Never sold but now is the time?

[tdonline]

I've been buying since 2000 and other than TLH, have never sold. Just DCAing my way to a modest retirement. My target retirement date is/was 2029. Unfortunately, I was laid off in 2024, got a new job and just lost it in a mass firing. Now I'm really nervous about my allocation of 93% stock and 7% in bonds. I have no income to buy the dip.

I was planning to re-allocate to 65/35 around 2027/28. With no job prospect on the horizon and involutary retirement/semi-retirement a possibility, I am seriously contemplating a substantial re-allocation to 65/35. The bulk of my investments is in my 401K and that's where I would re-allocate. Though I want to retire in 2029, I can't access the 401K until 2032 (yes, I am aware of options). I have about 400K in non-retirement and Roth contributions. In order of largest, Roth IRA (All US Market Index), cash and brokerage (Int'l Index)

Should I reallocate my 401K (1.2M)? Or leave it because I can't access it until 2032? And reallocate the non-retirement funds (400K) instead? The Roth contributions and brokerage accounts make up about 250K. Or reallocate across the board?

Or do nothing and don't sell while the market is going down?

My rational is that the market is still higher than what it was a year ago, when I was laid off and my investments made gains even though I haven't contributed to them. Best to lock in and preserve the gains? For my recent job, I was only there for a cup of tea and only have about 9K in retirement account so it's a non factor.

[Minderbinder]

Normally I'd say "trust your process" but it appears as though you are not terribly comfortable at 93/7 given your current life situation... So I would give serious consideration to finding that level that you can live with and getting there ASAP. Sounds like it's 65/35.

Fwiw I think 93/7 approaching retirement is extremely, extremely aggressive. You've done very well with that. But it seems aggressive to me (I'm at like 30% US, 17% international, balance in bonds and cash).

[ROIGuy]

Or do nothing and don't sell while the market is going down?

This is the problem. You don't know if the market will go down for a couple more days and then go higher than it did before. Or it may go down another 15%. You should base you decision on your current numbers and how it they will play out in the future, rather than a what if ideology.
If a year ago I told you the market would be at today's high would you of been happy with taking the profits?

Fear = "What if"
Success = "Even if"

[climber2020]

Or do nothing and don't sell while the market is going down?

If this were me, this is the option I'd choose. Do nothing with my investments and look for any job that will allow me to cover my living expenses.

[Mike Scott]

How much cash do you have (emergency fund)?
How long will your cash last?

I would not change the 401k.
I would not make any major changes in Roth or taxable.
You can spend any dividends from taxable without selling.
If your cash runs out you can sell from taxable and then Roth contributions.

Minimize your budget and make the cash last as long as possible before selling anything.
Maximize the job search.
I would hold on and wait before making major changes.

Transitioning to 65/35 is fine but don't do it in a panic.
Make a longer term plan on how to get there.

[enad]

If you're worried or losing sleep over your AA, then changing it to allow you to have peace of mind is worth it. Everyone's risk for appetite is different and it can change based on life events and/or as one nears retirement. Go with your gut, make your changes and sleep better.

[SeekingSecurity]

I think our timelines are pretty similar. We started investing around 2000 and plan to retire in 2029.

To the degree that you can, I would ignore what is happening in the markets on a day-to-day basis. Instead, ask yourself what asset allocation feels right to you given your goals. In November, based on our four year retirement goal, we moved to a 60/40 AA.

We asked ourselves if a big market run-up that we would partly lose out on would bother us. The answer was "no." We've already seen plenty of gains since we started investing. It felt like time to bank those gains.

We asked ourselves if a major market downturn would cause a retirement delay or a lot of anxiety. The answers were "maybe" and "probably." So, we played with a spreadsheet until we found an AA that led to "no" and "unlikely." 60/40 does that for us.

[GaryA505]

If you're worried or losing sleep over your AA, then changing it to allow you to have peace of mind is worth it. Everyone's risk for appetite is different and it can change based on life events and/or as one nears retirement. Go with your gut, make your changes and sleep better.

