well , I was up .0002 % But up is up , As far as market timing , I'll leave that to anyone who thinks they know what they are doing. If I happen to hit it good , It's just plain ol luck , But sometimes It's "GOOD TO BE LUCKY"
I think buying chinese equities here is the smartest play and this is why, check this out if you have a chance I think china can run big now that its down over 55% from highs
Welcome TG, Your doin good for 22 , Keep it up , Your points are well made , the problem is , it's CHINA , who knows what can happen , one day XI wakes up and BOOM all companies are nationalized , look at what they have done to Hong Kong
@WXYZ EXCELLENT POST! As someone in their mid 30's it is insightful to see someone who has made a plan, had to make some minor changes and excecated it successfully. I really like your 3 year rule and was always kind of wondering how I would actually start drawing on my investments when I get to that point. 3 years seems to get you out of most any market situation without having to buy in a dip. I see you went with annuities which I know very little about besides you give up a large chuck of money for guarantied monthly payments. I played with a basic annuity calculator just to get a little more insight. I can see the appeal from a risk/sleep at night standpoint but the annual growth rate would have to be pretty darn good to beat out using that money other ways. What's your take on the 4% rule for drawing? My current focus is balancing retirement, investing, cash. Right now my yearly expenses are low and they will be going up. We plan on buying a house in the next 12 months (trying to keep pushing it out and hoping prices will level out) so a large chunk of the cash portion will transition into home equity. Right now I am just maxing my 401k and saving as much cash as possible. After the home purchase I want to start a roth IRA to provide some tax free income because I am going to get hammered hard on 401k taxes. The two main points I am focusing on are minimizing taxes in retirement and finding the right mix of saving and spending. As of now I don't have children so I don't mind leaving surviving relatives with 'some' money I am also not going to go without just for someone else to get a windfall. Rough Net Worth Breakdown 401k 39% HSA 2% Investments 43% Cash 6.6% Cars/Equipment 11%
Well Mr TireSmoke. For most people the 4% rule is not going to come anywhere close to the amount of money they will want to have per year in retirement. In addition in my view it gives people a very FALSE sense of the reality of drawing down personal assets. AND....most people are not going to follow that sort of rule anyway. Lets take my case: I retired at age 49 in 1999.......although age is really not relevant to this example. One year later.....2000....was the start of the dot-com collapse which lasted till 2002. This market drop SLICED about 50% off many portfolios....if not more. Six years later we had the near economic collapse of 2008/2009 which took the markets down by about 65%. How is that for TIMING when you just retired one year prior in 1999 and were going to live off personal assets. From what I have seen and experienced it is going to be EXTREMELY DIFFICULT for the average person....in fact MOST people......to successfully manage their retirement money. My view is that MOST people are going to SIGNIFICANTLY take too much risk and are going to SIGNIFICANTLY underestimate the outflow of money from spending and potential market losses. Here is an example that I often use.......based somewhat on my experience......but......using a starting amount of money more similar to what most people might have when they retire. In this example the retiring person thinks that the markets are going to give them a return that will about make up for what they are taking out each year.........about a VERY CONSERVATIVE 5% to 6% return......so they will generally maintain their HOARD of money and perhaps even grow it a bit. Typical human.....happy thinking. So.....you retire with $2,000,000. Start of year 1.......you draw out $100,000 (5%) to live on for the year. You are down to $1,900,000. Over year 1 a nasty correction hits.....you are down 25%......