About to sell everything. Talk me off the ledge (or push me off) please!

[a plan comes together]

I get the whole "eventually the market always goes up" argument and trying to time it can result in losses. However, I'm in a situation here that is tearing me to shreds:

1. I had planned on early retiring at some point this year.
2. I missed the entire ride up. At the start of last year, I piled my entire net worth into investments, despite understanding we were at historically high valuations (foolish, in retrospect).
3. I've held tight since, despite the downturns. But this market now seems intent on going straight to hell with crazy overreactions to stupid shit (China is less than 1% of all U.S. exports!!!!!! WTF?!!?!). There is zero good news that has any sustained impact and the downturn has "seemingly" just started - we're still at a high valuation level.
4. My only hope for saving my retirement this year (and potentially years ahead) is to sell today and buy back in at a lower level that could get me back to par. I'd be happy to just recoup my losses and then play it smarter in the future by finding ways to protect the downside.
5. I don't think I have 2, 3, 4+ more years of work left in me to get back to the point I was at last year.

I realized I f'ed myself over on waiting until the peak to buy in and then planning to retire shortly after. Rare scenario, but shit happens. I'm literally watching my hard work and hopes and dreams vanish with each day. My plan is falling apart. Talk to me, please.

[okits]

How about some more details (living expenses, passive income streams, age, job situation)?  From your OP my initial thought is to quit your FT job, get a non-stressful PT side gig to generate a bit of cash to help cover living expenses, and to leave your investments alone.  So far, the only way you've possibly f-ed yourself was by picking an investment plan you couldn't fully commit to through market fluctuations.  If the plan behind your investment approach is good, do not succumb to panic now. 

[sol]

The market is down a notch, so you need to be working and buying, not quitting and selling.  Now is the time to keep your job going and continue to invest every dollar you can.

[BarkyardBQ]

I don't think you have a solid enough understanding of the market to retire yet. You should be able to handle a 20% or whatever downturn, and if you can't your plan needs work, and backup/safety nets like part time income, rentals, or a stash large enough that 20% doesn't make you blink. This self preservation/sell-all mentality in retirement will get you back in a cubicle pretty quickly if it goes badly.

If you can't retire this year, don't. If you have enough FU money and hate your day job, go find a nice part time job and ride it out. Time > Money

You should also read here for Sequence of Returns Risk, http://www.madfientist.com/safe-withdrawal-rate/

[frugledoc]

I assume you didn't put your entire net worth into equities 1 year pre retirement?  Bonds/CDs, anything to reflect your low risk personality/life situation

[FIRE47]

Personally I have to disagree with the keep buying crowd here, if you did just put your entire life savings into equities right before retiring what's done is done you cant chase your losses and let it ride - sure maybe give it another couple weeks (even better - a set limit) to see if it bounces but after that cut your losses, stocks could go up or down or sideways from here regardless of the current valuation - you are still 100% equities and a few months from retirement. In a best case you recoup your losses in a few months and are back where you were. In a worst case your retirement is delayed 10 years or more.

Personally I think you need to sell or at least come up with a better AA for you situation. Your age and health factor into this if you are old or cannot continue working for much longer (which your post hinted at) you really need to think about a better plan then riding out 100% equities and crossing your fingers.

Sometimes if you've already won (you just said you were able to retire) you have to take some chips off the table and stop playing the game, assuming you can cover inflation, future costs etc.

[a plan comes together]

I assume you didn't put your entire net worth into equities 1 year pre retirement?  Bonds/CDs, anything to reflect your low risk personality/life situation

Not all, but the large majority. Net, I'm down about $150K (15%), however.

I don't think you have a solid enough understanding of the market to retire yet. You should be able to handle a 20% or whatever downturn, and if you can't your plan needs work, and backup/safety nets like part time income, rentals, or a stash large enough that 20% doesn't make you blink. This self preservation/sell-all mentality in retirement will get you back in a cubicle pretty quickly if it goes badly.

If you can't retire this year, don't. If you have enough FU money and hate your day job, go find a nice part time job and ride it out. Time > Money

I can handle 20% (if I get out now). What I can't handle (and many people here prob. couldn't handle without major adjustments like working a few more years) is 40%+.

The market is down a notch, so you need to be working and buying, not quitting and selling.  Now is the time to keep your job going and continue to invest every dollar you can.

Is now really the time to invest every new dollar earned, given my situation? Valuations are still at historically high levels and we could drop another 30% easily.

How about some more details (living expenses, passive income streams, age, job situation)?  From your OP my initial thought is to quit your FT job, get a non-stressful PT side gig to generate a bit of cash to help cover living expenses, and to leave your investments alone.  So far, the only way you've possibly f-ed yourself was by picking an investment plan you couldn't fully commit to through market fluctuations.  If the plan behind your investment approach is good, do not succumb to panic now. 

1. I'm at about 4% SWR, $1M NW.
2. 36
3. job situation is a long story, but I have almost nothing left in the tank after being at same employer for 9 miserable years.
4. $30k/year living expenses

[WerKater]

4. My only hope for saving my retirement this year (and potentially years ahead) is to sell today and buy back in at a lower level that could get me back to par. I'd be happy to just recoup my losses and then play it smarter in the future by finding ways to protect the downside.

Where did you get this crystall ball that is telling you that the markets will continue to go down significantly? Will it also tell you when the bottom is reached?
Your previous attempts at timing the market seem not to have gone too well. Why do you think this time you will be right?

Your plan is not falling apart. But you can make it fall apart by selling now. Then, I almost guarantee, you will miss out on the market going up again at some point.
But you should adapt your plan. That is what us Mustachians do. We are flexible. We adapt. Nobody promised you an easy ride here.  So stop the panic talk, work a bit longer, keep investing and then retire happily. Don't try to rely on crazy speculation that the market will continue to drop and that you can predict where it will stop.

Alternative: Sell everything now, with unlimited orders. Tell all your friends to do the same. So that I can buy it all up at even lower prices (yes, I know, the effect would actually be unnoticeable, but one can dream...)