That's the way I think of it. If a dip in the market makes me nervous, my asset allocation has too much equities. I changed to about 40/60 as I ease into retirement, and the March 10 dip didn't bother me a bit. As a matter of fact I expected it, and I expect more (and worse) to come, at some future time that I can't predict.

[tdonline]

Normally I'd say "trust your process" but it appears as though you are not terribly comfortable at 93/7 given your current life situation... So I would give serious consideration to finding that level that you can live with and getting there ASAP. Sounds like it's 65/35.

Fwiw I think 93/7 approaching retirement is extremely, extremely aggressive. You've done very well with that. But it seems aggressive to me (I'm at like 30% US, 17% international, balance in bonds and cash).

I'm a set it and leave it person, to a fault. I thought I was at 85/15 and this week, did some spreadsheet work to discover 93/7. And frankly, I was a bit greedy too. I thought I could ride the wave a couple of more years at 85/15. But seeing 93/7 after losing my job and current events has scared me. I rode through 2008/09 oblivious but I'm definitely feeling things now.

[Everlast311]

Setting aside what the market will or won't do in the near future (unknown), 65/35 is likely more appropriate for someone within a few years of retirement.

[Harmanic]

If you change it to a more conservative allocation, you need to be comfortable with the possibility of underperforming the market. For me, my concern has always been having "enough" to maintain my standard of living, not getting rich from market returns. Therefore, my focus was more on saving than asset allocation.

[unbiased]

That's a good nest egg you've saved up over the years. Great job! You've already done the hardest part. Now give yourself a break and do what you got to do to sleep better at night.

As others have said, with uncertainty about your ideal date, de-risk. The market is mildly down, but WAY up over the last several years. Bond yields are still better than in a long time.

I would focus on two principles with rebalancing: (1) liquidity before 2032; and, (2) tax efficiency.

Liquidity might require a modest amount of bonds/cash in your taxable accounts--depending on your expected expenses before 2032. You don't want to spend taxable to "0" too soon. Obviously, you still have a Roth that you can withdrawal contributions from in the meantime and it's not the end of the world to take a 10% tax penalty for early withdrawals as a backup.

Regarding tax efficiency, if you have limited income to pay taxes then rebalance in tax-advantaged. I have a chunk of cash sitting in my 401K. If I need to "spend cash" I simply sell equities in taxable and buy equities with the cash in my 401K. Same difference (just watch for wash sales). But I ran out of TLH opportunities long ago, so this is the best approach for me.

[tdonline]

Or do nothing and don't sell while the market is going down?

If a year ago I told you the market would be at today's high would you of been happy with taking the profits?

Fear = "What if"
Success = "Even if"

That's why I think, yeah, the drops recently suck but I'm still up from a year ago when I was laid off and stopped contributing to my accounts. Time to be less aggressive even though like anyone else, I want those gains. It's just psychologically very difficult to step down after 25 years of buying.

[Rob Relyea]

Normally I'd say "trust your process" but it appears as though you are not terribly comfortable at 93/7 given your current life situation... So I would give serious consideration to finding that level that you can live with and getting there ASAP. Sounds like it's 65/35.

Fwiw I think 93/7 approaching retirement is extremely, extremely aggressive. You've done very well with that. But it seems aggressive to me (I'm at like 30% US, 17% international, balance in bonds and cash).

I'm a set it and leave it person, to a fault. I thought I was at 85/15 and this week, did some spreadsheet work to discover 93/7. And frankly, I was a bit greedy too. I thought I could ride the wave a couple of more years at 85/15. But seeing 93/7 after losing my job and current events has scared me. I rode through 2008/09 oblivious but I'm definitely feeling things now.

Doing a rebalance now to get back to 85/15 seems worth considering. That is just executing on your “current plan”.

Beyond that, figuring out next career steps and desired asset allocation changes could be the next steps after that.

