Author Topic: Anyone Else Terrified of Stock Market Right Now?  (Read 32140 times)

MustacheAndaHalf

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #200 on: May 06, 2022, 07:05:12 AM »
P.S. I assume high CAPE means a very low return going forward. So maybe we think the same thing but are saying it differently. E.g., I believe the rather low Vanguard forward return estimates to be very reasonable. Basically what I'm using in my own modeling.
I read a Vanguard study to that effect, but Vanguard no longer links to it, and even a cached version at another website is gone.  From memory, the white paper searched for the best signal of returns starting 10 years in the future, and extending to 20 years.  They found a 0.42 inverse correlation for CAPE, where high CAPE values predicted lower returns.  And P/E ratio by itself had 0.38 or 0.40 correlation.

Near the end of last year I was trying to return to being a buy & hold investor who picked more aggressive stocks.  That ended when the market's optimism in Dec 2021 make no sense compared to inflation and Covid-19 risks, let alone checking the CAPE 10 and seeing it 2nd only to the dot-com crash.  I struggled a bit to pick stocks but allocated more cash... but I ended that struggle at the start of April, when I went 63% cash and 3% bearish derivatives.  I can appreciate people are scared, but I'm investing for this not ending well.

As a general principle, I agree with Mr Green that cash is a risky asset allocation.  But did you know active managers cannot invest even 30% in cash?  One of them on a financial TV channel let slip "cash looks really good right now, but I'm not paid to be in cash."  Exactly.

ChpBstrd

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #201 on: May 06, 2022, 07:22:41 AM »
Sorry I should have been more precise.

What I was doing is applying textbook Bayesian statistics to the question, does a high CAPE (over 30) correlate with traditional SWRs failing.

And, correct me if I'm wrong please, but I think the "traditional" SWR rate failures have not been high CAPE situations. It's 1966 and the related "start" dates which were followed by stagflation in 1970s that fail... And then arguably financial and banking crises in early 1900s.

For the record, few people are going to be more surprised at this than me... And I do think you get a little bump in failure rate probably but not much.

Tip: To explore this graphically, look at the shiller CAPE ratios chart, pick the high valuations, and then use portfolio visualizer to see how various portfolios would have fared.

P.S. I assume high CAPE means a very low return going forward. So maybe we think the same thing but are saying it differently. E.g., I believe the rather low Vanguard forward return estimates to be very reasonable. Basically what I'm using in my own modeling.

This blog has already done the work for you:
https://earlyretirementnow.com/2016/12/21/the-ultimate-guide-to-safe-withdrawal-rates-part-3-equity-valuation/

Current Shiller PE is 32.6, which by ERN's analysis means 10y annualized returns are likely to fall into the 4% to -4% range. The only other times the Shiller PE has been this high were 1929, 1999-2001, and maybe 2018. https://www.multpl.com/shiller-pe

As ERN notes, ALL failures of the 4% rule occurred at times when CAPE was >20.

SeattleCPA

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #202 on: May 06, 2022, 10:04:27 AM »
Sorry I should have been more precise.

What I was doing is applying textbook Bayesian statistics to the question, does a high CAPE (over 30) correlate with traditional SWRs failing.

And, correct me if I'm wrong please, but I think the "traditional" SWR rate failures have not been high CAPE situations. It's 1966 and the related "start" dates which were followed by stagflation in 1970s that fail... And then arguably financial and banking crises in early 1900s.

For the record, few people are going to be more surprised at this than me... And I do think you get a little bump in failure rate probably but not much.

Tip: To explore this graphically, look at the shiller CAPE ratios chart, pick the high valuations, and then use portfolio visualizer to see how various portfolios would have fared.

P.S. I assume high CAPE means a very low return going forward. So maybe we think the same thing but are saying it differently. E.g., I believe the rather low Vanguard forward return estimates to be very reasonable. Basically what I'm using in my own modeling.