$475,000.....you now have $1,425,000. Start of year 2......you again draw out your $100,000 (because your expenses require this much) to live on for the year. You are down to $1,325,000 Over the course of year 2 the nasty correction continues.....down another 20%....you now have $1,060,000 Start of year 3....you draw out the $100,000......you are now down to $960,000. So at the start of year 3 you have now lost or used over HALF your entire retirement fund.....IN ONLY 3 YEARS....so you wake up, start to panic and go to cash.....from here the games begin.....market timing....jumping in and out.....whipsaw.....panic......etc, etc, etc. This is a REAL example....but with lower numbers than I had. I had to live through a 50% CRASH one year after retiring and a 65% CRASH six years later. In my example above the draw down was ONLY 5% to start. From my experience most people are going to have just as many expenses in their early retirement years as when they were working. So....having successfully done what I consider to be nearly impossible......living on personal assets for 21 years......I dont think most people will have much of a chance to make it work. I was lucky that I started the retirement journey with the plan to keep 5 years of money liquid. BUT.....if I did not have the experience with money that I have and the amount of money that I started with.....it probably would have been a DISASTER. As to the ANNUITIES......the ONLY annuities that I would EVER consider are basic income annuities.....all the others are TRASH. I basically created a pension for myself.....and my wife.....for life. We both come from families where most of the people lived into their 90's. So it is a very good probability that one of us will live into our 90's. The total annuity income will continue FOR LIFE of whichever one of us lives the longest. I really dont care about return on the annuity money. BUT....if I did....it is RISK FREE MONEY....a CASH EQUIVALENT......so NO return that I could get.......on a risk free cash equivalent......is going to equal what that payout is going to be. In addition.....since I now have a guaranteed LIFETIME INCOME......may stock market money is fully long term money for life. I am able to take my usual risk with that money and continue fully invested for life since I do not need to use that money. Anyway.....you get the idea. This is my plan and it has worked very nicely for me. Others......that are not me......will have to just do what is best for them. Obviously there is no ONE plan that fits everyone......but......I know from having lived it that it is MUCH MORE DIFFICULT to pull off than many people realize. Most people are going to find out the hard way when they retire. Keep in mind.....the past 10 years have given many young investors a VERY INFLATED view of market returns. This is NOT going to be long term reality. Thanks for the question TireSmoke....as a young person....you are hitting all the right steps in what you are doing. The most important thing that you are doing is PLANING for the future.....not just drifting through life.
Tiresmoke , In response to your question on the 4% rule , it is a guideline , and assumes you are going to spend on just the bare necessities. THAT is not realistic, I personally know that a lot of people when thinking of retirement start to think, "Now I'll have time to travel" or "Pursue my $$$$$$ hobby" The usual thing that happens is after a year or two , and doing what they want to do , they check the financial calculator and say ^%&^%*%(^ we didn't save enough money to do anything !!! In remodeling : we have a saying, figure your bid as close as possible , THEN DOUBLE IT !! , that's a more realistic idea of the cost. And I would apply the same principal to retirement
Ah, yes. Sequence of return risk. I've spent the last several years trying to insulate us from this exact risk. The best part of sequence of return is is that, if you can mostly insulate yourself from it, you can withdraw at a higher rate.
With the GAIN in the market today.....the SP500 in now back to early August levels. SO....at this moment.....the loss from the nasty drop is about 7 weeks of gains.
EXACTLY TomB16. I knew I CONSERVATIVELY had the funds to live for 21 years on personal assets. I ALSO knew that at age 70......through my 30 year Treasuries or through income annuities.....I was going to TOTALLY INSULATE myself and my LIVING money from ANY risk of loss......sequence or otherwise. LUCKILY.......I was able to do what I planned. Some times I look back and think.....WOW......how did I pull that off. I look back and think....even I....did not realize how difficult and how much discipline.....it was going to be. BUT....we were LUCKY....we lived out normal pre-retirement lifestyle with no changes in our spending, collecting, investing, etc, etc. NICELY.....I am looking at a 6% to 7% RAISE in my Social Security money this year....about $5000 more per year for the SS raise and the elimination of of the high income penalty for medicare and prescription drugs.