I helped my mom get from a 93/7 to 60/40 a few years ago. She now rebalances to 60/40 when it gets 5% away from her target. Helped her sleep much better.

[tdonline]

How much cash do you have (emergency fund)?
How long will your cash last?

I would not change the 401k.
I would not make any major changes in Roth or taxable.
You can spend any dividends from taxable without selling.
If your cash runs out you can sell from taxable and then Roth contributions.

Minimize your budget and make the cash last as long as possible before selling anything.
Maximize the job search.
I would hold on and wait before making major changes.

Transitioning to 65/35 is fine but don't do it in a panic.
Make a longer term plan on how to get there.

Have about 10 months of expenses in savings. Though I want to avoid this, parent has about 2 years of cash I can access. She offered and in the long run, it's my inheritance. My brokerage account is tiny and dividends are in the low 3 figures monthly.

[rkhusky]

If you're worried or losing sleep over your AA, then changing it to allow you to have peace of mind is worth it. Everyone's risk for appetite is different and it can change based on life events and/or as one nears retirement. Go with your gut, make your changes and sleep better.

That's the way I think of it. If a dip in the market makes me nervous, my asset allocation has too much equities. I changed to about 40/60 as I ease into retirement, and the March 10 dip didn't bother me a bit. As a matter of fact I expected it, and I expect more (and worse) to come, at some future time that I can't predict.

I am also at 40/60 and sleep well at night. All these folk that think the sky is falling with a little dip have way too much in stock and are perhaps not internationally diversified. I expect a 50% drop could happen at any time and am prepared.

[GaryA505]

That's the way I think of it. If a dip in the market makes me nervous, my asset allocation has too much equities. I changed to about 40/60 as I ease into retirement, and the March 10 dip didn't bother me a bit. As a matter of fact I expected it, and I expect more (and worse) to come, at some future time that I can't predict.

I am also at 40/60 and sleep well at night. All these folk that think the sky is falling with a little dip have way too much in stock and are perhaps not internationally diversified. I expect a 50% drop could happen at any time and am prepared.

Precisely!

[CookieDough]

I find that when I want to make changes to my AA, it helps to always think of them as permanent changes due to either new information or new circumstances. In other words, I don't change my AA now with the intention of changing it back later.

If 93% stock is too aggressive for you, especially in your current circumstances, I'd say pick a new AA that you can live with for the foreseeable future: maybe 65/35, maybe 75/25, maybe 50/50, whatever you feel more solid in and can stick with. An "all-weather" AA. Don't make the change unless you consider it permanent.

That approach has helped me not make knee-jerk changes as my situation and understanding have evolved over the years.

[delamer]

How much cash do you have (emergency fund)?
How long will your cash last?

I would not change the 401k.
I would not make any major changes in Roth or taxable.
You can spend any dividends from taxable without selling.
If your cash runs out you can sell from taxable and then Roth contributions.

Minimize your budget and make the cash last as long as possible before selling anything.
Maximize the job search.
I would hold on and wait before making major changes.

Transitioning to 65/35 is fine but don't do it in a panic.
Make a longer term plan on how to get there.

Have about 10 months of expenses in savings. Though I want to avoid this, parent has about 2 years of cash I can access. She offered and in the long run, it's my inheritance. My brokerage account is tiny and dividends are in the low 3 figures monthly.

Sell enough assets to get 4 years of expenses into cash equivalents. That will carry you to your planned retirement date.

This could in part be in your 401(k) or its rollover. It isn’t clear why you are reluctant to take money from your 401(k). With a very low income, this is a great opportunity to take money out of that account (if needed) and pay very little in income taxes.

[tdonline]

Have about 10 months of expenses in savings. Though I want to avoid this, parent has about 2 years of cash I can access. She offered and in the long run, it's my inheritance. My brokerage account is tiny and dividends are in the low 3 figures monthly.

Sell enough assets to get 4 years of expenses into cash equivalents. That will carry you to your planned retirement date.