[merula]

If you sell everything, you lock in your losses. If you stick with your holdings, they will earn money. Maybe not this year, but the stock market ALWAYS recovers, even when the talking heads say "This time is different."

If you're nervous and don't feel like buying low (which doesn't make objective sense but can make a certain amount of sense if your initial asset allocation wasn't the right fit for you, which it definitely sounds like), then start putting your savings somewhere that you do feel comfortable in an effort to rebalance without selling.

You can't time the market consistently, no one can, and anyone who claims to is trying to get your money. But if you hold, you'll be fine. And don't just trust me on that, here's the math: http://awealthofcommonsense.com/worlds-worst-market-timer/

[FIRE47]

I assume you didn't put your entire net worth into equities 1 year pre retirement?  Bonds/CDs, anything to reflect your low risk personality/life situation

Not all, but the large majority. Net, I'm down about $150K (15%), however.

I don't think you have a solid enough understanding of the market to retire yet. You should be able to handle a 20% or whatever downturn, and if you can't your plan needs work, and backup/safety nets like part time income, rentals, or a stash large enough that 20% doesn't make you blink. This self preservation/sell-all mentality in retirement will get you back in a cubicle pretty quickly if it goes badly.

If you can't retire this year, don't. If you have enough FU money and hate your day job, go find a nice part time job and ride it out. Time > Money

I can handle 20% (if I get out now). What I can't handle (and many people here prob. couldn't handle without major adjustments like working a few more years) is 40%+.

The market is down a notch, so you need to be working and buying, not quitting and selling.  Now is the time to keep your job going and continue to invest every dollar you can.

Is now really the time to invest every new dollar earned, given my situation? Valuations are still at historically high levels and we could drop another 30% easily.

How about some more details (living expenses, passive income streams, age, job situation)?  From your OP my initial thought is to quit your FT job, get a non-stressful PT side gig to generate a bit of cash to help cover living expenses, and to leave your investments alone.  So far, the only way you've possibly f-ed yourself was by picking an investment plan you couldn't fully commit to through market fluctuations.  If the plan behind your investment approach is good, do not succumb to panic now. 

1. I'm at about 4% SWR, $1M NW.
2. 36
3. job situation is a long story, but I have almost nothing left in the tank after being at same employer for 9 miserable years.
4. $30k/year living expenses

Ok this changes things given your age - the portfolio really isnt the issue here its probably finding another job. You cant really afford to sell everything at only 36 - how will you fund a 60 year retirement? Given your horizon it is going to come back eventually. I'd worry more about the job situation than the portfolio.

[BarkyardBQ]

You could start caching your next 2 years expenses with current income and stop investing, so you don't have to withdrawal from a down portfolio. If you were going to retire this year, wouldn't that be the first thing you do... Save 30k in the last few months before pulling the trigger; or would you quit and the following week pull out 1-12 months income? I plan on saving my first year or 2 of needed expenses in my final months of work and leaving the portfolio alone.

http://www.nytimes.com/interactive/2016/your-money/stock-market-tips.html?smid=tw-nytimes&smtyp=cur&_r=1

[Frankies Girl]

If you sell now while it's down all you're doing is locking in the losses. That is a supremely boneheaded move. You will not save your retirement for this year. You're acting out of desperation and fear and blind panic. Is that how you want to start your retirement? Sounds awful. Calm down, deep breaths and resign yourself to holding on until the market is on an upswing and SAVE MORE MONEY for a cash cushion so you won't be in this predicament again.

Did you have a year or two cash or CD ladder savings in place to weather downturns? This should have been a given since you seem to be a pretty conservative/risk adverse person. So scale back your investing right now (but don't sell anything!!) and figure this next year is all about increasing your cash holdings to avoid the panic of selling off when the market goes down. If you have cash/CDs to tap (at least one year's living expenses is recommended, but more is always better), it will make the whole "the market is crashing!" feeling a little less panicky for you.

It doesn't matter if you put in the largest chunk of money last year "when the market was at its highest." The market will go back up and in a few years/decade, that one time high will be far behind and a mere blip on the chart.

I quit my job last spring. I worked at a place that paid me well and likely would never be able to go back to, so quitting was closing the door completely as far as I was concerned; I could find similar work pretty easily but it would be a fraction of what I was making at that place. Since then, I've seen the market go down, down, down. I've lost over 80K so far and figure it's going to lose some more before too much longer. Guess what? I'm not panicking and I'm not selling off things. I threw in the last of dry powder a few weeks ago and now am just kind of sad I don't have any more to invest. I have stop gaps in place to ensure I won't be out on the street (plan A, plan B and even a plan C... right now we're on plan A).


If you really don't think you can work another year or two where you are, then look for another job that isn't as stressful. My plan B is a part time job doing something fun and easy - possibly freelancing, but more like retail or waiting tables. I did it in my college days and I have no issues with the idea of doing something that I can walk away from in a year if it gets to be boring or too much like hard work.

The sky is not falling, despite what all the hysterical news sources are touting. Stop listening to the noise and try to look at the big picture. The market drops sometimes. The market goes into a bear sometimes. It's natural and healthy and to be expected many more times in your lifetime. If you had a plan in place to retire this year, you should have also had some secondary (or tertiary) plans in the pipe as well for occasions such as this. I'd suggest you also check out Dr. Doom's drawdown series to see how portfolios might weather the market during downturns as it might help give you some other ideas.

But if the worst for you is that you might have to delay quitting your job for a year or even two... you're still way ahead of most of the population out there. You should be looking at it from the positive side, not the negative. Buckle down and stay the course.

[a plan comes together]

Where did you get this crystall ball that is telling you that the markets will continue to go down significantly? Will it also tell you when the bottom is reached?
Your previous attempts at timing the market seem not to have gone too well. Why do you think this time you will be right?

We're at a CAPE of 23.55, which is 47% above the historical median, even after the recent decline. Nobody knows for sure, you are correct. But, I'd feel much more comfortable plowing more money into the market right now if we were at a CAPE below the median (vs. 47% above).