This blog has already done the work for you:
https://earlyretirementnow.com/2016/12/21/the-ultimate-guide-to-safe-withdrawal-rates-part-3-equity-valuation/

Current Shiller PE is 32.6, which by ERN's analysis means 10y annualized returns are likely to fall into the 4% to -4% range. The only other times the Shiller PE has been this high were 1929, 1999-2001, and maybe 2018. https://www.multpl.com/shiller-pe

As ERN notes, ALL failures of the 4% rule occurred at times when CAPE was >20.

Yes. I know. But no failures occurred at times when CAPE was >30. Right?

dandarc

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #203 on: May 06, 2022, 10:27:05 AM »
Sorry I should have been more precise.

What I was doing is applying textbook Bayesian statistics to the question, does a high CAPE (over 30) correlate with traditional SWRs failing.

And, correct me if I'm wrong please, but I think the "traditional" SWR rate failures have not been high CAPE situations. It's 1966 and the related "start" dates which were followed by stagflation in 1970s that fail... And then arguably financial and banking crises in early 1900s.

For the record, few people are going to be more surprised at this than me... And I do think you get a little bump in failure rate probably but not much.

Tip: To explore this graphically, look at the shiller CAPE ratios chart, pick the high valuations, and then use portfolio visualizer to see how various portfolios would have fared.

P.S. I assume high CAPE means a very low return going forward. So maybe we think the same thing but are saying it differently. E.g., I believe the rather low Vanguard forward return estimates to be very reasonable. Basically what I'm using in my own modeling.

This blog has already done the work for you:
https://earlyretirementnow.com/2016/12/21/the-ultimate-guide-to-safe-withdrawal-rates-part-3-equity-valuation/

Current Shiller PE is 32.6, which by ERN's analysis means 10y annualized returns are likely to fall into the 4% to -4% range. The only other times the Shiller PE has been this high were 1929, 1999-2001, and maybe 2018. https://www.multpl.com/shiller-pe

As ERN notes, ALL failures of the 4% rule occurred at times when CAPE was >20.

Yes. I know. But no failures occurred at times when CAPE was >30. Right?
If you've got 30% or more in bonds, that's what I see on that chart for a 30 year horizon. 60 years looks much, much worse with 30+ CAPE though. I think the conclusion to be had is individuals nearing retirement, whether standard or early, should have something like 20-30% in bonds, and if valuations are high at that time, consider how that potentially impacts things.

dandarc

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #204 on: May 06, 2022, 10:41:41 AM »
* or if the definition of failure is higher than a zero ending balance.

SeattleCPA

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #205 on: May 06, 2022, 10:55:59 AM »
I think the conclusion to be had is individuals nearing retirement, whether standard or early, should have something like 20-30% in bonds, and if valuations are high at that time, consider how that potentially impacts things.

I agree.

BTW if I run a monte carlo simulation and use Vanguard's most recent expected returns estimates (which are available here: https://advisors.vanguard.com/insights/article/marketperspectivesapril2022 ) I get a very concerning set of outcomes.

And for the record, I consider that in setting safe withdrawal rates etc.

Also, I think if I was planning for how much I needed to save annually in order to retire by some point in the future? I'd also use those return estimates.

What I was trying to point out with my first message in this thread was fact that these really extreme CAPE ratios don't absolutely and automatically sabotage your or my SWR plan. Or more precisely, the failures of common asset allocation formulas haven't occurred in past when CAPE at start of retirement exceeded 30.

Stipulation: There is basically no data on this. I.e., the only thirty-year retirement with a starting CAPE of 30 is the one that shows in the '29 crash. And there, you got a 4% SWR to work. The only other instance of a starting CAPE over 30 occurs for folks starting retirement in and around 2000. But we don't have 30 years of retirement to truly test those years. However it looks to me like those will all work.

P.S. I am not going to go look through all of Big Ern's 52 posts on SWRs... but I've read many of those and am pretty sure he's noted this oddity too.

dandarc

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #206 on: May 06, 2022, 11:49:48 AM »
Point taken - very high valuations have yet to produce an actual retirement failure with the usual parameters. About 8 years to know for sure.