This could in part be in your 401(k) or its rollover. It isn’t clear why you are reluctant to take money from your 401(k). With a very low income, this is a great opportunity to take money out of that account (if needed) and pay very little in income taxes.

Reluctant? The primary reason I'm asking about de-risking my 401K is precisely because I may have to draw from it earlier than 59.5. That's why I'm considering re-allocating investments to lower the 93% in equities. If I knew for sure I won't touch my 401K until 2032, then I'd likely leave the allocation the way it is. That's 7 years away which gives me some time to pick another time to reallocate. I'm worried that I may need to tap into it within 3-5 years. That's iffy in terms of the market recovering from a big downturn.

[tesuzuki2002]

It sounds like 93/7 got you to where you are today.

Do you have enough cash to ride out the next 24 months with out dipping into investments.?

I would look to find a job that will pay for your current expenses... so you are not pulling money out.

I too wonder if I will get more conservative as I approach retirement... I do not plan to do that as I would plan for a bucket strategy to pull money over to stable investment for the 1-3 year horizon... and then stay agressive... but that's not what everyone wants...

I've come to a place where I appreciate a 30% drop in value so I can buy in at a lower price... Perhaps thinking shifts when you are no longer buying in...

[tdonline]

I've come to a place where I appreciate a 30% drop in value so I can buy in at a lower price... Perhaps thinking shifts when you are no longer buying in...

Trust me, no job, retirement on the horizon, yeah it shifts.

Laid off and mass fired all within a year was not how I envisioned the autumn of my career.

[delamer]

Sell enough assets to get 4 years of expenses into cash equivalents. That will carry you to your planned retirement date.

This could in part be in your 401(k) or its rollover. It isn’t clear why you are reluctant to take money from your 401(k). With a very low income, this is a great opportunity to take money out of that account (if needed) and pay very little in income taxes.

Reluctant? The primary reason I'm asking about de-risking my 401K is precisely because I may have to draw from it earlier than 59.5. That's why I'm considering re-allocating investments to lower the 93% in equities. If I knew for sure I won't touch my 401K until 2032, then I'd likely leave the allocation the way it is. That's 7 years away which gives me some time to pick another time to reallocate. I'm worried that I may need to tap into it within 3-5 years. That's iffy in terms of the market recovering from a big downturn.

You said “I can’t access the 401(k) until 2032.” Given that is not literally true, I thought you were reluctant to do so and that you preferred to spend doen your other assets first.

Regardless, my advice doesn’t change — put several years of expenses in cash. 10 months isn’t snough in your circumstances.

[tesuzuki2002]

I've come to a place where I appreciate a 30% drop in value so I can buy in at a lower price... Perhaps thinking shifts when you are no longer buying in...

Trust me, no job, retirement on the horizon, yeah it shifts.

Laid off and mass fired all within a year was not how I envisioned the autumn of my career.

I have several passion projects that would pay me enough to live on pay bills, medical, food & beer etc... I would not be able to save like I can at my career job.. But I'd likely fall into a better healthier routine and enjoy living.

Do you have anything you've been wanting to do to could provide enough income?

[ER_LatePlanner]

I got laid off less than 3 years before my planned (but rather modest) early retirement, so I can at least somewhat relate to the position you find yourself in. Many here are much more financially knowledgeable and savvy than I, but I'll offer up some thoughts as someone who's been scrambling to make a not-quite-as-early retirement still feasible, albeit a little fragile. And take heart, you've got more $ to work with than I did at the time of my layoff.

1. While continuing to look for decently-paying work, you might want to give yourself a short deadline before you take at least *some* kind of job. Any pay can help, and I found that there were steeply diminishing returns after weeks of all-day every day job searches.

2. Immediately work on ways to cut "unwise" spending. That would be most non-essentials though not necessarily all. A little income plus a little reduction in expenses keeps you afloat longer if you're stuck spending down savings.