[a plan comes together]

Ok this changes things given your age - the portfolio really isnt the issue here its probably finding another job. You cant really afford to sell everything at only 36 - how will you fund a 60 year retirement? Given your horizon it is going to come back eventually. I'd worry more about the job situation than the portfolio.

I agree, it is essential for me to find other income sources, and if I stay in the market and we dip another 20% I'll prob. need to move to another job (would be a massive pay cut from current job based on going market value).

If I sell, I realize I cannot go income-less at age 36 for the rest of my life. I would prob. take the approach of:
1. using cash in other ways outside of equities (likely real estate and self-employment income)
2. getting back in to the market at a lower valuation (yes, I realize this is market timing and could totally blow up in my face)

[Eric]

If you're on the verge of selling everything to move to cash, you're never going to make it in retirement.  You're 36 years old.  You can expect to see approximately 20-30 more of these 10% dips throughout your lifetime, with at least a handful of actual real drops in the 30-40% range.  If you can't handle a 10% dip while you have a steady income, how in the hell are you going to handle one while you're relying on your investments to sustain you? 

[Financial.Velociraptor]

I'm down substantially this year but I derive about 95% of my budget from passive interest, distributions, and dividends.  I have to sell very little to cover the rest and am actually covering the shortfall with covered calls right now.  I think it is your asset allocation that is suspect, then. 

If you were 60/40 bonds/stocks, you'd have a substantial portion of your budget coming in as cash payments, be seeing less volatility, and probably sleeping better at night.  If I get my way, I'll continue to massage my asset allocation to include every larger exposure to debt and debt like instruments.  I have no interest in a moonshot.

[capitalninja]

I get the whole "eventually the market always goes up" argument and trying to time it can result in losses. However, I'm in a situation here that is tearing me to shreds:

---snip---

I realized I f'ed myself over on waiting until the peak to buy in and then planning to retire shortly after. Rare scenario, but shit happens. I'm literally watching my hard work and hopes and dreams vanish with each day. My plan is falling apart. Talk to me, please.

What are you invested in? That would be helpful to know before knowing what action to take next.

If you're invested in good index funds that pay dividends, I'd say to just let it ride. 1M invested should easily produce 30 - 40k per year in dividend income which if reinvested will help you reach retirement that much faster.

Selling is probably the worst thing that you could do right now; especially considering that you currently have a source of income and thus don't really need this money. More than likely you will regret selling in less than a year if you do.

Ultimately you'll have to do what works well for you but please give it some deep thought first. If everyone is selling and screaming that the sky is falling, 99.9999999% of the time you want to do the opposite of that.

My 10 cents.

[faramund]

The question about dividends is very pertinent.

If you have 1M in shares, and your living expenses are 30K, the dividend must come very close to covering those expenses. Even if it was say 2%, that'd give you 20K, and you would have to sell 10K of your shares to live on.. I assume that's pretty much what you had planned on doing anyway. If you didn't want to sell the shares (in which case what was your previous plan?) - can't you find a fairly easy alternate income that at least owns 10K.

(of course if your dividend is 3% - I really don't see what your problem is)

[robartsd]

I'm assuming you're 100% in a stock mutual fund. You need a good mix of bonds for money you plan to use in the next few years. Rather than selling any stock, I'd buy a bond mutual fund to complement what you currently have with any new investment money you come up with. If the funds are in the same account, you can probably even have your dividends from the stock fund automatically reinvested in the bond fund to move your asset allocation transition even faster.

[Jsn]

"Warren [Buffett], it strikes me that if you did nothing else you never sell. That is, if you can grit your teeth through and just disregard short-term declines in the market or even long-term declines in the market, you will come out well. I mean you just stick all your money in stocks and go home and don’t look at your portfolio you’ll do far better than if you try to trade it.”  – Alan Greenspan

(emphasis mine.)

As merula has already suggested, how's a good time to re-read http://awealthofcommonsense.com/worlds-worst-market-timer/

[a plan comes together]

"Warren [Buffett], it strikes me that if you did nothing else you never sell. That is, if you can grit your teeth through and just disregard short-term declines in the market or even long-term declines in the market, you will come out well. I mean you just stick all your money in stocks and go home and don’t look at your portfolio you’ll do far better than if you try to trade it.”  – Alan Greenspan

(emphasis mine.)

As merula has already suggested, how's a good time to re-read http://awealthofcommonsense.com/worlds-worst-market-timer/

You had me until "Alan Greenspan" ;-)

[sirdeets]

My thoughts are - if you sell it all right now - and have the standard of living you are after with the current balance - do it.

There was an interesting paper I read a while back about people to retire, they goes against a lot of what you read ("have your age in bonds", etc).

The basics of the paper was that if you're close to retirement, and don't have enough to me happy on, go ahead and pump into risky assets.

If you're close to retirement, and have a sum you are happy with, go ahead and go safe, as its not worth the risk at this point.

[Financial.Velociraptor]

Is there a breakdown of actual budget needs in this thread yet?  I saw approx 1MM in market (perhaps 850k now that market is down?)  I have some debt and debt like options that would provide 50k plus on 850k

Municipal bond closed end funds (tax exempt) IIM, IQI, NEA, NIO: yield about 6% at current price.  7.5% after tax equivalent for 25% tax bracket.

JRO, floating rate closed end fund.  Yields 7.5% taxable with upside income potential from rising Fed rates.

JPS, closed end preferred shares fund.  Yields 7.8% taxable.

GIM, short duration intl. bond fund yields 5% taxable.

BDCL, closed end business development company fund.  Yields 21.82% taxable!

HNW, closed end fund with 80% investment grade debt securities.  Yields 9.78% taxable.

Say you settle for a blended average of 6% yield from debt and debt like instruments: 850k * .06 = 51k annual income, some of which is tax exempt. 

To my way of thinking, an income allocation makes a huge difference to your stability.  It doesn't do much for you if there is hyperinflation though.

[capitalninja]

Reacting to volatility as the masses do (Buy high and Sell low) will make and keep you poor.