Generally speaking with regards to money, perhaps we'd all benefit by relaxing a little more - things will be OK, particularly for those on this forum who mostly have quite good plans in place and/or in the works.

SeattleCPA

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #207 on: May 06, 2022, 12:14:11 PM »
Point taken - very high valuations have yet to produce an actual retirement failure with the usual parameters. About 8 years to know for sure.

Generally speaking with regards to money, perhaps we'd all benefit by relaxing a little more - things will be OK, particularly for those on this forum who mostly have quite good plans in place and/or in the works.

+1

joe189man

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #208 on: May 06, 2022, 01:28:47 PM »
BTW if I run a monte carlo simulation and use Vanguard's most recent expected returns estimates (which are available here: https://advisors.vanguard.com/insights/article/marketperspectivesapril2022 ) I get a very concerning set of outcomes.

That's bleak and concerning - looks like we will need to save more or spend less over the next decade

shureShote

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #209 on: May 06, 2022, 01:41:08 PM »
BTW if I run a monte carlo simulation and use Vanguard's most recent expected returns estimates (which are available here: https://advisors.vanguard.com/insights/article/marketperspectivesapril2022 ) I get a very concerning set of outcomes.

That's bleak and concerning - looks like we will need to save more or spend less over the next decade

Anyone go back and check how often they have been correct? I am not going to check because I will continue to do tomorrow exactly what I have done for many years. Save save save and watch spending.

SeattleCPA

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #210 on: May 06, 2022, 01:56:13 PM »
BTW if I run a monte carlo simulation and use Vanguard's most recent expected returns estimates (which are available here: https://advisors.vanguard.com/insights/article/marketperspectivesapril2022 ) I get a very concerning set of outcomes.

That's bleak and concerning - looks like we will need to save more or spend less over the next decade

Ok, just to say it, not happy about this. For sure. But I actually don't think it's that bleak. First, if you or I know about this and have some heads up notice? We can avoid getting blind-sided. E.g., we can do a better job saving or earning or maybe (sorry) work a little bit longer. (Who this scenario will really suck for are folks who get surprised and find themselves short...)

Second, if it turns out we've been too pessimistic or conservative? Well, that's probably not terrible either. You'll just find yourself ahead.

Third, finally, if you're just starting your financial journey? I think you have actionable insights from understanding the effect of lower long term rates of return. E.g., you can intentionally select an earnings method that provides higher income (so you can save more) or a longer runway (so you happily work a bit longer.)



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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #211 on: May 06, 2022, 02:52:14 PM »
I don't have much money; my retirement funds are quite low for my age.  However, I have just started heavily investing i.e. maxing 401k, IRA, +brokerage with the leftover.  I feel like this is a great time to be in my position as I will be DCA'ing into the market for the upcoming uncertain times.  Other than maxing out I-bonds(just bought $20k, may do another 20 as gifts) which will become my emergency fund, I'm all FXAIX.

You are in the spot I was in during the 2008/2009 time period.  Low retirement balance for my age but steady job enabled me to keep shoveling money into dollar cost averaging the upswing and staying the course put me in the position I'm in right now of doubling my money several times over since then.

I'll continue to be putting my money in and watching expenses. 


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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #212 on: May 06, 2022, 03:12:09 PM »
BTW if I run a monte carlo simulation and use Vanguard's most recent expected returns estimates (which are available here: https://advisors.vanguard.com/insights/article/marketperspectivesapril2022 ) I get a very concerning set of outcomes.

That's bleak and concerning - looks like we will need to save more or spend less over the next decade

Does anyone understand how to interpret "10-year, annualized, nominal return projections?" I take nominal to mean not-real (inflation adjusted), but does "nominal return" also assume no dividend reinvestment?

waltworks

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #213 on: May 06, 2022, 03:14:18 PM »
Once you're even vaguely in the 4% WR ballpark, your risks of RE failure are mostly non-financial anyway. An average (my guess for the forum membership) 45 year old FIRE male has only a 65% chance of living long enough to make it 30 years anyway (though many folks here are fitter/healthier than normal). Then there are the other sorts of non-financial SHTF scenarios - war, runaway climate change, etc, etc.