3. This one's more personal and you'll need to evaluate your own situation carefully. But FWIW, here's my voice of experience. If it comes to it, at least *consider* your mother's offer of "early inheritance". My spouse and I aren't just *willing*, but actively *want* to gift our kids as early as we think we safely can. We would not want them to turn it down during a time of real need.
(But as stated before, our plan is a little fragile. It'll survive a fairly bad future without big changes but we'd need to make real adjustments if there's a repeat of a couple of the worst eras historically. On the other hand, any plan that holds up for a pretty bad future will start giving us excess beyond our guardrails in the event of an average future. That's when early gifts can happen.)

4. Liquidity matters a lot right now. So I would say to focus first on your brokerage account. Make sure to set yourself up with a good amount of cash & short term safe assets there. (A couple decent options are SGOV and VGSH. There's many more.) But also realize that without a regular income, you may/will find yourself in the 0% LTCG bracket. So you may not need to *hurry* to sell long-held brokerage equities. While you remain low in income, you can probably sell these off a little at a time, as needed, at 0% LTCG tax.

5. The next priority (IMHO) is your Roth account. As long as possible, I'd try to keep Roth funds tilted strongly toward long-term growth. You can pull out contributions later if you find you need to, but start by approaching things as though you won't need to. Your future self will thank you.

6. Anything else you need to do to get to your desired 65/35 asset allocation can be done in your 401k with no immediate tax consequence.

[index245]

Delete

[tdonline]

I rebalanced to 70/30. Mostly in my 401K and a little bit in a Roth IRA. I went with peace of mind--I just have to not look when the market rockets up starting tomorrow.

The Roth IRA was the one I had to think through. I only exchanged 75K to a bonds but I hedged just in case I need cash in 3 or 4 years. That one, if circumstances allow, I will rebalance to all growth.

With cash (including parental help) and brokerage, I have enough to survive 3.5 years. And I will not be umemployed for 3.5 years...if I have to take on any work to bring in some cash, that's going to be the way it goes. Hopefully, I'll be employed soon enough and back to buying.

Many thanks to all contributors to this thread. I reread it many times before making my decision.

[tdonline]

Trust me, no job, retirement on the horizon, yeah it shifts.

Laid off and mass fired all within a year was not how I envisioned the autumn of my career.

I have several passion projects that would pay me enough to live on pay bills, medical, food & beer etc... I would not be able to save like I can at my career job.. But I'd likely fall into a better healthier routine and enjoy living.

Do you have anything you've been wanting to do to could provide enough income?

Nothing springs to mind that would bring in enough to pay the bills. I volunteer with rescue animals. A retired friend who pet sits part time via a company. She shared my story with the company owner and owner wants to chat. So there's that, but it's more like snack money.

[rkhusky]

That’s the disadvantage of step functions in AA, eg 90/10 until 5 years before retirement and then 50/50. You might be forced into retirement 6 years early and the market could crash at about the same time. Reason why TDF’s typically have smooth glide paths.

[MBB_Boy]

Your situation is the only one among the recent "should I sell / get out of market" threads that I have any empathy for. You have had some big hits over the last year and that sucks. I'm sorry.

Your psyche and likely ego are bruised, and it's messing with your confidence in your plan. And that is a perfectly natural and frankly healthy response.

Whether 93/7 was / is too aggressive for your original plan is debatable and an argument that I don't think is worth having. What seems apparent to me is that it's too aggressive for you RIGHT NOW. You are unemployed with uncertain prospects. I didn't catch your field, but I have MBA friends and former co-workers in the tech space that are on month 6 or more of looking for jobs.

I think you can adjust your AA to be more conservative right now and not feel like you have to keep it forever and ever amen. If you want to adjust it for possible involuntary early retirement now because you aren't comfortable, do it. Then change it back once you land a new gig and let the fog of war dissipate.

[White Coat Investor]

while the market is going down?

So you want to sell AFTER the market went down? Really?

Your crystal ball also seems a lot clearer than mine, so maybe I should be taking tips from you.

