The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Frankies Girl on April 11, 2014, 12:30:15 PM
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I'm thinking that one of the major reasons it's better is that if you have enough to retire during a flat/down market, then the chances of the market itself trending downwards sharply is less likely to happen, thereby reducing the possibility of substantial losses to your portfolio in the early days. Is this correct, and anything else to add/clarify?
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You're assuming that because the market went down it won't go down more and/or will go up? Since the market go up 2/3 of the time I guess it makes some sense. But also see Japan's lost decade..
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Yes this for me is a pretty major problem.
You see.. when your about to pull the plug it is point of maximum fear.. i.e you are suddenly living on that stash (Actually I am waiting for 3 years before actually spending any of it).. And we know that a major pullback in the early years can really hurt your future net worth.
Then again.. retiring in 2008 was probably not going to happen because of the wailing and gnashing of teeth in the media about how its 1929 all over again.. I mean would you really retire then (with a much smaller stash than you had) , or wait a couple of years until the market started growing again?
If you analyse this eough.. you would never pull the plug...:)
Frank
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I'm thinking that one of the major reasons it's better is that if you have enough to retire during a flat/down market, then the chances of the market itself trending downwards sharply is less likely to happen, thereby reducing the possibility of substantial losses to your portfolio in the early days. Is this correct, and anything else to add/clarify?
If you retire you should have a portfolio allocation that will survive a down market, shouldn't matter which way it goes you have enough. Especially true for FIRE
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I'd think it would depend where in the 'cycle' the economy is - and that may be difficult to tell. If you retire when the market just starts declining, the impact would be more severe than if the economy had started leveling off.
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Based on what I see in cFIREsim, the best years to retire (i.e the highest end values) in are the bottoms of big depressions. Of course it is a lot harder to have enough assets in those years.
The tougher question is knowing when the bottom has been reached!
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You're kind of begging the question here, aren't you?