If you're at around 4%, go live your life how you want and stop spending time comparing CAPE numbers FFS.

-W

Mr. Green

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #214 on: May 06, 2022, 03:21:04 PM »
Once you're even vaguely in the 4% WR ballpark, your risks of RE failure are mostly non-financial anyway. An average (my guess for the forum membership) 45 year old FIRE male has only a 65% chance of living long enough to make it 30 years anyway (though many folks here are fitter/healthier than normal). Then there are the other sorts of non-financial SHTF scenarios - war, runaway climate change, etc, etc.

If you're at around 4%, go live your life how you want and stop spending time comparing CAPE numbers FFS.

-W
+1. It's quite chilling to think that 1 in 3 45 year olds won't see 75. At the young end of that scale a significant percentage of the deaths are non-preventanle health issues or accidents. Car accident, aneurysm, aggressive cancer that takes someone in a year. Chills me to the bone when I think about that statistic and wasting any more of my life at a job I hate. Carpe diem is it for me my friend.

clifp

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #215 on: May 06, 2022, 03:51:26 PM »
Once you're even vaguely in the 4% WR ballpark, your risks of RE failure are mostly non-financial anyway. An average (my guess for the forum membership) 45 year old FIRE male has only a 65% chance of living long enough to make it 30 years anyway (though many folks here are fitter/healthier than normal). Then there are the other sorts of non-financial SHTF scenarios - war, runaway climate change, etc, etc.

If you're at around 4%, go live your life how you want and stop spending time comparing CAPE numbers FFS.

-W
+1. It's quite chilling to think that 1 in 3 45 year olds won't see 75. At the young end of that scale a significant percentage of the deaths are non-preventanle health issues or accidents. Car accident, aneurysm, aggressive cancer that takes someone in a year. Chills me to the bone when I think about that statistic and wasting any more of my life at a job I hate. Carpe diem is it for me my friend.
Actually, if you use a more sophisticated calculator you'll find the life expectancy is significantly higher.  I put it 45-year-old male in good health, a bit overweight 200lb 5' 11', college-educated, married, making over 80K and came up with average life expectancy of 87, with 75% chance of living to 79 and 25% chance of making it to 93. 


waltworks

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #216 on: May 06, 2022, 06:05:32 PM »
Sure, you can quibble about life expectancy all you want. You're more likely to be dead in 30 years than broke regardless, though, if you're 45 and @4% WR. Fighting to get to a lower WR is a fool's bet.

-W

clifp

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #217 on: May 06, 2022, 06:51:40 PM »
Sure, you can quibble about life expectancy all you want. You're more likely to be dead in 30 years than broke regardless, though, if you're 45 and @4% WR. Fighting to get to a lower WR is a fool's bet.

-W

If I started with 4% SWR at age 39, with an 80/20 AA, I'd have a few hundred thousand and would start collecting $2K/month social security in a few months. That's a lot closer to being broke than dying in my case. Instead, I started at 3%, and made additional spending adjustments in 2009.  I also diversified asset classes to include real estate and alternative investments, I'm ok if stock and bonds go down 50%, I don't think that's true for lots of early retirees.

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #218 on: May 06, 2022, 08:32:41 PM »
BTW if I run a monte carlo simulation and use Vanguard's most recent expected returns estimates (which are available here: https://advisors.vanguard.com/insights/article/marketperspectivesapril2022 ) I get a very concerning set of outcomes.

That's bleak and concerning - looks like we will need to save more or spend less over the next decade

Does anyone understand how to interpret "10-year, annualized, nominal return projections?" I take nominal to mean not-real (inflation adjusted), but does "nominal return" also assume no dividend reinvestment?