[WeakOldGuy]

I find that when I want to make changes to my AA, it helps to always think of them as permanent changes due to either new information or new circumstances. In other words, I don't change my AA now with the intention of changing it back later.

If 93% stock is too aggressive for you, especially in your current circumstances, I'd say pick a new AA that you can live with for the foreseeable future: maybe 65/35, maybe 75/25, maybe 50/50, whatever you feel more solid in and can stick with. An "all-weather" AA. Don't make the change unless you consider it permanent.

That approach has helped me not make knee-jerk changes as my situation and understanding have evolved over the years.

This makes perfects sense for the OP. His AA may have been appropriate for him when employed, but now that he is not employed and the employment prospects are uncertain, a change in his AA to reflect the change in circumstances seems wise.

I would look at a more conservative AA at this point, regardless of what the market is doing. 60/40 would be the place I would look at as a baseline and adjust more or less risky from there. How to get there from the current 93/7 is another question. Of course that 93/7 was two days ago so it may be different now.

[Wannaretireearly]

Your situation is the only one among the recent "should I sell / get out of market" threads that I have any empathy for. You have had some big hits over the last year and that sucks. I'm sorry.

Your psyche and likely ego are bruised, and it's messing with your confidence in your plan. And that is a perfectly natural and frankly healthy response.

Whether 93/7 was / is too aggressive for your original plan is debatable and an argument that I don't think is worth having. What seems apparent to me is that it's too aggressive for you RIGHT NOW. You are unemployed with uncertain prospects. I didn't catch your field, but I have MBA friends and former co-workers in the tech space that are on month 6 or more of looking for jobs.

I think you can adjust your AA to be more conservative right now and not feel like you have to keep it forever and ever amen. If you want to adjust it for possible involuntary early retirement now because you aren't comfortable, do it. Then change it back once you land a new gig and let the fog of war dissipate.

I like this. Be flexible with AA as life meanders. Why not…
Tbh, I rebalanced into equities yesterday. Sold TRD 2025 and bought 2035.

Now, I’m close enough to retirement I should be more conservative. I probably moved from 70/30 to 80/20 today. I’ll be ok drifting back down to 70:30

[tibbitts]

I think you can adjust your AA to be more conservative right now and not feel like you have to keep it forever and ever amen. If you want to adjust it for possible involuntary early retirement now because you aren't comfortable, do it. Then change it back once you land a new gig and let the fog of war dissipate.

The problem with this is that you will end up repeatedly buying high and selling low. I did that a few times during my career because my income was closely tied to the economy. I would have been much better off sticking to the same plan. And I didn't have anywhere near 93/7 ever, but it still "felt" differently during downturns. So I can see the OP changing, maybe gradually, to a lower equity allocation, but not going back.

[MBB_Boy]

I think you can adjust your AA to be more conservative right now and not feel like you have to keep it forever and ever amen. If you want to adjust it for possible involuntary early retirement now because you aren't comfortable, do it. Then change it back once you land a new gig and let the fog of war dissipate.

The problem with this is that you will end up repeatedly buying high and selling low. I did that a few times during my career because my income was closely tied to the economy. I would have been much better off sticking to the same plan. And I didn't have anywhere near 93/7 ever, but it still "felt" differently during downturns. So I can see the OP changing, maybe gradually, to a lower equity allocation, but not going back.

That's a potential problem, but how many times in life would you realistically go through something like 2 job losses in a year? And selling low twice over a lifetime wouldn't matter in the end anyway. Assuming both job losses happened to coincide with a big drop, which isn't even what happened to OP

[windaar]

Now I'm really nervous about my allocation of 93% stock and 7% in bonds.

Then this wasn't the right AA for you. I'm sorry that many here the last few years let recency bias give very un-Boglehead advice. Best move now if a crash comes is to grit your teeth and ride it out. Capitulation means you lost. And maybe a lot. Lesson to younger investors is that maybe we shouldn't roll our eyes at "age in bonds/fixed." There's a reason for that guideline.

[SeekingSecurity]

Now I'm really nervous about my allocation of 93% stock and 7% in bonds.

