8:13 am

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by drhoda » Tue Dec 04, 2018 9:35 pm

Not totally set by any means.

25/50/25 Stocks/CDs/Cash

Equal amount in rental property, couple of small pensions kicking in later with social security. Rental income and may even reverse mortgage my home later if necessary. Good salary, Want to work for 2-3 more years. Perhaps a bit of consulting after that to limit my dipping into savings too soon.

My VERY strong gut feeling is that the stock market has no where to go but down from here. Over the next 12 mos I see market dropping to as low as 19,000 once capitulation is complete. If this does indeed happen then I may sell my CDs (even at a loss) and gradually buy back in. Otherwise I will just ride the 3.55% into the sunset.

I also do not see inflation as a significant risk. Perhaps in the shortterm but figure it stays at 2% or even lower over the next 10 years.

[OT comment removed by admin LadyGeek]

The only difference between now and 2009 is that the housing bubble is not as bad now than as then and banks are better regulated now. This may give us a slightly softer landing than 2009.

justsomeguy2018
Posts: 144
Joined: Wed Oct 03, 2018 8:11 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by justsomeguy2018 » Tue Dec 04, 2018 9:55 pm

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
If a taxable account,
I would leave $x dollars (whatever you're comfortable with) in high dividend yielding stocks/funds for the potential tax advantages of qualified dividends (non-REIT), depending on your retirement income level.

I would set aside some portion in cash or FDIC MM account to buy back in a correction, with caveat that even if market drops 40%, there is still risk remaining (dropped 90% in Great Depression before it was all said and done).

I would put 5 to 10 years worth of funds in the laddered CDs.

Perhaps some in TIPs.

Finally some in treasuries/bonds - if we hit another depression/great recession, expect another 0% interest rate environment - the current interest rate bonds would command a premium in value.

averagedude
Posts: 358
Joined: Sun May 13, 2018 3:41 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by averagedude » Tue Dec 04, 2018 10:02 pm

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
In my investing lifetime, i have never seen a time where everyone said that the economy is great, housing is affordable, and stocks are cheap. If you get out of the stockmarket with the intention of getting back in when things look better, you may never invest in stocks again.

lollipop8088
Posts: 1
Joined: Tue Dec 04, 2018 9:53 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by lollipop8088 » Tue Dec 04, 2018 10:14 pm

drhoda:
I have the same thinking as you and am planning to set up a CD ladder when I happened upon your message. I got in the stock market in a rather bad time :oops: ...January of 2018 and sold the stock fund just one month ago. With this money I plan to do CD ladder, but only short term CDs, from 3 months up to one year. Nothing longer. I get 2.45% for 6 months and 2.7% for one year. (Not brilliant) I plan to get back in stocks sometime in future when prices drop substantially and things quiet down. Mainly I live on rental income (Tokyo). I am 51, manage my own money, cruise along life as life takes me. I don’t have a grand portfolio in specifics, nothing like 20% this, 40% that, 25% others... maybe I should...which is why I recently became a fan of reading Boglehead forums...I find everything so changeable and nothing everlasting...Whatever works good for you is good enough, being comfortable and not being what “should be”. Nothing wrong with CD ladders if you can sleep at night and find 3.55% better than stock market now. At least, that’s what I plan to do.. :happy don’t know if this helps but just to let you know you are not the only one being “conservative”.

delamer
Posts: 6396
Joined: Tue Feb 08, 2011 6:13 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by delamer » Tue Dec 04, 2018 10:15 pm

drhoda wrote:
Tue Dec 04, 2018 9:35 pm
Not totally set by any means.

25/50/25 Stocks/CDs/Cash

Equal amount in rental property, couple of small pensions kicking in later with social security. Rental income and may even reverse mortgage my home later if necessary. Good salary, Want to work for 2-3 more years. Perhaps a bit of consulting after that to limit my dipping into savings too soon.

