Author Topic: Is it better to retire in a down market?  (Read 2167 times)


  • 5 O'Clock Shadow
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Is it better to retire in a down market?
« on: June 03, 2015, 10:54:03 AM »
Here's my thought, if anyone has any evidence for this please share. This may also have been discussed before.

Let me pose two scenarios. The first scenario is one where you retire in 2009 when S&P 500 is at its lowest. Your stash is invested in 100% stocks (for this imaginary scenario). Your stash is also 1 million dollars. Thus you are withdrawing ~4% or 40K a year. In 2009 when the markets were tanking you own 1464 shares of S&P 500 which cost $683 a share at the low. (I know we cannot time the markets)

The second scenario is quitting now. You also have 1 million dollar stash. Your buying power with the million is only 473 shares of the S&P 500 at $2011 a share.

Since we all believe the markets will always go up since society as a whole will continue to innovate, consume, and use. It seems as if retiring when markets are going through the roof would be ill advised, even though our stashes seem to be at an all time high. Thus we would be withdrawing 4% of a stash which was built with all these up years.

If you had the choice wouldn't you want to retire when your stash is artificially deflated aka 2009, vs now when it may be inflated.


  • Magnum Stache
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Re: Is it better to retire in a down market?
« Reply #1 on: June 03, 2015, 10:58:07 AM »
Other than inflation the biggest risk for a FIRE attempt is FIREing right before a crash. So yes it is better if you hit your number at the low than at the high. Good luck on knowing where you are in relation to that at the time. It's not a bad idea to look around before pulling the proverbial trigger and evaluating whether your risk tolerance can stomach some bad event in the near future.


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Re: Is it better to retire in a down market?
« Reply #2 on: June 03, 2015, 11:00:42 AM »
the number of shares that you own is irrelevant to the discussion.  You can have one million shares worth $1 each, or ten shares worth $100k.

Also, it doesn't matter what the market has just done in the last 1-2 years.  What matters most is what the market will do, especially over the next 3-5 years.  People like to think that 'the market just crashed, so the next several years will be great.  Not always true.  Conversely, a bear market isn't necessarily pending just because we've had a recent bull market.

Paul der Krake

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Re: Is it better to retire in a down market?
« Reply #3 on: June 03, 2015, 11:14:45 AM »
If you had $1M in 2009, then you most likely had significantly more than $1M just 3 years ealier, unless you had an extremely short and extremely high paying career. Why didn't you retire before the 2009 crash?


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Re: Is it better to retire in a down market?
« Reply #5 on: June 04, 2015, 07:07:41 AM »
The CAPE or even simple PE is somewhat predictive of future returns. Share price is not a useful indicator for future return. CAPE and PE are very abnormally high right now. So some are concerned about retiring right now. However, a 4% withdrawal rate has still performed pretty well historically even with CAPE over 20. The exceptions were mostly retiring in the 60s when inflation killed you early in your retirement.