Capitulation means you lost. And maybe a lot.

I'm not sure about this. The OP is banking a lot of gains. As Nisiprius's recent post shows (in another thread), this is barely a downturn when looked at over the scale of the past 25 years that the OP has been investing. Rather than thinking of this as capitulating, you can think of it as realizing your AA is out of alignment with your needs and fixing it while you are still way up.

[Minderbinder]

Capitulation means you lost. And maybe a lot.

I'm not sure about this. The OP is banking a lot of gains. As Nisiprius's recent post shows (in another thread), this is barely a downturn when looked at over the scale of the past 25 years that the OP has been investing. Rather than thinking of this as capitulating, you can think of it as realizing your AA is out of alignment with your needs and fixing it while you are still way up.

Exactly. We're at what, levels from November?

If the allocation is wrong for life circumstances, 10% lower after the market has more than doubled the preceding 5 years is nothing. Particularly given international is up YTD.

It's way cheaper to realize this now and not after a 50% drawdown.

I agree won't don't jerk the wheel but I don't think the current environment is some kind of "it's been so bad, you can't sell now and just have to white knuckle it" moment either.

[tibbitts]

The problem with this is that you will end up repeatedly buying high and selling low. I did that a few times during my career because my income was closely tied to the economy. I would have been much better off sticking to the same plan. And I didn't have anywhere near 93/7 ever, but it still "felt" differently during downturns. So I can see the OP changing, maybe gradually, to a lower equity allocation, but not going back.

That's a potential problem, but how many times in life would you realistically go through something like 2 job losses in a year? And selling low twice over a lifetime wouldn't matter in the end anyway. Assuming both job losses happened to coincide with a big drop, which isn't even what happened to OP

I don't understand how selling low even once, much less twice, in mid-career necessarily wouldn't have a dramatic effect on lifetime return. It could be a positive or negative impact (or none at all of course) depending on how you timed the reentry.

Everybody here talks about the compounding of tiny expense ratio differences. So how is getting out (say with just half your money) at say 10% down and then not getting back in (if that happens at all) until the market is back at the previous all-time-high, not just as impactful if not more?

[SeekingSecurity]

That's a potential problem, but how many times in life would you realistically go through something like 2 job losses in a year? And selling low twice over a lifetime wouldn't matter in the end anyway. Assuming both job losses happened to coincide with a big drop, which isn't even what happened to OP

I don't understand how selling low even once, much less twice, in mid-career necessarily wouldn't have a dramatic effect on lifetime return. It could be a positive or negative impact (or none at all of course) depending on how you timed the reentry.

Everybody here talks about the compounding of tiny expense ratio differences. So how is getting out (say with just half your money) at say 10% down and then not getting back in (if that happens at all) until the market is back at the previous all-time-high, not just as impactful if not more?

I don't think the OP is down 10%. The market is down 10% from it's high. That's not quite the same.

Totally made up example:
Imagine I invested $1,000 25 years ago and magically got a steady 10% return every year. At the market high in February, I would have had almost $11,000. After a 10% drop, I would have about $9,900. Am I down $1,100 or up $8,900? Depends on the timeframe.

[paul2112]

If you want some safety for some of your $, you can get brokered 1-5 year CDs paying 4% on Schwab.

[paul2112]

If you want some safety for some of your $, you can get brokered 1-5 year CDs paying 4% on Schwab.

[tibbitts]

I don't understand how selling low even once, much less twice, in mid-career necessarily wouldn't have a dramatic effect on lifetime return. It could be a positive or negative impact (or none at all of course) depending on how you timed the reentry.

Everybody here talks about the compounding of tiny expense ratio differences. So how is getting out (say with just half your money) at say 10% down and then not getting back in (if that happens at all) until the market is back at the previous all-time-high, not just as impactful if not more?

I don't think the OP is down 10%. The market is down 10% from it's high. That's not quite the same.