[Another Reader]

What you are facing is "sequence of returns" risk.  Retiring into a market where you suffer significant losses after reaching your "target" amount often leads to failure, especially when you need to withdraw closer to 3.5 or 4 percent to cover your net income needs and taxes.  In my view, the time to sell would have been before the decline, which you could not have predicted anyway.

All of these folks that retired early in the last few years retired into positive sequences of returns.  Most of their portfolios grew much faster than whatever percentage they withdrew.  Some folks successfully lived off only the income produced or even less.  They are in a position to survive a 20 percent or greater drop in value.  You are not.

In your shoes, I would resign myself to working in some capacity for a few more years to make up the difference between a conservative withdrawal rate on a shrunken portfolio and your income needs, including taxes.  Once your portfolio recovers to the point where you feel it can support a withdrawal rate that is comfortable for you, then I would think about full retirement.

[faramund]

There's another option, if the dividend from your current index isn't enough. Is there an index that has a higher dividend.

For example,

Down here in Australia, there are two Vanguard indexes I use
VAS , which is an all company index (dividend 3.x%)
VHY,   which is a collection of high yielding companies (dividend 5.x%).

Over the time of their existence VHY has tended to outperform VAS by about 1% a year, though its been the reverse of this in the last couple of years. So in overall terms (dividend+growth) they're pretty similar.

Surely there's something equivalent in the US.

So if you could transfer a large proportion of your money into a high yielding index, that combined with your remaining stocks - should be able to get you a dividend high enough to live on - and you would still have the usual dividend advantages, namely that they tend to grow with the economy and inflation.

[GrowingTheGreen]

Get your shit together. In a psychological sense. You knew this would happen. Everyone said the market will go down and that you'll have to resist every impulse to sell. Well. Here we are. Take a deep breath and ride it out.

[horsepoor]

I won't respond on what you should do with your investments, but it seems like the answer is to find a more agreeable way to make 30k and quit the job.  You don't need to stash any more, so you can afford to downshift in a big way.

[thriftyc]

Ride it out and get a fun part time job - live lean and stay the course.   In my own case I am 40% bonds and 60% equities - lets me sleep at night while rebalancing when stocks are on sale. Find an allocation that works for YOU longterm.

Another option - is to still quit your shit job that you hate (and a job you hate is a shit job) and change careers through a 1 or 2 year college program to something much lower stress that you love to do.  (personal trainer, physio assistant, pharmacy assistant whatever)  Do that for 5 fun years - then retire.

You have options BECAUSE of the position you are in  - utilize them and enjoy life.

I utilized mine and walked out on my shit job last week to semi FIRE and work a fun part time job on about the same NW as you.

[TheOldestYoungMan]

You said at the beginning you were hoping to retire sometime this year but had not retired yet.  Worst case scenario you do have to wait a little longer.

Best case scenario you wake up tomorrow, realize that this has been the worst opening to a year ever, and whew, now that that's out of the way, just acknowledge that a few of those years of retirement you'll have to put in a few extra shifts at the ice cream place you decided was a decent part-time gig.

I found out the market was going down today because some coworkers were trying to grief me about my investing.  In a panic I logged in to check my investments...nope, more shares today than the last time I checked it, and since I wasn't planning on selling any shares soon, I haven't lost anything.

You haven't lost anything either friend.  Keep plowing money in, watch the dollar cost averaging work, the dividend re-investing.  Remember that controlling costs is all you really have control over.

As long as you can live frugally, you can survive any downturn.

If I was FI already and a January like this was happening, I'd be a little annoyed honestly.

Looks like I'd need to earn about $7k of spending money through effort this year! Shit! That'll take me like a whole month!  Or I'll have to airbnb my place while I'm travelling!  Such a hassle!

One month working out of twelve!  Knew I should have put off FIRE for four more years!  *rollseyes*

The volatility of the markets over the past ~18 months is certainly a thing though.

Go read the dr. doom post about what it's like to be invested in 100% equities and then rethink your asset allocation.

Do.Not.Buy.High.And.Sell.Low.  Just don't!  That's all I can say.  There's no "stopping the losses" or "minimizing the damage" that can be achieved by doing that.  The damage is done.  It will bounce back.  Keep contributing, look at number of shares in the account instead of number of dollars, and happiness will be improved.

[MasterStache]

The market is down a notch, so you need to be working and buying, not quitting and selling.  Now is the time to keep your job going and continue to invest every dollar you can.

+1

The "soon to retire" folks at work here are freaking out and wanting to sell. Meanwhile I am scraping every penny I can together to buy more. Even part of my wife's car fund was invested. 

I don't understand the OPs thought process. Did you assume the markets were always going to go up? Especially right after you bought in?

[a plan comes together]

Lots of responses here - too many for me to respond to individually (damn day job) - and I appreciate all of them.
I'm calming down a tad.

To those w/ sentiments like, "markets don't always go up, what did you expect?" - yes, I know, volatility is good, markets fluctuate, in the long run markets trend upward, yadayadayada - trust me, I get it. It can be difficult to completely remove emotion and personal situation:
1. will to continue job/career is near zero
2. I have only experienced declines in invested net worth, which is a huge gut punch
3. I have almost zero cushion (if you believe in the 4% rule) and a big drop right before retirement with a long recovery could be catastrophic

On top of that, you throw in some rational observances:
1. CAPE is 47% above median. Valuation of this market is high, by any historical measure, with much more downside than upside (and it tends to head back to the mean): http://www.multpl.com/shiller-pe/
2. We are in year 7, one of the longest bull runs in history
3. Every bull run comes to an end
4. Fed is starting to raise rates
5. The world is awash in cheap oil
6. US market is now somehow directly correlated to China's volatility
7. QE has ended
8. World growth has stagnated
9. No inflation to speak of

A lot of signs point to significant declines, which goes back to my 'zero cushion' comment earlier.

However, as of today, I haven't liquidated anything yet. A few things I'm going to do:
1. I need to gameplan and try to take emotion out of this. Obviously, my risk profile is not quite what I was thinking it was and I need to rationally figure out how to diversify
2. I need to keep earning income in some way until I build a bigger cushion to better weather declines

[zephyr911]

Side work?