My VERY strong gut feeling is that the stock market has no where to go but down from here. Over the next 12 mos I see market dropping to as low as 19,000 once capitulation is complete. If this does indeed happen then I may sell my CDs (even at a loss) and gradually buy back in. Otherwise I will just ride the 3.55% into the sunset.

I also do not see inflation as a significant risk. Perhaps in the shortterm but figure it stays at 2% or even lower over the next 10 years.

[OT comment removed by admin LadyGeek]

The only difference between now and 2009 is that the housing bubble is not as bad now than as then and banks are better regulated now. This may give us a slightly softer landing than 2009.
What if you are wrong?

What if inflation starts to run at 5% and the S&P 500 has a annual total return of 8% (on average), over the next 10 years?

It is one thing to set aside several years of retirement expenses in cash to protect against short-term market volatility. It is another thing to bail on the stock market for long-term investing.

averagedude
Posts: 358
Joined: Sun May 13, 2018 3:41 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by averagedude » Tue Dec 04, 2018 10:29 pm

If you earn 0.5% real return after inflation from ladder CD's and use the 4% withdrawal rate, you will run out of money in 26.6 years. Alot of past investors having a balanced portfolio, using the 4% withdrawal rate, have actually seen their money grow over that time horizon.

drhoda
Posts: 23
Joined: Wed Feb 11, 2015 8:13 am

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by drhoda » Wed Dec 05, 2018 10:55 pm

justsomeguy2018 wrote:
Tue Dec 04, 2018 9:55 pm
drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
If a taxable account,
I would leave $x dollars (whatever you're comfortable with) in high dividend yielding stocks/funds for the potential tax advantages of qualified dividends (non-REIT), depending on your retirement income level.

I would set aside some portion in cash or FDIC MM account to buy back in a correction, with caveat that even if market drops 40%, there is still risk remaining (dropped 90% in Great Depression before it was all said and done).

I would put 5 to 10 years worth of funds in the laddered CDs.

Perhaps some in TIPs.

Finally some in treasuries/bonds - if we hit another depression/great recession, expect another 0% interest rate environment - the current interest rate bonds would command a premium in value.
I double checked my current portfolio. Currently sitting on 50% MM Cash/20% stocks/30% CDs, Most all of this is IRA and 401k.

40% of my networth is also in my home and rental properties which I view as a fixed income investment giving me a fairly nice annual return, albeit taxable on the rental. This makes my above portfolio even more conservative. My home is 7 years away from being paid for but I could also do a reverse mortgage then if I needed to.

Your overall advice is pretty sound I think. I'm sorta doing that. My CD's and rental property could get me through 5-10 years of retirement. Soc Security, pension, rental income, remaining 401k and reverse mortgage are my go to funds after that,

My MM account is earning 2.2% so my main debate is whether to commit this to longer term CD's to get a higher return or wait around for the impending stock market correction(s). Which could be anywhere from an additional 10% to 40%, probably something in between.

I am leaning toward dollar cost averaging every time the market drops 5% over he next 12 mos (like this week) using half my cash portfolio and putting the other half in longterm CD's. If interest rates and inflation do fall then this only makes my CD's even more of a wise investment.

Warren Buffet once said that "an investor needs to do very few things right as long as he or she avoids big mistakes".

justsomeguy2018
Posts: 144
Joined: Wed Oct 03, 2018 8:11 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by justsomeguy2018 » Wed Dec 05, 2018 11:06 pm

drhoda wrote:
Wed Dec 05, 2018 10:55 pm
justsomeguy2018 wrote:
Tue Dec 04, 2018 9:55 pm
drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
If a taxable account,
I would leave $x dollars (whatever you're comfortable with) in high dividend yielding stocks/funds for the potential tax advantages of qualified dividends (non-REIT), depending on your retirement income level.

I would set aside some portion in cash or FDIC MM account to buy back in a correction, with caveat that even if market drops 40%, there is still risk remaining (dropped 90% in Great Depression before it was all said and done).