I really like this little article. The Consequences of a Market Correction https://awealthofcommonsense.com/2021/09/the-consequences-of-a-market-correction/ (BOLD is my opinion OR what I consider important content) "I have a confession to make. I just can’t get myself worked up this Evergrande story. Some markets people are comparing this Chinese property developer to Lehman Brothers or Bear Stearns.1 But if we’re being honest here 99.9% of investors had never heard of this company before they showed up in the headlines last week. And how many investors actually understand how the Chinese government is likely to handle all of the debt on this company’s books? You can read all of the stories and listen to all of the podcast explainers but is it really going to help you become a better investor? Is this company really going to impact your ability to reach your financial goals? Maybe I’m just over the fact that we’ve been swatting away potential canaries in coalmines for years now when the majority of them simply haven’t mattered. Or maybe it’s just that I’ve resigned myself to the fact that market corrections can and will happen and the reason is mostly irrelevant. If you’ve been reading this blog for an extended period of time you’ve read all of my market correction stats. The average peak-to-trough drawdown for the S&P 500 in a given calendar year since 1928 is around -16%. There have been 53 double-digit drawdowns overall in this time frame. The average loss for those corrections is -23%, lasting more than 200 days from peak to trough. Over the past 93 years the U.S. stock market has fallen 20% or worse on 21 different occasions.2 That’s once every 4-and-a-half years. It’s fallen 30% or worse 13 times or one out of every 7 years. Of course, there’s a big difference between averages and reality. The stock market fell 50% from 2000-2002. It repeated that feat just 6 short years later. From 1940-1968, there wasn’t a single bear market in excess of 30%. Then over the next 6 years it happened twice. There are also some years in which there are no corrections. In 34 out of the past 93 years, there was no peak-to-trough drawdown that reached double-digit levels in a calendar year period (it hasn’t come close this year just yet). On 7 different occasions, there wasn’t even a 5% correction in a given year (most recently in 2017). From 2007-2011, the average peak-to-trough drawdown in the S&P 500 each year was -24%. Then from 2012-2017, it was just -8%. There are ebbs and flows to these things. It’s also true that each time there is a correction there is a different reason. Sometimes it’s macro-related. Sometimes it has to do with market fundamentals. Sometimes it’s geopolitical in nature. Sometimes investors are simply looking for an excuse to sell after experiencing large gains. Sometimes the downturns feel completely random. Most of the risks investors worry about don’t occur. And even if they do occur, they don’t match up with the time frame you’re worried about them occurring. Markets are hard. Now, just because this Evergrande story will likely never morph into another Lehman or Bear Stearns moment doesn’t mean it won’t impact certain investors or investments. It still might lead to some damage. The question is: Does it matter? If you measure your time horizon in years and decades, you’re going to be dealing with many more corrections along the way. At times, a large portion of your portfolio will seemingly vanish (for a time at least). I suppose you could try to predict every geopolitical, macro and fundamental story in the years ahead to figure out how it will impact the market. But the odds show even if you could predict the headlines, you’ll never be able to predict how investors will react to those headlines. And even if you could predict the direction of the markets over the short-term, you’ll never be able to predict the magnitude or length of those moves. And even if you happen to nail the timing on the next correction, you’ll likely never be able to do it again. My point here is market corrections are going to happen whether you know the reason or not. It’s not an if, but a when. And since no one can figure out the when with consistency, the only thing you can do is re-calibrate your portfolio or expectations ahead of time. Either you learn to live with volatility or make your portfolio durable enough to better withstand the bursts of volatility. This is true if we’re living through the next Lehman moment or a minor dip we all forget about in 3 months. MY COMMENT I should probably just BOLD this entire article.....it is so TRUE for any investor to know and understand. Corrections.....bear markets.....are just part of the NORMAL market process. They are the short term price you pay for COMPOUNDING your money over the long term. They are why market timing and trading DO NOT work since they are random and unpredictable.
man, that's a heavy duty reality check right there. i think i'll milk this "day job" for a few more years. i call it a day job because i've always been pursuing other more pleasurable activities and refuse to wait tables. my wife and i live very conservatively and if and when we do retire the transition should be smooth. you are a trooper, @WXYZ.