Fun job?

You don't have much of a safety margin, you say. Well, just making $20K a year is like slapping an extra $450K on top of your Stash. Do something silly you always thought would be fun but would never give you the lifestyle you wanted. Be a barista or a tour guide. Or look at part-time work, consulting, etc, in your current field.

Or, if nothing else, at least look for a new job in your current field to ease the burnout. You're FI, or nearly so, and you can afford to take some risks if you're willing to compensate for losses. Don't let this situation trap you.

[HBFIRE]

Sounds to me like you need to reevaluate your risk tolerance and asset mix.  If this minor correction makes you freak out, then your asset mix is too risky.  This current correction is nothing, and is going to happen may times during your life.  If you can't handle the swings, increase your bond %.  You might want to consult with a good money manager, one who will evaluate your goals and risk tolerance to  advise you on a proper balance of assets.  Yes, it will cost some $, but seems to me you need to do this and it would be well worth it.

[GrowingTheGreen]

Lots of responses here - too many for me to respond to individually (damn day job) - and I appreciate all of them.
I'm calming down a tad.

To those w/ sentiments like, "markets don't always go up, what did you expect?" - yes, I know, volatility is good, markets fluctuate, in the long run markets trend upward, yadayadayada - trust me, I get it. It can be difficult to completely remove emotion and personal situation:
1. will to continue job/career is near zero
2. I have only experienced declines in invested net worth, which is a huge gut punch
3. I have almost zero cushion (if you believe in the 4% rule) and a big drop right before retirement with a long recovery could be catastrophic

On top of that, you throw in some rational observances:
1. CAPE is 47% above median. Valuation of this market is high, by any historical measure, with much more downside than upside (and it tends to head back to the mean): http://www.multpl.com/shiller-pe/
2. We are in year 7, one of the longest bull runs in history
3. Every bull run comes to an end
4. Fed is starting to raise rates
5. The world is awash in cheap oil
6. US market is now somehow directly correlated to China's volatility
7. QE has ended
8. World growth has stagnated
9. No inflation to speak of

A lot of signs point to significant declines, which goes back to my 'zero cushion' comment earlier.

However, as of today, I haven't liquidated anything yet. A few things I'm going to do:
1. I need to gameplan and try to take emotion out of this. Obviously, my risk profile is not quite what I was thinking it was and I need to rationally figure out how to diversify
2. I need to keep earning income in some way until I build a bigger cushion to better weather declines

Right there in your list of 9 reasons why your world is about to end. There it is. You didn't state it, but therein the problem lays. You've convinced yourself that the only direction from here is down. You sound link Jim Cramer on Mad Money (dunno if he's still on TV--canceled cable). You're regurgitating every damn news headline out there. Quit reading about this shit dude. I think that's your big problem. Just stop googling it!

Yes. There are negative signs.  What's the other option? Sell and lock in your losses? Warren Buffet would slap you across the face and call you a dummy-head.

Get a part time gig, wait it out, and listen to what everyone on here is saying. It's all great advice. I have no idea why you aren't going to pursue the part time job and let your principal grow.

[Full Beard]

If you had some type of terminal illness I would say that could be a case for selling everything and just enjoying life.  Otherwise, I would just ride it out and ignore the noise.  You're in such a great position at just 36 years old with close to a million dollars.  This is definitely a first world problem.  I have a friend serving in the peace corps in Africa.  After talking to him about the living conditions over there it really makes me appreciate just how good we have it. 

Go get a part-time job or just take a year off and unwind...you can afford it.

[sol]

peace corps in Africa.  After talking to him about the living conditions over there it really makes me appreciate just how good we have it. 

Yes, it's easy to lose perspective.

AAAaGH, my investments are down 15%, and now I'm going to have to postpone my annual vacation to the Carribbean!  The heated floor in my master bathroom and walk in closet still works great, but I'm not sure I can afford to upgrade to granite bathroom counters with undermount sinks this month, because now I have to invest more while stocks are cheap instead of blowing that money on a bathroom!  My life is shit! 

What's that you say?  A child dies of malnutrition or diarrhea every nineteen seconds?  How can that possibly matter if I don't have granite countertops in my bathroom?  It's the stock market's fault that I can't afford to help those kids, damn this recession!

[MrGreen]

I don't think you have a solid enough understanding of the market to retire yet. You should be able to handle a 20% or whatever downturn, and if you can't your plan needs work, and backup/safety nets like part time income, rentals, or a stash large enough that 20% doesn't make you blink. This self preservation/sell-all mentality in retirement will get you back in a cubicle pretty quickly if it goes badly.

If you can't retire this year, don't. If you have enough FU money and hate your day job, go find a nice part time job and ride it out. Time > Money

I can handle 20% (if I get out now). What I can't handle (and many people here prob. couldn't handle without major adjustments like working a few more years) is 40%+.

The market is down a notch, so you need to be working and buying, not quitting and selling.  Now is the time to keep your job going and continue to invest every dollar you can.

Is now really the time to invest every new dollar earned, given my situation? Valuations are still at historically high levels and we could drop another 30% easily.

No one can tell you what to do obviously but I think you're off your rocker. A 40% drop would essentially be a repeat of 2008. Sorry, not happening. You couldn't sell me on that with all the numbers in the world; there's just too many positive things happening. But that's my opinion. I think you really need to take the historical stuff with a grain of salt. We just went through the worst recession in 80 years and things don't just smooth back out to historical norms the next year like nothing happened. How do you know CAPE won't continue to stay above the average? Also, recessions don't appear for no reason and there is about as much compelling data to argue for things continuing to go up, as there is data to argue for a downturn. Big corporate profits. Jobs growth. Wages starting to increase.

[Rubic]

FWIW, if you're selling today, I may be on the opposite side of your trade (i.e. I'm buying).