I would put 5 to 10 years worth of funds in the laddered CDs.

Perhaps some in TIPs.

Finally some in treasuries/bonds - if we hit another depression/great recession, expect another 0% interest rate environment - the current interest rate bonds would command a premium in value.
My MM account is earning 2.2% so my main debate is whether to commit this to longer term CD's to get a higher return or wait around for the impending stock market correction(s). Which could be anywhere from an additional 10% to 40%, probably something in between.

I am leaning toward dollar cost averaging every time the market drops 5% over he next 12 mos (like this week) using half my cash portfolio and putting the other half in longterm CD's. If interest rates and inflation do fall then this only makes my CD's even more of a wise investment.

Warren Buffet once said that "an investor needs to do very few things right as long as he or she avoids big mistakes".
I like the flexibility of a MM account. In a downturn, cash is king. But you never know how long or how deep the fall in asset prices will last, or when they will ever go back up. So there's that. On the other hand, I've probably lost out on a lot of money the last 10 years by not investing in stocks (outside of 401k contributions) and keeping it in high yield checking/MM. Now I've finally reached a financially viable place where I can invest, and of course, the market is tanking. Go figure.

Most on this board will accuse you of the sin of market timing of DCA'ing 5% drops, but after a 9 year bull run, and erring on the side of being conservative, I personally don't think it's a bad strategy. But who the heck knows!

User avatar
beyou
Posts: 2093
Joined: Sat Feb 27, 2010 3:57 pm
Location: Northeastern US

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by beyou » Wed Dec 05, 2018 11:40 pm

Search for articles in sequence of return risk.
Some say reduce equities at retirement, the increase as you age. Makes sense to me, when retiring in your 50s, you still have no social security nor medicare. Seems sensible to be conservative then. As you get closer to such benefits, one can think of those streams almost like adding bonds, so you can start reducing bonds/CDs, adding stocks. If one is concerned about inflation, get tips, to complement bonds or CD ladder.

Matket timing is impossible, but planning for events such as benefits eligibility is feasible.

protagonist
Posts: 5475
Joined: Sun Dec 26, 2010 12:47 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by protagonist » Thu Dec 06, 2018 12:50 am

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.

Seems like a lot of risk and very little reward to be in the stockmarket over the next 5 - 10 years

I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
If you buy CDs, unless things have changed dramatically in the last few months (since I checked), I would consider shorter maturities. When I was looking he yield curve flattened out beyond about 2-3 years. Assuming that the CDs you are looking at have early withdrawal penalties, you can probably get close to the same return with a 2 year CD (check out secondary market as well), and if interest rates rise as projected you may be able to get a better rate when they mature.

Kevin M is the best source of information when it comes to these sorts of investments. You might want to see what he has to say.

User avatar
HomerJ
Posts: 11935
Joined: Fri Jun 06, 2008 12:50 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by HomerJ » Thu Dec 06, 2018 1:07 am

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.
All of this was true 5 years ago too (Except unemployment being low, but that's a POSITIVE indicator - not sure why you included it in a doom post)

None of the above matters.

What matters is that you're 58 nearing retirement.

So yeah, it's a good time to be more conservative. It would be a good time to be conservative even if stock market or CAPE wasn't high or if experts were predicting decent gains. Because what if the experts were wrong? (like they usually are) Or what if we had a crash even with CAPE at a "medium" level?

The risk is never zero. REGARDLESS of inaccurate economic/stock market indicators, you'd want to be conservative when nearing retirement because you can't afford a 25%-40% (or 60%!) correction.
I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye. Worked too hard to lose it all in a 25 - 40% correction.

Am I crazy to be so conservative?
I think going 100% CDs is a bit much. Is 3.55% enough to let you retire? What if inflation goes up? You're still going to have risk to worry about.

Going 30% stocks, 70% CDs might be reasonable. If the stock market crashes 40%, you're only down 12%. And you can live off the CDs while waiting stocks to come back.