I wasn't asked but I will provide my take on the 4% SWR (safe withdrawal rate) Returns vary wildly. 99% of people use an aggregation device instead of investing directly in companies. Often, this advice came from their bank. All money comes from companies. All. ETFs just pass money through; at least, most of it. ETFs don't generate anything themselves, except a nice cut of other people's money. So, Joe Average who owns a balanced ETF and his bank's money market fund can look at 4% as an optimistic number for SWR. Quite a few people suggest 3% is a lot safer. If Joe retires at 60, he can probably withdraw 4% annually without much concern for sequence of return risk or his 2% average annual gain and be just fine. Meanwhile, a good investor will average over 10% annual gain. Keep in mind, everyone thinks they are a good investor but extreme few are. The point is, someone producing over 10% per year on their nest egg can withdraw 6% and their nest egg will be larger when they die than it was when they retire. Real SWR for a good investor could easily be 12% from age 45 or maybe 20% from age 60. This is wild speculation intended only to provide context to my assertions. Actual SWR varies per investor, nest egg, and number of funded years. Can you become a good investor? Answer: yes. Look at what works: Buy and hold the S&P 500 without market timing -> works 100% of the time Buy and hold a very small group of companies based on industry knowledge and research -> works if you really are as smart as you think you are Negative S&P 500 (Lynch method) -> I'm not super familiar with it but it appears to be a viable strategy with a strong likelihood of success. Nobody wants to use these three approaches. They want to trade. If you have a chance to meet with a fire group, seize it. Ask people how they made enough money to retire early. Let me know if you ever meet someone who has gotten rich with trading, over the long term. With a solid investing program (that might be as simple as a monthly purchase of VOO), 4% SWR probably doesn't apply to you; you can look at something much higher.
In retirement and using personal assets.....the one thing that I ABSOLUTELY HATED.....were the INCOME TAXES. I was so glad when I exhausted my IRA money......and.....with how the annuities are taxed....... got into a lifetime tax situation of EXTREMELY low income taxes.
That is very smart thinking Emmett. As a business owner I did not have a day job to milk. Because of my personality I was working...balls to the wall....all the time......driven by ownership and the responsibility of $25,000 per month in overhead.....which was a big CHUNK of money back in the years 1976 to 1999.
WXYZ , just curious , you are always "fully invested" does that mean you have your stocks set to : "Reinvest Dividends" automatically ? Or do you allow them to build up some cash in your account for redistribution in the stocks you like at the time ? Slightly changing your allocation in various stocks Just curious
Too many slaves in this world die by torture and pain. Too many people do not see they're killing themselves and going insane. - Accept
Markets are STILL moving on up......the birds are singing.....it is a BEAUTIFUL day in the neighborhood.
Yeah TomB16.......I came to realize that NO ONE had written on their tombstone....."he was a great worker". I saw too many guys work their ass off and than die. ALL of my good friends from my work years died between ages 54 and 62. You know....we all see that life expectancy for a MALE is about 80 years......according to a life expectancy table. SO....with human nature being what it is........we all see ourselves as going to live that long or longer. BUT....what no one ever considers is....how a life expectancy table works......that "expectancy"........means that HALF of the people will die BEFORE that average life expectancy age.....often...many years before. When I could BAIL I did. Family, life, just about everything is more important than WORK when you get down to it.
That was a lyric quote from Accept - Balls to the Wall. I am following your lead, W. Thank you for showing the way.
Oldmanram Yeah....I automatically reinvest ALL dividends in the stock that produced it immediately on payment. On my two funds......all dividends and capital gains are immediately automatically reinvested. I also NEVER re-balance a holding or generally take profits on my long term holdings. I let the winners run. I try to TRUST my portfolio and let it do its thing for the long term without micro-management.