Totally made up example:
Imagine I invested $1,000 25 years ago and magically got a steady 10% return every year. At the market high in February, I would have had almost $11,000. After a 10% drop, I would have about $9,900. Am I down $1,100 or up $8,900? Depends on the timeframe.

It doesn't matter if the OP is down 10%, which is why I said "say 10%"... it's just an example. The point is if you sell lower and buy back higher it's significant. I'd say tiny percentages of gains and losses are insignificant, but the expense ratio police would come along and educate me on the difference between .03% and .07% or whatever over time.

[MBB_Boy]

I don't think the OP is down 10%. The market is down 10% from it's high. That's not quite the same.

Totally made up example:
Imagine I invested $1,000 25 years ago and magically got a steady 10% return every year. At the market high in February, I would have had almost $11,000. After a 10% drop, I would have about $9,900. Am I down $1,100 or up $8,900? Depends on the timeframe.

It doesn't matter if the OP is down 10%, which is why I said "say 10%"... it's just an example. The point is if you sell lower and buy back higher it's significant. I'd say tiny percentages of gains and losses are insignificant, but the expense ratio police would come along and educate me on the difference between .03% and .07% or whatever over time.

Ehhhh......I'm pretty sure only the most hardcore of expense ratio police get worked up over that. And the honest ones of those do the math on it and the amount isn't that much compared to the total you have after a lifetime of investing - but having a few extra grand is obviously better than not having it.

In the example we are talking about, selling low once or twice in an investing lifetime due to something drastic like a big health scare, unexpected kid, double job loss etc. is not going to be the difference between reaching your retirement goals and failure. Not if you've been doing everything else right over 30+ years. We can contrive an example (e.g., selling at 40% loss in 2008 right before retiring), but this isn't the investing theory section

[tibbitts]

It doesn't matter if the OP is down 10%, which is why I said "say 10%"... it's just an example. The point is if you sell lower and buy back higher it's significant. I'd say tiny percentages of gains and losses are insignificant, but the expense ratio police would come along and educate me on the difference between .03% and .07% or whatever over time.

Ehhhh......I'm pretty sure only the most hardcore of expense ratio police get worked up over that. And the honest ones of those do the math on it and the amount isn't that much compared to the total you have after a lifetime of investing - but having a few extra grand is obviously better than not having it.

In the example we are talking about, selling low once or twice in an investing lifetime due to something drastic like a big health scare, unexpected kid, double job loss etc. is not going to be the difference between reaching your retirement goals and failure. Not if you've been doing everything else right over 30+ years. We can contrive an example (e.g., selling at 40% loss in 2008 right before retiring), but this isn't the investing theory section

I agree that it's not likely to make the difference between retiring or not for most of us, but disagree that just once or twice (including the 2008 example you gave) can't easily make a lifestyle difference. And I disagree with getting out after a modest loss and then re-entering later as a downturn mitigation strategy. It's not that difficult to "contrive" other examples, like the precipitous drop in 1987.

[MBB_Boy]

Ehhhh......I'm pretty sure only the most hardcore of expense ratio police get worked up over that. And the honest ones of those do the math on it and the amount isn't that much compared to the total you have after a lifetime of investing - but having a few extra grand is obviously better than not having it.

In the example we are talking about, selling low once or twice in an investing lifetime due to something drastic like a big health scare, unexpected kid, double job loss etc. is not going to be the difference between reaching your retirement goals and failure. Not if you've been doing everything else right over 30+ years. We can contrive an example (e.g., selling at 40% loss in 2008 right before retiring), but this isn't the investing theory section

I agree that it's not likely to make the difference between retiring or not for most of us, but disagree that just once or twice (including the 2008 example you gave) can't easily make a lifestyle difference. And I disagree with getting out after a modest loss and then re-entering later as a downturn mitigation strategy. It's not that difficult to "contrive" other examples, like the precipitous drop in 1987.

That's fine - but to be clear, I said nothing about getting out after a loss as a downturn mitigation strategy. That's market timing and I don't agree with that