And if a crash DOESN'T happen, you'll be happy to have some stocks going up, making some extra gains to protect you against inflation. You won't feel like you made a mistake by going 100% CDs if the market doubles from here.
The J stands for Jay

J295
Posts: 1738
Joined: Sun Jan 01, 2012 11:40 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by J295 » Thu Dec 06, 2018 9:26 am

To be fair, no one posting has complete information on your financial situation to give you reasonably meaningful advice. We don’t know your expenses, Dollar amount of assets and asset mix, family situation, long-term objectives, etc.

I will share with you, respectfully, that we believe having an investment policy statement that we follow is crucial. For what it’s worth, we retired six years ago at age 53 and have an age based allocation. We are on auto pilot.

I read your post as making decisions based on, in large part, current economic, political, and other similar conditions. The challenge will be, what do you do next year, or five years from now, or 10 years from now when your mind and your gut are sending you other messages. It’s easy to search Taylor’s posts or the wiki to find evidence that market timing historically has not been effective.

I sincerely wish you the best with whatever you decide. If this decision making paradigm works for you, all the better. It’s just not our cup of tea.

bradshaw1965
Posts: 720
Joined: Tue Jul 31, 2007 9:36 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by bradshaw1965 » Thu Dec 06, 2018 9:51 am

drhoda wrote:
Tue Dec 04, 2018 9:35 pm

My VERY strong gut feeling is that the stock market has no where to go but down from here. Over the next 12 mos I see market dropping to as low as 19,000 once capitulation is complete. If this does indeed happen then I may sell my CDs (even at a loss) and gradually buy back in. Otherwise I will just ride the 3.55% into the sunset.
You seem like you have great resources and know how to use them but you do know deep down that your gut feeling is not going to be helpful to you at all, and probably will hurt, no matter what the outcome right? Forecasts like this, professional or personal are plan killers.

drhoda
Posts: 23
Joined: Wed Feb 11, 2015 8:13 am

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by drhoda » Thu Dec 06, 2018 8:19 pm

HomerJ wrote:
Thu Dec 06, 2018 1:07 am
drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.
All of this was true 5 years ago too (Except unemployment being low, but that's a POSITIVE indicator - not sure why you included it in a doom post)
I actually think that the current unemployment rate being so low is the BIGGEST indicator that the economy has peaked and we are headed nowhere but down from here. There is pretty strong historical evidence showing how the stock market almost always goes into a bear market after unemployment bottoms

Karma Skimmer
Posts: 34
Joined: Mon Jan 29, 2018 11:21 am

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by Karma Skimmer » Fri Dec 07, 2018 12:57 am

You're not crazy or too conservative. I struggle with the risk-reward question all the time as well.

My thinking on CDs is the same. At 3%+ return on 5-year CDs, I like them better than Bond index funds. Some CD's have good early-withdrawal agreements--it even made sense to early-withdraw and re-buy some in my ladder. CDs serve my cash needs too because they are easy to break, I don't see the need to hold cash separately.

On risk-reward, I'm 59, retiring at 62 or 65. I'm not smart enough to make any reliable predictions about the market or the economy, and my gut feelings can vary by the hour, so I invest according to my financial plan, wherein I have accounted for sleep factor and my risk-averse nature.

User avatar
HomerJ
Posts: 11935
Joined: Fri Jun 06, 2008 12:50 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by HomerJ » Fri Dec 07, 2018 11:34 am

drhoda wrote:
Thu Dec 06, 2018 8:19 pm
HomerJ wrote:
Thu Dec 06, 2018 1:07 am
drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.
All of this was true 5 years ago too (Except unemployment being low, but that's a POSITIVE indicator - not sure why you included it in a doom post)
I actually think that the current unemployment rate being so low is the BIGGEST indicator that the economy has peaked and we are headed nowhere but down from here. There is pretty strong historical evidence showing how the stock market almost always goes into a bear market after unemployment bottoms
Isn't it the opposite?

