Author Topic: Anyone who was close to retirement in 2008? What did you do?  (Read 1703 times)

MoneyGoatee

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Anyone who was close to retirement in 2008? What did you do?
« on: February 23, 2020, 10:34:08 PM »
In 2008, the stock market dropped ~30%.  Some people might have a huge enough nest egg that the drop didn't affect them.  Some who were not close to retirement were also less affected because they would have time to recover.  So I'm interested in the people who went into 2008 on the verge of retirement with retireable net egg amounts but got hit by the crash and suddenly saw their nest egg become UNretireable amounts.  Even though the market bounced back in 2009, but at the time people didn't know that.  Are there anyone here who experienced this at the time?  Were there any tricky maneuvers investment-wise (or otherwise) we need to know about, in case the next recession came (if it did)?

dmc

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Re: Anyone who was close to retirement in 2008? What did you do?
« Reply #1 on: February 24, 2020, 06:19:25 AM »
I retired fall of 2007.  I had already changed my asset allocations some what.  I was at approx 60-40, and mostly in boring mutual funds.  It was a little unnerving to see our net worth drop by more than a cost of a new house.

But after a year of early retirement, I was 50 in 2007, I wasn’t going back to work.  We watched our spending, no big ticket items like cars or European vacations.  Then of coarse the market came back, like it pretty much always had.  And now we are better off than ever.

Lady Stash

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Re: Anyone who was close to retirement in 2008? What did you do?
« Reply #2 on: February 25, 2020, 10:07:38 AM »
I wasn't close to retirement so I just kept investing and stopped looking at my 401K until it started rebounding and was fun to watch again.  In hindsight I wish I'd bought more stocks back then.  What a sale!   I had older co-workers who had been planning to retire until the market tanked.  They mostly kept working.  It was a good time to have multiple sources of income.   

iris lily

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Re: Anyone who was close to retirement in 2008? What did you do?
« Reply #3 on: February 25, 2020, 10:16:27 AM »
My number for retiring was age 55. That was an arbitrary number I just pulled out of my head, a vague  desire. But the stock market crash hit and it kept me from seriously exploring it.

So, I worked a few more years, into a pension, and then of course the market has since rebounded so we are very comfortable in retirement income and assets.

Looking back, I’m glad I didn’t retire at age 55-56 ish Because at that point I still didn’t mind going to work And there would’ve been too much economic uncertainty for me. I am very cautious when it comes to money.But also looking back, I could’ve retired easily at 58 or 59. Even though the ACA was Not a sure thing, we would’ve made it work if that had fallen through.



spartana

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Re: Anyone who was close to retirement in 2008? What did you do?
« Reply #4 on: February 25, 2020, 11:26:21 AM »
I was also somewhat newly FIREd when the crash happened. Lost about 50% NW between house (paid off) and investments. However I had VERY low base expenses once FIREd and had some cash (bonds, laddered CDs, etc) I could live off for several years so didn't have to touch the stash and could even buy some greatly reduced stocks. Did tighten the belt a bit on discretionary spending but didn't need to go back to work or get roommates or anything. Just rode my bike a lot and played at the beach. It was actually a pretty nice time and I learned I didn't need as much money or expensive experiences to be happy. Sadly no one I knew (all in their late 30s or early 40s with kids and mortgages and big debts and who depended on higher income jobs) didn't fair well at all. Most lost everything not just their nest egg.

ChpBstrd

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Re: Anyone who was close to retirement in 2008? What did you do?
« Reply #5 on: February 27, 2020, 09:52:46 AM »
2008 illustrates the fallacy of using market prices as one’s “FIRE number”. What actually retires a person is having a claim on a stream of earnings cash flows that can cover all their expenses. The 4% rule is a helpful rule of thumb that is applicable in normal times and valuations. However, I would argue that at the peaks and troughs of our bubble driven market, investors should do the work of projecting the cash flow of their assets.

A person retiring in ‘08 could have safely retired - or stayed retired- at withdrawal rates above 5-6% because stock prices had been so artificially depressed by the crisis. At that time, it was possible to buy 8-10% growing cash flows and cover all of one’s expenses for a fraction of 25x living expenses. A half million then could have bought a lot more cash flow than a half million in, say, 2000 or early 2020. As it turned out (and always turns out), prices realigned with cash flows.

The amount of cash flow one controls has a much bigger influence on when one can retire than market prices. As we’ve seen this week, market prices whipsaw all over the place. It would be ridiculous to call oneself FI last week, but to then resolve to go back to work for OMY this week because stock prices fell. You still have the same assets! The price will change tomorrow.

It’s not easy to look up free cash flow for the indices (which you can then scale up or down to calculate FCF for your index fund shares). I have yet to find a free online source for this metric. So one must rely on articles done by people with Bloomberg terminals. This makes it tempting to use earnings as a proxy, but they are very much not the same metric.


https://banyanhill.com/free-cash-flow-fcf-yield-shows-when-to-invest/

magnet18

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Re: Anyone who was close to retirement in 2008? What did you do?
« Reply #6 on: February 27, 2020, 01:19:30 PM »
Run the portfolio backtester, if you decided on a 4%SWR at the highest peak in 07, then stoically withdrew that same $ value from the account every single month without ever checking the balance, the portfolio would currently be worth ~double what it was at the 07 peak

nereo

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Re: Anyone who was close to retirement in 2008? What did you do?
« Reply #7 on: February 27, 2020, 01:49:22 PM »
Not myself per se, but my parents were planning on retiring at the end of 2008.  My dad was a physician in a private practice, my mother a school administrator.

After seeing the markets tumble they each decided to work "one or two more years".  Ironically, that same year the person who had been in charge of running the practice flamed out, so my father took over his duties (and salary bump). A year after he was supposed to retire he was working harder than ever.  My mom never planned on working at that job long enough to qualify for their pension (in 2008 she would have been there 15 of the required 20 years).

Fast forward four years and my parents wound up way overshooting their retirement.  Instead of retiring they had the 4 biggest earning years of their careers.  At that point my mom stayed on for a 5th adn final year to qualify for a pension, which - coupled with SS - covers the majority of their spending.

In hindsight they would have been fine retiring in '08; they had enough padding to weather even that poo storm.  but 4+ years of additional earnings + an extra pension + the longest bull market in US history has resulted in a tiny WR.  My dad recently said that their investments could be cut in half and they'd still be ahead of where they planned to be in 2008.