I think that's including dividends. So to get real return, subtract inflation.

shureShote

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #219 on: May 07, 2022, 07:52:49 PM »
Once you're even vaguely in the 4% WR ballpark, your risks of RE failure are mostly non-financial anyway. An average (my guess for the forum membership) 45 year old FIRE male has only a 65% chance of living long enough to make it 30 years anyway (though many folks here are fitter/healthier than normal). Then there are the other sorts of non-financial SHTF scenarios - war, runaway climate change, etc, etc.

If you're at around 4%, go live your life how you want and stop spending time comparing CAPE numbers FFS.

-W

When a walrus talks (at least this one), we should pause and reflect.

I think the risk assessment concerning money takes such an important part of my actions because it is easy to calculate. I have $10, I can buy a couple gallons of gas, no money, I am walking. Even with tons of assumptions I can still come up with some sort of scenario I can relate to. Being healthy right now, I canít come up with how the scenario would be in 20 years if the doc gives me a bad diagnosis. Ok, so it gets warmer in 15 years, what is that truly going to mean to me each day? No idea. So I likely focus on the lesser unknown of the unknowns. Or at least ones that allow me to circle a number at the bottom of the page.

Thanks for another perspective. Not quite screw it, live for today, but more to be real and view the entire system we are all working to exist in.

RunningintoFI

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #220 on: May 08, 2022, 07:47:42 PM »
Once you're even vaguely in the 4% WR ballpark, your risks of RE failure are mostly non-financial anyway. An average (my guess for the forum membership) 45 year old FIRE male has only a 65% chance of living long enough to make it 30 years anyway (though many folks here are fitter/healthier than normal). Then there are the other sorts of non-financial SHTF scenarios - war, runaway climate change, etc, etc.

If you're at around 4%, go live your life how you want and stop spending time comparing CAPE numbers FFS.

-W

When a walrus talks (at least this one), we should pause and reflect.

I think the risk assessment concerning money takes such an important part of my actions because it is easy to calculate. I have $10, I can buy a couple gallons of gas, no money, I am walking. Even with tons of assumptions I can still come up with some sort of scenario I can relate to. Being healthy right now, I canít come up with how the scenario would be in 20 years if the doc gives me a bad diagnosis. Ok, so it gets warmer in 15 years, what is that truly going to mean to me each day? No idea. So I likely focus on the lesser unknown of the unknowns. Or at least ones that allow me to circle a number at the bottom of the page.

Thanks for another perspective. Not quite screw it, live for today, but more to be real and view the entire system we are all working to exist in.

If you want to expand upon this philosophy a bit, the book "Die With Zero" is an interesting read discussing how people's spending habits change in the last decade(s) of their life and how the marginal utility of your dollars decreases over the last 20-25% of the typical lifespan.  It caused me to go from extreme hardcore FIRE saver to a more reasonable gradual saver because I realized how valuable my physical functionality mixed with my income at this age (32) is relative to 30 years from now. 

waltworks

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #221 on: May 08, 2022, 08:36:06 PM »
You can read all about this elsewhere, but the quick summary of "4% is plenty" involves:

-Trinity study assumes ZERO INCOME in retirement. No inheritance, no getting paid to do something you'd volunteer for anyway, no finding $5 on the sidewalk, etc. Most people will end up with at least some income.

-Likewise, the study assumes no social security (for those in the US) income. Chances are very good you'll get some meaningful money from SS.

-It also assumes no flexibility in RE spending. Even a modest 10% belt-tightening (easier for fatter FIRE scenarios but doable for almost anyone) saves most failure cases.

-Most people spend less as they age past their 60s or so, so projecting your current spending into the future is likely to be overly pessimistic (though not guaranteed to be).

-You can't buy more years of life and even a healthy person in early middle age is less likely to run out of money than they are to die in <30 years.


Obviously everyone is different and if you want to leave behind millions of dollars for your heirs/charity, don't mind/like your job, and are highly unsure what your future travel/lifestyle plans are, then you want to be more conservative in general.

If you don't particularly like working and have other stuff you'd like to do, have potentially lucrative hobbies/interests, and don't care about leaving money to the next generation, your needs are a bit different. One could make a pretty strong argument for 5 or 6% WRs in that scenario, so long as the retiree has some spending flexibility and believes they'll receive something from SS.