Bear markets are caused by recessions. Recessions cause layoffs. Unemployment rises.

Low unemployment doesn't cause bear markets or even signal them.

But bear markets can cause unemployment to rise.
The J stands for Jay

gregwils
Posts: 27
Joined: Mon Oct 03, 2016 12:17 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by gregwils » Fri Dec 07, 2018 12:31 pm

This...
mhadden1 wrote:
Mon Dec 03, 2018 11:38 pm
At 58, you can reasonably hope for 20-30 years in retirement. You may be right about a recession next year, but you could easily have to endure two or three or four more after that. You should make a long term plan that allows you to achieve your financial goals while sleeping well at night.

justsomeguy2018
Posts: 144
Joined: Wed Oct 03, 2018 8:11 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by justsomeguy2018 » Sat Dec 08, 2018 1:56 am

drhoda wrote:
Thu Dec 06, 2018 8:19 pm
HomerJ wrote:
Thu Dec 06, 2018 1:07 am
drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.
All of this was true 5 years ago too (Except unemployment being low, but that's a POSITIVE indicator - not sure why you included it in a doom post)
I actually think that the current unemployment rate being so low is the BIGGEST indicator that the economy has peaked and we are headed nowhere but down from here. There is pretty strong historical evidence showing how the stock market almost always goes into a bear market after unemployment bottoms
Take what some folks here say with grain of salt, i had hesitations starting up a small-ish taxable account balance this September, as I was expecting a future market drop, i was told "only a fool market times!" So i left the money in taxable instead of pulling out like my gut told me, now I am down 10% and probably staring at a long road ahead until i even get back to even. I'm youngish so I can wait it out, but its still annoying to buy assets at a premium that i figured i couldve bought later for 10% less. You want to buy low, sell high, not be the one left holding the bag. <shrug>

tbone555
Posts: 32
Joined: Thu Apr 13, 2017 1:28 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by tbone555 » Sat Dec 08, 2018 6:25 am

justsomeguy2018 wrote:
Sat Dec 08, 2018 1:56 am
drhoda wrote:
Thu Dec 06, 2018 8:19 pm
HomerJ wrote:
Thu Dec 06, 2018 1:07 am
drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.
All of this was true 5 years ago too (Except unemployment being low, but that's a POSITIVE indicator - not sure why you included it in a doom post)
I actually think that the current unemployment rate being so low is the BIGGEST indicator that the economy has peaked and we are headed nowhere but down from here. There is pretty strong historical evidence showing how the stock market almost always goes into a bear market after unemployment bottoms
Take what some folks here say with grain of salt, i had hesitations starting up a small-ish taxable account balance this September, as I was expecting a future market drop, i was told "only a fool market times!" So i left the money in taxable instead of pulling out like my gut told me, now I am down 10% and probably staring at a long road ahead until i even get back to even. I'm youngish so I can wait it out, but its still annoying to buy assets at a premium that i figured i couldve bought later for 10% less. You want to buy low, sell high, not be the one left holding the bag. <shrug>

I feel for you, but if the market went up 10% you would be saying exactly the same thing - that you mis-timed the market by not buying in September. Many of us go through this phase when we start investing and learn our lesson the hard way.

Also...you suggested variable annuities to the OP without any reasoning. Do you have any?

User avatar
HomerJ
Posts: 11935
Joined: Fri Jun 06, 2008 12:50 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by HomerJ » Sat Dec 08, 2018 11:42 am

