Any Recent FIREee's Freaking Out?

[SnackDog]

The Schiller PE is at a rare peak.  Historically, when it is over 25, the following 10-year real return for stocks has been under 1%.  Pretty grim if this is the first 10 years of your retirement.  I may wait until it is under 15 (real stocks have returned >10% over 10 years historically in such settings).

[dude]

I can sum it up in a few sentences:  For people that already FIRE'd their asset allocation and account balances should make enough sense that short term volatility doesn't affect their overall plan, so no freak outs should be incurred. For people that haven't, especially those with a long way to go...give me a break.  We get 3+ years of amazing returns where all of us made an absolute boatload of money and people freak out because we get our first 10% correction...which is normally a yearly/bi-annual staple of a healthy market anyway...and all of a sudden it's 'woe is me all my saving is for naught I bought right before a crash!!"...how many people felt horrible about the market a month ago when we were breaking all time highs daily...stay the course, buy on a discount, get rich.

You see, that's the thing, it's very easy for someone 10+ years away from FIRE'ing to spout this kind of thing, but perhaps much different when you have actually hung up the gloves and are living on a fixed income.  Because the specter of "what if this time it's not just a routine 10% correction?" is going to weigh far more heavily on one's mind if they've just FIRE'ed, I suspect.  And you have to put current market conditons in perspective -- 10-year Treasuries are at 2.2%.  We are in unprecedented territory so far as I'm aware, so it's a little more difficult, I think, to just casually dismiss any significant downturn.  Again, not saying this is the start of a bear market or a deflationary period or whatever, but just curious how people who FIRE'ed recently are reacting.

[Terrestrial]

I can sum it up in a few sentences:  For people that already FIRE'd their asset allocation and account balances should make enough sense that short term volatility doesn't affect their overall plan, so no freak outs should be incurred. For people that haven't, especially those with a long way to go...give me a break.  We get 3+ years of amazing returns where all of us made an absolute boatload of money and people freak out because we get our first 10% correction...which is normally a yearly/bi-annual staple of a healthy market anyway...and all of a sudden it's 'woe is me all my saving is for naught I bought right before a crash!!"...how many people felt horrible about the market a month ago when we were breaking all time highs daily...stay the course, buy on a discount, get rich.

You see, that's the thing, it's very easy for someone 10+ years away from FIRE'ing to spout this kind of thing, but perhaps much different when you have actually hung up the gloves and are living on a fixed income.  Because the specter of "what if this time it's not just a routine 10% correction?" is going to weigh far more heavily on one's mind if they've just FIRE'ed, I suspect.  And you have to put current market conditons in perspective -- 10-year Treasuries are at 2.2%.  We are in unprecedented territory so far as I'm aware, so it's a little more difficult, I think, to just casually dismiss any significant downturn.  Again, not saying this is the start of a bear market or a deflationary period or whatever, but just curious how people who FIRE'ed recently are reacting.

Fair enough, I can see how its a bigger gut check when you need to live off the money as opposed to just saving it. 

[Terrestrial]

The Schiller PE is at a rare peak.  Historically, when it is over 25, the following 10-year real return for stocks has been under 1%.  Pretty grim if this is the first 10 years of your retirement.  I may wait until it is under 15 (real stocks have returned >10% over 10 years historically in such settings).

There has been a lot of discussion on the Shiller PE recently and different people have different views on it.  I guess I would point out this:

I don't dispute a low Shiller PE, if you can catch it or if it occurs, has been correlated with higher future returns, but are you factoring in the opportunity cost of waiting...for maybe as long as 2 decades?

It briefly came down to ~15 in '09 as a result of the financial crisis...if one had bought then you'd do very, very well, but it was also a disproportionately large recession compared to normal, and also a very hard time to commit all your capital for many people.  It also only briefly touched around 15 before rising again (short window).  Before that, it hadn't been under 15 since the late 1980's.   You may be waiting a really long time. 

I haven't run the numbers but my gut tells me someone that invested in the early 90s with a Shiller PE at 20 (after 'missing' the last sub-15 window) and then collected 15+ years of dividends and compounding growth was still better off than someone who held out the until they could buy in 2009.  The S&P 500 still went up 70% from 1992 to the very bottom of the stock market collapse in 2009 even before considering dividends.

[Woodshark]

This type of volatility is a gut check for whether your asset allocation is in line with you being able to sleep at night.  I've got a 60/40 allocation so not really losing any sleep. 

Same here. I went from 70/30 to 60/40 this year because even though I was enjoying the new market highs, I was worried at night.

But I had to learn the hard way from the 2008 plunge when I was super aggressive and had 100% stock allocation. 

Once again, I did the same. After the 2008 drop I was humbled. Iit was hard to resist the panic urge to sell.  I vowed to hold on and not sell anything until the market had returned back to around 13,000.

I had to wait a few years but when it crossed 13K I started moving us into bond funds. Ended up around 70/30.

At the end of August I went to 60/40. Very happy I did. I sleep well now. This recent pull back is just noise.

[Bateaux]

If you are truly prepared to FIRE this little dip shouldn't have bothered you.  Using the Fire calculator is a powerful tool.   Determine what you intend to spend and for how long.  It gives you a total to save.  I intend to retire with a certain degree of luxury.   Part of that luxury is sleeping at night when the market dips 10, 20 or 30 percent.  Build in a buffer.  Don't quit work when you can just pay the bills during the good times.  I'm close now, but I'm making sure by building in an additional $250k before I pull the plug.