Not being snarky, but some people don't have the temperament for the volatility of equities.  One of my close relatives lost 50% of his net worth in 2009 because he sold everything -- despite my pleading -- only to later obsess over his missed gains between 2010-2015.  Once he'd sold, he was waiting for the market to drop back to his sell price to buy back in. Never did.

Now, in addition to having lost half his net worth in 2009, he's compounding the problem of his remaining savings by keeping it all in low-yielding CDs.

[MLKnits]

Honestly, OP, you're in a dream position, because your annual spending is so low. You can quit your job, find something--or hell, a series of somethings--that earn you $30 (or a bit less, even), sell only enough to cover the difference and any taxes, and your $1M will just keep growing in the meantime.

Go be a barista! Go teach English in South Korea! Go tutor elementary-school kids in math! Go be a temp! Your current job/career suck, but dude: you're free. You badass'd your way to not needing that level of income, probably ever again. Why are you working so much as another day?

[Interest Compound]

Here's a fun post from over at Bogleheads:

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=182194

---------------------------------

There's a lot of chatter now that we're in the first correction in some years. Just for some perspective I pulled up S&P closing prices since 1986, a little over 30 years.

Here's the worst 150 days:
1. 19-Oct-1987   -20.47 (Black Monday)
2. 15-Oct-2008   -9.03
3. 1-Dec-2008   -8.93
4. 29-Sep-2008   -8.79
5. 26-Oct-1987   -8.28
6. 9-Oct-2008   -7.62
7. 27-Oct-1997   -6.87
8. 31-Aug-1998   -6.80
9. 8-Jan-1988   -6.77
10. 20-Nov-2008   -6.71
11. 8-Aug-2011   -6.66
12. 13-Oct-1989   -6.12
13. 19-Nov-2008   -6.12
14. 22-Oct-2008   -6.10
15. 14-Apr-2000   -5.83
16. 7-Oct-2008   -5.74
17. 20-Jan-2009   -5.28
18. 5-Nov-2008   -5.27
19. 12-Nov-2008   -5.19
20. 16-Oct-1987   -5.16
21. 6-Nov-2008   -5.03
22. 17-Sep-2001   0.00
23. 10-Feb-2009   -4.91
24. 11-Sep-1986   -4.81
25. 4-Aug-2011   -4.78
26. 15-Sep-2008   -4.71
27. 17-Sep-2008   -4.71
28. 2-Mar-2009   -4.66
29. 17-Feb-2009   -4.56
30. 18-Aug-2011   -4.46
31. 10-Aug-2011   -4.42
32. 14-Apr-1988   -4.35
33. 12-Mar-2001   -4.32
34. 20-Apr-2009   -4.28
35. 5-Mar-2009   -4.25
36. 30-Nov-1987   -4.18
37. 14-Nov-2008   -4.17
38. 3-Sep-2002   -4.15
39. 2-Oct-2008   -4.03
40. 24-Aug-2015   -3.94
41. 22-Oct-1987   -3.92
42. 20-May-2010   -3.90
43. 6-Oct-2008   -3.85
44. 27-Aug-1998   -3.84
45. 4-Jan-2000   -3.83
46. 19-Jul-2002   -3.83
47. 22-Sep-2008   -3.82
48. 9-Nov-2011   -3.67
49. 15-Nov-1991   -3.66
50. 4-Aug-1998   -3.62
51. 03-Dec-1987   -3.53
52. 24-Mar-2003   -3.52
53. 30-Mar-2009   -3.48
54. 27-Feb-2007   -3.47
55. 23-Feb-2009   -3.47
56. 24-Oct-2008   -3.45
57. 4-Jun-2010   -3.44
58. 3-Apr-2001   -3.44
59. 5-Aug-2002   -3.43
60. 9-Sep-2008   -3.41
61. 10-Jul-2002   -3.40
62. 14-Jan-2009   -3.35
63. 29-Jan-2009   -3.31
64. 22-Jul-2002   -3.29
65. Dec 18, 2015   -3.26
66. 6-May-2010   -3.24
67. 27-Sep-2002   -3.23
68. 5-Feb-2008   -3.20
69. 22-Sep-2011   -3.19
70. Aug 21, 2015   -3.19
71. 27-Oct-2008   -3.18
72. 20-Dec-2000   -3.13
73. 4-Feb-2010   -3.11
74. 20-Sep-2001   -3.11
75. 29-Jun-2010   -3.10
76. 6-Jun-2008   -3.09
77. 8-Mar-1996   -3.08
78. 21-Oct-2008   -3.08
79. 07-Jul-1986   -3.07
80. 22-Jun-2009   -3.06
81. 30-Sep-1998   -3.05
82. 18-Feb-2000   -3.04
83. 6-Aug-1990   -3.02
84. 1-Oct-1998   -3.01
85. 19-Sep-2002   -3.01
86. 7-Jan-2009   -3.00
87. 23-Aug-1990   -3.00
88. 4-Sep-2008   -2.99
89. 9-Jan-1998   -2.97
90. 9-Aug-2007   -2.96
91. Sep 1, 2015   -2.96
92. 1-Aug-2002   -2.96
93. 14-Oct-1987   -2.95
94. 21-Sep-2011   -2.94
95. 7-Nov-2007   -2.94
96. 26-Jun-2008   -2.94
97. 4-Dec-2008   -2.93
98. 24-Jan-2003   -2.92
99. 2-Jul-2009   -2.91
100. 17-Jan-2008   -2.91
101. 09-Nov-87   -2.89
102. 16-Jul-2010   -2.88
103. 29-Jan-2002   -2.86
104. 11-Dec-2008   -2.85
105. 3-Oct-2011   -2.85
106. 11-Aug-2010   -2.82
107. 30-Oct-2009   -2.81
108. 15-Oct-1999   -2.81
109. 2-Jan-2001   -2.80
110. 1-Nov-2011   -2.79
111. 24-Jan-2000   -2.76
112. 28-Jan-2000   -2.75
113. 9-Oct-2002   -2.73
114. 11-Apr-1997   -2.73
115. 08-Jan-1986   -2.73
116. 29-Feb-2008   -2.71
117. 18-Jul-2002   -2.70
118. 23-Jul-2002   -2.70
119. 06-Oct-1987   -2.70
120. 13-May-2009   -2.69
121. 23-Mar-1999   -2.69
122. 20-Jan-1988   -2.68
123. 9-Oct-1990   -2.67
124. 9-Sep-2011   -2.67
125. 3-Aug-2007   -2.66
126. 18-Nov-1986   -2.64
127. 1-Nov-2007   -2.64
128. 5-Jan-2001   -2.62
129. 15-Aug-1997   -2.59
130. 22-Jan-1990   -2.59
131. 10-Sep-1998   -2.58
132. 14-Mar-2001   -2.58
133. 10-Mar-2003   -2.58
134. 17-Nov-2008   -2.58
135. 1-Oct-2009   -2.58
136. Sep 28, 2015   -2.57
137. 7-Mar-2000   -2.56
138. 19-Oct-2007   -2.56
139. 28-Dec-1987   -2.56
140. 2-Aug-2011   -2.56
141. 12-Oct-2000   -2.55
142. 17-Sep-1998   -2.55
143. 15-Jul-1996   -2.54
144. 2-Sep-2011   -2.53
145. 11-Dec-2007   -2.53
146. 20-Jun-2013   -2.50
147. 30-Sep-2011   -2.50
148. 13-Jan-2016   -2.50
149. 15-Jan-2008   -2.49
150. 19-May-2003   -2.49