justsomeguy2018 wrote:
Sat Dec 08, 2018 1:56 am
drhoda wrote:
Thu Dec 06, 2018 8:19 pm
HomerJ wrote:
Thu Dec 06, 2018 1:07 am
drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Stock market is high. CAPE ratios high. Unemployment is at 10 year low. Housing near a bubble. Recession on the horizon in a year or so. Most experts predicting much lower stock market returns over the next ten years.
All of this was true 5 years ago too (Except unemployment being low, but that's a POSITIVE indicator - not sure why you included it in a doom post)
I actually think that the current unemployment rate being so low is the BIGGEST indicator that the economy has peaked and we are headed nowhere but down from here. There is pretty strong historical evidence showing how the stock market almost always goes into a bear market after unemployment bottoms
Take what some folks here say with grain of salt, i had hesitations starting up a small-ish taxable account balance this September, as I was expecting a future market drop, i was told "only a fool market times!" So i left the money in taxable instead of pulling out like my gut told me, now I am down 10% and probably staring at a long road ahead until i even get back to even. I'm youngish so I can wait it out, but its still annoying to buy assets at a premium that i figured i couldve bought later for 10% less. You want to buy low, sell high, not be the one left holding the bag. <shrug>
You shouldn't be taking our advice blindly. If you don't understand the WHY of the advice, you shouldn't be following it.

No one can predict what the market is going to do. That's the first lesson. Until you believe that, the rest of the advice won't make any sense.

Most of the time, the market trends upwards.

So far, even during the times the market dropped, it recovered and reached new heights fairly soon afterwards.

Even if it takes years to recover, during that time, you're putting new money in at lower prices, and when it does recover, and shoot up again in a new bull market, you'll be in great shape.

Sure, if you can time the market successfully, you'd be richer. But the long-term historical average of 9%-10%? That INCLUDES the crashes. It's okay to be invested during the down-turns. You STILL, so far, make a pretty decent return in the long run.
The J stands for Jay

victw
Posts: 75
Joined: Sat Feb 20, 2016 4:07 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by victw » Sat Dec 08, 2018 11:54 am

It seems like you've been asking some variation on the same question since you joined the forum in 2015. Have you developed an IPS?

willyd123
Posts: 54
Joined: Mon Feb 19, 2018 7:23 am

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by willyd123 » Sat Dec 08, 2018 12:08 pm

I am in the same situation as you are (upper 50s and nearing retirement). What I have done is to employ the bucket system where I have 3 years of expenses in cash and cash-like investments and then 7 years of shorter term investment grade bonds and the remainder of my assets are in riskier assets such as equities. I plan to spend the low risk assets first and as I do, replenish the low risk assets by selling the higher risk assets, etc. This way, I believe I'll feel safer about riding out bad equity markets for a fairly long time.

All that said, as I am nearing retirement, I am at my peak earnings years with high bonuses and equity awards vesting, etc. and thus have a lot of cash that, per my strategy, should be going into equities but I have not deployed the cash as I believe equities are pretty richly valued and equity returns will be lower over the next several years (unless we have a big pullback). I know this is timing the market and you can never do that successfully over time, but I just can't buy equities right now.

JoeRetire
Posts: 1687
Joined: Tue Jan 16, 2018 2:44 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by JoeRetire » Sat Dec 08, 2018 12:11 pm

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
I can buy 5 year CD's now with 3.55% return. Thinking about just building me a CD ladder, holding to maturity and telling the stock market and it's risk goodbye.
Sounds like a plan.
Worked too hard to lose it all in a 25 - 40% correction.
Hint: You wouldn't be losing it all in that scenario.
Am I crazy to be so conservative?
Hard to tell. It depends on what you have now, your goals, and what you need to reach them.

3funder
Posts: 786
Joined: Sun Oct 15, 2017 9:35 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by 3funder » Sat Dec 08, 2018 6:58 pm

You don't really "lose" money unless your time horizon is short. If you enjoy a 30-year retirement, it won't matter much if you lose some money next year. Your portfolio is conservative right now, so how much do you really think you're going to lose if the market crashes? Do you have an allocation to international stocks? If not, I'd suggest it, as valuations are reasonable. Others will try and spook you out of it by warning you that there's too much currency risk, but it makes little difference in the long run. If I were in your position, I'd go 25/25/50 (US Stock/International Stock/US Bond) and let it ride.