-W

clifp

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #222 on: May 08, 2022, 09:03:21 PM »


If you want to expand upon this philosophy a bit, the book "Die With Zero" is an interesting read discussing how people's spending habits change in the last decade(s) of their life and how the marginal utility of your dollars decreases over the last 20-25% of the typical lifespan.  It caused me to go from extreme hardcore FIRE saver to a more reasonable gradual saver because I realized how valuable my physical functionality mixed with my income at this age (32) is relative to 30 years from now.

I do agree with moderation in almost all things including saving.  However, I disagree with marginal utility of $ going down as you get older.

My sister 71, just put her husband 79, in a nursing home two months ago with Parkinson's. The cost will be just under 90K, and that's one of the cheapest facilities in Honolulu.  I did her taxes so I know she spent $53k for what was basically 40 hours of help a week @$25/hour. She spent all of Covid trying to care for him, and pretty much killed herself.  Fortunately, with $1 million stash, and reasonable income from my sister's art business they have enough to keep him there for 5 years and hopefully he won't make another 10.

My mom, 96, is on year 11 or 12 of living with Alzheimer's. The expenses started with 3-4 days a week for $30k and then rapidly went to $100K year for 16-hour/day. This was in southern Oregon. We moved her to a nursing home near my other sister in northern Seattle we've been spending between 85-110K

My good friend's mom, died last year at 102, of nothing other than old age. She had been living with them since age 90. Around 95, they start getting caregivers and end up with one who got room and board and money to stay with her at night, and a team of three cared for her for M-F for about 10 hours/day total cost of about $80K

Another friend in Oakland has his mom 89, with COPD and similar ailments in a nursing home for about 4 years, about $85K

A friend in Gilroy, CA had his FIL pass last year, after living with Alzheimer's for the last 5 years. One of his wife's four sisters took care of him, but they still 50K a year on additional help.

Finally a younger friend 50, just put his mom 85, in a nursing home in St. George, Utah it is cheaper $<80K year

It seems me making sure you get fed, bathed, and don't end up in one of those awful places that will accept Medicare after you've spent all of your resources is a pretty high marginal utility to me. In fact, pretty much everyone knows, whose spouse or parent didn't die of cancer spent $50-100K the last several years of their care.
care
Fortunately, in all these cases the senior citizens had sufficient resources (no one had close to sufficient income) . How many years they will continue to have the resource is a different question, generally at least 3 to 5 years.

But if you don't they you are placing a tremendous burden on your children, kid sister, or other relatives to either sacrifice several years of their life to taking care of you or a tremendous financial burden. (I think long-term care insurance is scam, but I suppose it is option, just not something I've seen many folks on the board talk about purchasing

Even if you are one of the lucky ones who's health is still good in your 80s, being able to hire people to do stuff you can't or your wife won't let you do is awfully nice. Plus flying first class, and being able to take a Viking or Regency cruise instead of Carnival are all worthwhile to many people, not me yet.  Finally, you can give away your money while you are still alive and see the benefits it provides to others.

Mr. Green

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #223 on: May 09, 2022, 02:01:17 AM »
@clifp My grandparents lived quite long lives as well. 85 and 94. Amazingly both died at home before any decline required long-term assistance. They were about as healthy as you can be in old age. What I learned from them is to expect virtually all leisure travel with the exception of visiting family to curtail by my mid-70s. For the last 10-20 years of their lives, they spent so little money (everything is paid for by that point) that they weren't even spending their entire Social Security checks. So they were once again in the accumulation phase. Short of incredibly poor timing where extended care is required immediately after being highly mobile and larger annual spending, I expect our long term care will likely fund itself through the years of our life where we don't need care yet but simply aren't well enough highly mobile to spend much money. This certainly varies by person but our social security checks will be large enough that we'll end up in the same boat, unable to spend it all on basic living, once we reach the age where we no longer have any debt and aren't traveling.
« Last Edit: May 09, 2022, 10:47:14 AM by Mr. Green »

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #224 on: May 09, 2022, 07:06:02 AM »
In my case, the difference between 3.5% and 4% WR is two years of additional work. I wonder to what extent the increased financial risk of FIREing two years earlier is offset by the health benefits from reduced stress? Someone should do a study...