Somewhat arbitrarily, we've had a bad run of 13 trading days, down 9.5%. Here's a sampling of bad 13-day stretches since 1986:
19-Oct-1987   -31.31
27-Oct-1997   -9.65
4-Aug-1998   -9.66
4-Sep-1998   -11.31
22-Mar-2001   -10.86
21-Sep-2001   -15.92
22-Jan-2009   -10.78
14-Apr-2000   -10.07
23-Jul-2002   -19.35
17-Sep-2008   -9.86
20-Nov-2008   -25.19
3-Mar-2009   -16.63
21-Jan-2009   -9.83
8-Aug-2011   -16.69
25-Aug-2015   -10.11
15-Jan-2016   -9.53


On a more positive note, best 50 days:
1. 13-Oct-2008   11.58
2. 28-Oct-2008   10.79
3. 21-Oct-1987   9.10
4. 23-Mar-2009   7.08
5. 13-Nov-2008   6.92
6. 24-Nov-2008   6.47
7. 10-Mar-2009   6.37
8. 21-Nov-2008   6.32
9. 24-Jul-2002   5.73
10. 30-Sep-2008   5.42
11. 29-Jul-2002   5.41
12. 20-Oct-1987   5.33
13. 16-Dec-2008   5.14
14. 28-Oct-1997   5.12
15. 8-Sep-1998   5.09
16. 3-Jan-2001   5.01
17. 29-Oct-1987   4.93
18. 20-Oct-2008   4.77
19. 16-Mar-2000   4.76
20. 9-Aug-2011   4.74
21. 15-Oct-2002   4.73
22. 11-Aug-2011   4.63
23. 10-May-2010   4.40
24. 5-Apr-2001   4.37
25. 21-Jan-2009   4.35
26. 18-Sep-2008   4.33
27. 30-Nov-2011   4.33
28. 16-Oct-2008   4.25
29. 18-Mar-2008   4.24
30. 15-Oct-1998   4.17
31. 4-Nov-2008   4.08
32. 12-Mar-2009   4.07
33. 19-Sep-2008   4.03
34. 24-Feb-2009   4.01
35. 14-Aug-2002   4.00
36. 1-Oct-2002   4.00
37. 2-Dec-2008   3.99
38. 11-Oct-2002   3.91
39. 26-Aug-2015   3.90
40. 24-Sep-2001   3.90
41. 5-Dec-2000   3.89
42. 18-Apr-2001   3.89
43. 1-Sep-1998   3.86
44. 8-Dec-2008   3.84
45. 9-Apr-2009   3.81
46. 8-May-2002   3.75
47. 17-Jan-1991   3.73
48. 11-Mar-2008   3.71
49. 5-Jul-2002   3.67
50. 5-Dec-2008   3.65

---------------------------------

I don't know what you take from this, but I can't help but look and see how almost all the BEST days, came shortly after some of the WORST days. You can't predict the future, so don't make bets with your portfolio that hinge on your predictions being accurate. The current price, by definition, is what the totality of all investors think the price should be. Don't trick yourself into thinking you know more than them. If they thought the price should be lower, again by definition, it would already be lower.

"Prices in the marketplace are by definition the right price." ~Alan Greenspan, former Chairman of the Federal Reserve

Don't do anything stupid.

[Kaspian]

Never mind CAPE, Shiller, P/E ratios, valuations, corrections, and all that other nonsense.  You must have a proper personal investment plan and you must do a risk tolerance assessment and answer those questions honestly.  There is no shame (at all!) in havng a 50% bond allocation if that's necessary for your peace of mind.  (That's actually what Bogle has!)  Last year everyone was screaming, "100% equities--the only way to go, wha-hooo!  I can take it!"  Yeah, well shit--it's easy to be say you're brave when everything's going well.   

[forestj]

Just offering a bit of perspective...

If I had as much money as you do in equities, I would snap my fingers, kick back, and open a beer. I would be thinking...

I'm FREE!!!! After all that hard work, it finally PAID OFF! I don't have to work any more. I can just sit on my savings, and even if the market drops 70% from my peak at 1M, and I lose 700k, I'll still have enough to retire.  I can withdraw enough money every year to pay rent, buy good food, and keep myself entertained with several different hobbies. I can go do whatever I want, and work for myself, on my own projects and ideas until the cows come home!! THIS IS GREAT!!! I'M FREE!!!

I don't know if you are supporting several other people, if you are tied to a HCOL area, or what, but I don't think you should let yourself be tied down, I don't think your should let your $30,000k  a year hang over your head and cause anxiety. Slash it! Make it $15,000k a year! Work part time to make it $10,000 a year. Just let go of your ego, zoom out a bit, and bask in the immense freedom that your wealth offers you. You are a Millionaire!! You don't have to spend it! You can do whatever the hell you want!