justsomeguy2018
Posts: 144
Joined: Wed Oct 03, 2018 8:11 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by justsomeguy2018 » Tue Dec 11, 2018 3:24 pm

3funder wrote:
Sat Dec 08, 2018 6:58 pm
You don't really "lose" money unless your time horizon is short. If you enjoy a 30-year retirement, it won't matter much if you lose some money next year. Your portfolio is conservative right now, so how much do you really think you're going to lose if the market crashes? Do you have an allocation to international stocks? If not, I'd suggest it, as valuations are reasonable. Others will try and spook you out of it by warning you that there's too much currency risk, but it makes little difference in the long run. If I were in your position, I'd go 25/25/50 (US Stock/International Stock/US Bond) and let it ride.
We just don't know if this is true though. If you had retired in 1999 and left a high allocation in the market, you would have had little funds to draw off for around 16 years, unless you sold a large portion off in 2008. For all we know, the S&P 500 value in the year 2029 may end up being exactly the same as its value in 1999.

livesoft
Posts: 62910
Joined: Thu Mar 01, 2007 8:00 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by livesoft » Tue Dec 11, 2018 3:29 pm

drhoda wrote:
Mon Dec 03, 2018 11:20 pm
Am I crazy to be so conservative?
No, but perhaps you are only crazy thinking that it is logical for everyone else to do as you do?
Wiki This signature message sponsored by sscritic: Learn to fish.

3funder
Posts: 786
Joined: Sun Oct 15, 2017 9:35 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by 3funder » Tue Dec 11, 2018 11:48 pm

justsomeguy2018 wrote:
Tue Dec 11, 2018 3:24 pm
3funder wrote:
Sat Dec 08, 2018 6:58 pm
You don't really "lose" money unless your time horizon is short. If you enjoy a 30-year retirement, it won't matter much if you lose some money next year. Your portfolio is conservative right now, so how much do you really think you're going to lose if the market crashes? Do you have an allocation to international stocks? If not, I'd suggest it, as valuations are reasonable. Others will try and spook you out of it by warning you that there's too much currency risk, but it makes little difference in the long run. If I were in your position, I'd go 25/25/50 (US Stock/International Stock/US Bond) and let it ride.
We just don't know if this is true though. If you had retired in 1999 and left a high allocation in the market, you would have had little funds to draw off for around 16 years, unless you sold a large portion off in 2008. For all we know, the S&P 500 value in the year 2029 may end up being exactly the same as its value in 1999.
Sure -- if all your money is in the S&P 500. If it's in international stocks and US bonds as well, I don't see how there would be any major issues.

mikeyzito22
Posts: 96
Joined: Sat Dec 02, 2017 5:42 pm

Re: 58 y/o nearing retirement - looking at economic/stock market indicators

Post by mikeyzito22 » Wed Dec 12, 2018 12:08 am

drhoda wrote:
Tue Dec 04, 2018 9:35 pm
Not totally set by any means.

25/50/25 Stocks/CDs/Cash

Equal amount in rental property, couple of small pensions kicking in later with social security. Rental income and may even reverse mortgage my home later if necessary. Good salary, Want to work for 2-3 more years. Perhaps a bit of consulting after that to limit my dipping into savings too soon.

My VERY strong gut feeling is that the stock market has no where to go but down from here. Over the next 12 mos I see market dropping to as low as 19,000 once capitulation is complete. If this does indeed happen then I may sell my CDs (even at a loss) and gradually buy back in. Otherwise I will just ride the 3.55% into the sunset.

I also do not see inflation as a significant risk. Perhaps in the shortterm but figure it stays at 2% or even lower over the next 10 years.

[OT comment removed by admin LadyGeek]

The only difference between now and 2009 is that the housing bubble is not as bad now than as then and banks are better regulated now. This may give us a slightly softer landing than 2009.
Eeeeeek. Predictions! Bubble? I love that you know the future! Tell me more.

Post Reply