Telecaster

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #225 on: May 09, 2022, 01:31:16 PM »
To answer the original question.... Hell no!

In fact I have more work than I can handle right now with my FIRE side gig. Having a desirable skill really pays off. I've decided to put off some re-renovations to my own home to hammer away more money despite not needing to. Analyzing the stock market just isn't my thing. Worrying about something I have zero control over isn't my thing either.

Love this post. 

jnw

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #226 on: May 09, 2022, 02:04:55 PM »
Just bought like 4 shares of ITOT today @ 3.7% discount before market closed.  Would of bought more but that's all I can afford this month.

Silrossi46

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #227 on: May 09, 2022, 06:32:05 PM »
I shoved 7g in the bank today from selling junk car parts  from in my shed and around my house over the last few months.  Bought all vtsax  with it today before the 4pm bell.

jnw

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #228 on: May 09, 2022, 06:36:36 PM »
I shoved 7g in the bank today from selling junk car parts  from in my shed and around my house over the last few months.  Bought all vtsax  with it today before the 4pm bell.

Sweet, so you'll get around a 3.5 to 4% discount as well then when they buy it aftermarket?

Silrossi46

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #229 on: May 09, 2022, 06:47:26 PM »
 Just before 4pm you get the drop for that day.  So I bought at 96.xx today

RunningintoFI

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #230 on: May 09, 2022, 09:20:28 PM »


If you want to expand upon this philosophy a bit, the book "Die With Zero" is an interesting read discussing how people's spending habits change in the last decade(s) of their life and how the marginal utility of your dollars decreases over the last 20-25% of the typical lifespan.  It caused me to go from extreme hardcore FIRE saver to a more reasonable gradual saver because I realized how valuable my physical functionality mixed with my income at this age (32) is relative to 30 years from now.

I do agree with moderation in almost all things including saving.  However, I disagree with marginal utility of $ going down as you get older.

My sister 71, just put her husband 79, in a nursing home two months ago with Parkinson's. The cost will be just under 90K, and that's one of the cheapest facilities in Honolulu.  I did her taxes so I know she spent $53k for what was basically 40 hours of help a week @$25/hour. She spent all of Covid trying to care for him, and pretty much killed herself.  Fortunately, with $1 million stash, and reasonable income from my sister's art business they have enough to keep him there for 5 years and hopefully he won't make another 10.

My mom, 96, is on year 11 or 12 of living with Alzheimer's. The expenses started with 3-4 days a week for $30k and then rapidly went to $100K year for 16-hour/day. This was in southern Oregon. We moved her to a nursing home near my other sister in northern Seattle we've been spending between 85-110K

My good friend's mom, died last year at 102, of nothing other than old age. She had been living with them since age 90. Around 95, they start getting caregivers and end up with one who got room and board and money to stay with her at night, and a team of three cared for her for M-F for about 10 hours/day total cost of about $80K

Another friend in Oakland has his mom 89, with COPD and similar ailments in a nursing home for about 4 years, about $85K

A friend in Gilroy, CA had his FIL pass last year, after living with Alzheimer's for the last 5 years. One of his wife's four sisters took care of him, but they still 50K a year on additional help.

Finally a younger friend 50, just put his mom 85, in a nursing home in St. George, Utah it is cheaper $<80K year

It seems me making sure you get fed, bathed, and don't end up in one of those awful places that will accept Medicare after you've spent all of your resources is a pretty high marginal utility to me. In fact, pretty much everyone knows, whose spouse or parent didn't die of cancer spent $50-100K the last several years of their care.
care
Fortunately, in all these cases the senior citizens had sufficient resources (no one had close to sufficient income) . How many years they will continue to have the resource is a different question, generally at least 3 to 5 years.