[Financial.Velociraptor]

OP should consider: Since 1950, stocks have experienced 147 pullbacks of 5% or more, 40 corrections of 10% or more, 19 drops of 15% or more, 11 bear markets of 20% or more, and just five crashes of more than 30%.

That comes out to a:
5% drop every 5 months
10% drop every 20 months
15% drop every 41 months
20% drop every 71 months
30% drop every 156 months

If you have a long retirement horizon, you absolutely *must* be able to weather volatility.  Drops of the current size come frequently.  If you can't stomach it, your asset allocation has too little fixed income.

[okiedoke]

OP should consider: Since 1950, stocks have experienced 147 pullbacks of 5% or more, 40 corrections of 10% or more, 19 drops of 15% or more, 11 bear markets of 20% or more, and just five crashes of more than 30%.

That comes out to a:
5% drop every 5 months
10% drop every 20 months
15% drop every 41 months
20% drop every 71 months
30% drop every 156 months

If you have a long retirement horizon, you absolutely *must* be able to weather volatility.  Drops of the current size come frequently.  If you can't stomach it, your asset allocation has too little fixed income.

This.  It sounds like, somehow, you accumulated nearly $1mm without having it invested in anything besides cash until last year?  Is that right?  That's pretty weird, unless you came into some kind of windfall, but whatever. 

If so, then the problem for you is, this is your first time with a drawdown.  You're  a volatility virgin.  As Buffett has said, “There are certain things that cannot be adequately explained to a virgin either by words or pictures.”

What you didn't know (because you simply *can't know* what it feels like to actually lose money in the market until you have money in the market to lose) is that every damn time there is a 10% pullback, there are dozens of reasons why the world is ending, this time is different, etc.  Your first time or two it's hard to tune them out -- which is why you've made a parade of horribles in your last post.  But you've got to do it.   I must imagine that it feels worse, or more urgent/desperate/different, when your first time through that comes on the eve of a planned retirement -- because you feel like the stakes are higher, and you can't buy into the dip as much.  That, however, I can only imagine, because I'm not that close to FIRE myself.

Anyway, you still haven't spelled out your asset allocation (% stocks / bonds / cash) and dividend rate yet.  Until you do that I don't think we can really help you in this forum.  It's quite possible that you have too much in equities for your risk tolerance.  But guess what?  You can't really ever know your risk tolerance until you know what it feels like to lose money in the market.  Consider that the gift of this minor market blip.

[dude]

Relevant article today:

http://www.bloombergview.com/articles/2016-01-22/corrections-bear-markets-recessions-and-crashes

[okits]

Relevant article today:

http://www.bloombergview.com/articles/2016-01-22/corrections-bear-markets-recessions-and-crashes

I liked that.  Very level-headed.

Interest Compound, Financial.Velociraptor, thanks for posting those numbers, they give some nice context.

okiedoke - WB's virgin quote = hilarious (and apt).

From another thread:

I am beginning to realize that many people on this forum are going to have a rude awakening when they face their first major downturn.  Seems like a lot of people here have only experienced 2010-2015 and have no idea what a 2007-2009 feels like.

Or for that matter, 2001-02. I started investing in 1999. Think about what my investing life looks like! I'm currently roughly 75/25 (110-age in stocks in 5% increments down every 5 years). I managed not to sell during the worst parts of 2002 or 2009, even when everyone was convinced this really was the big one and we were all doomed (in fact I increased my inputs). But the little bit of bonds helped me get through the worst of it. And despite a relatively low income (and really only getting seriously started in 2003) I'm now looking at close to 500k. I should like to add this:

I made most of my money via the investments I made during those stock market crashes.

That last line says it all.  Imagine if s/he had panic-sold to preserve capital, or even just halted investment of new cash.  That account would not be half a million-ish now.  Her greatest gains are from when she bought low.  Good enough to say "buying opportunity!" during a correction, but even better are people's stories of the reward from staying invested and continuing to buy during those corrections.

OP - I hope you've continued to calm and are closer to a revised investment plan that's sensible and suitable for you.

[robartsd]

My wife and I first invested in March 2008. We were both nervous about the economy. I chose a fund with just 1/3 equities, she went 100% bonds. We didn't touch (or even really look at) our funds for a few years (we were investing an insurance windfall in Roth IRAs before filling out our FAFSAs for the coming school year). After weathering the 08-09 losses and profiting from the recovery, we both felt comfortable increasing our allocation of stocks. I'm still significantly more agressive than she is (and struggle somewhat with how much is my risk tolerance vs. how much I feel I should compensate for her adversion to risk). Our investments are still small (our primary finacial goal over the past few years was emliminating debts with rates over 5% - we're still torn a bit between investing for retirement vs. saving for a down payment on a house).

[BFGirl]

I invested about 940K since August of 2014, so I have bought in at high valuations.  Of that investment I'm probably 35% equities and rest bonds/cash.  Despite being advised to allocate more toward equities, I knew my stomach couldn't handle the large drops.  I'm 5 years to retirement and my stomach has hurt even with my limited exposure, so I understand a little bit of what you are going through.  So, you may want to reconsider your asset allocation to something that is easier for you to handle.  On the practical side, if you quit your job now, you have enough assets that you are not going to starve.  Maybe you need a 6 month-1 year break to figure out something that you would enjoy doing that can supplement your investment income.  During the next 40+ years you probably have to live, I'll bet you will find something that you like doing that can earn you some extra money if you need it. :)

I was close to selling my equities this week but resisted and bought instead :)

[robartsd]

I'm probably 35% equities and rest bonds/cash. ... I'm 5 years to retirement...

That's perhaps slightly more conservative than conventional advice for where you should be 5 years prior to retirement, but not far off that mark. Of course it is very conservative for the conventional advice for someone who still has at least a third of their working years ahead of them (which 5 years could easily be in a FIRE plan).