But if you don't they you are placing a tremendous burden on your children, kid sister, or other relatives to either sacrifice several years of their life to taking care of you or a tremendous financial burden. (I think long-term care insurance is scam, but I suppose it is option, just not something I've seen many folks on the board talk about purchasing

Even if you are one of the lucky ones who's health is still good in your 80s, being able to hire people to do stuff you can't or your wife won't let you do is awfully nice. Plus flying first class, and being able to take a Viking or Regency cruise instead of Carnival are all worthwhile to many people, not me yet.  Finally, you can give away your money while you are still alive and see the benefits it provides to others.

I think you are affirming what I originally meant without me explicitly writing it out so let me be more clear how I am referencing marginal utility of money.

The amount of enjoyment you can get out of $1 is far higher at age 35 than it is at age 85 because the average person can DO so much more with that dollar at a young age than they can at an older age.  Even if you have billions in the bank in your late 80s, how many 80 year olds are able to jump on an airplane and spend hours traveling across continents or go hike mountains or camp outside?  All the money in the world becomes irrelevant because the options have dwindled due to physical limitations, so it makes sense to utilize dollars when the functionality of those dollars is maximized to enjoying life rather then simply preserving life. 

I don't think you disagreed with what I wrote out above but I wanted to make sure I was clear that the marginal utility of money to me is about getting the most enjoyment out of it. 

To what you reference throughout the rest of your post, I am sorry for all of the long term care issues that are going on around you. 

clifp

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #231 on: May 10, 2022, 02:15:18 AM »

I think you are affirming what I originally meant without me explicitly writing it out so let me be more clear how I am referencing marginal utility of money.

The amount of enjoyment you can get out of $1 is far higher at age 35 than it is at age 85 because the average person can DO so much more with that dollar at a young age than they can at an older age.  Even if you have billions in the bank in your late 80s, how many 80 year olds are able to jump on an airplane and spend hours traveling across continents or go hike mountains or camp outside?  All the money in the world becomes irrelevant because the options have dwindled due to physical limitations, so it makes sense to utilize dollars when the functionality of those dollars is maximized to enjoying life rather then simply preserving life. 

I don't think you disagreed with what I wrote out above but I wanted to make sure I was clear that the marginal utility of money to me is about getting the most enjoyment out of it. 

To what you reference throughout the rest of your post, I am sorry for all of the long term care issues that are going on around you.

I understand your point, and probably for most people it is valid, but not everyone. Sure a 35-year can physically climb Everest and 80-year-old can't. Although I remember Buzz Aldrin was 85 when he got frostbite in Antarctica.  Is the pleasure of the 35-year-old spending $20,000 to climb Everest necessarily greater than 80-year oenophile spending $20,000 on case of wine to enjoy with his best friends he's known for 50 years?  I'd don't know.  I do know that 35-year can't know, and if the 80-year didn't climb Everest when he is young also won't know. Not having done either I certainly don't know.

For me minimizing pain is every bit as important, as maximizing pleasure. For some people that means they can fly first class so they can travel and not feel miserable at the end of the flight. For me that means not having to do things I hate doing, like home repairs, cleaning, and yard work, for other people it means not doing their own taxes, or managing their money.  I hated cleaning toilets at 20 and I still do at 60.  The money saved by doing it myself at 20, has enabled me to avoid it at 60, so I don't think the utility has changed.

I think the question becomes even more complicated when the subject comes to altruistic acts. I know my mom and grandfather got great pleasure giving their children and grandchildren big gifts, as I get older and doing the same for grand neices and nephews, and charities I'm understand why it brought them such pleasure.

evme

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Re: Anyone Else Terrified of Stock Market Right Now?
« Reply #232 on: May 10, 2022, 04:47:50 PM »
Not terrified, no. Corrections and wild swings are to be expected in the stock market (remember March 2020?). I get through market turbulence by not checking my account balances when the market is down a lot, knowing that any negative balances are only paper losses. Big market corrections/crashes are often opportunities to buy equities on sale. I prefer buying things when they are on sale.